Why Biden isn’t to blame for California’s astronomical gas prices – SFGate

Many are quick to blame President Joe Biden for the high cost of gas in the United States — especially the prices in California, which are the most expensive in the country. 

A recent headline on Fox News read: “California drivers react to the most expensive gas prices in America,” and stated, “Some Mendocino, Calif., drivers blame Biden for soaring gas prices.”

Former President Donald Trump also accused Biden of damaging the oil industry while speaking to Mark Levin on his Nov. 20 show “Life, Liberty & Levin.” Trump falsely claimed that gas prices in California are $7.50 a gallon, which is far off from the average price of $4.71 a gallon, reported by AAA. 

But can a president really impact gas prices? 

Severin Borenstein, an energy economist at UC Berkeley’s Haas School of Business, said there isn’t much that a president can do to affect the situation.

“In the long run, a president could have some effect on oil prices by making major changes in the land available for development and related regulations,” Borenstein wrote in an email. “But even that would be difficult without the support of Congress. And it would take many years or longer to have any impact on oil prices.”

The price of crude oil is the steady driver for the high price of gasoline across the country, and in the last six months crude oil prices rose because there hasn’t been enough world supply to meet world demand.

“The only way in which Biden has influenced that is in passing some of the macro economic stimulus, which has kept the economy growing, which has increased the demand for gasoline (as has getting the vaccine out),” Borenstein wrote. “So, in the sense that we have a stronger economy than we would have had without the American rescue package and other policies, that is on Biden and the Democrats in Congress. But otherwise, it’s pretty much out of the hands of DC politicians.”

Biden announced Tuesday he’s releasing 50 million barrels of oil from the Strategic Petroleum Reserve, the nation’s emergency stockpile, to lower energy costs, but Borenstein said the impact will likely be minimal.

“SPR releases typically have very small effects, but the administration has negotiated with other consuming countries – Japan, China, South Korea – to get them to also release oil from their SPRs,” Borenstein wrote in an email. “Even with all that participation, however, the additional supply will probably amount to less than 2% of world demand so the impact will be pretty modest.”

Even without the additional release of the barrels, the price of gas has been slowly declining — as crude oil prices topped out about a month ago and have been dropping gradually ever since. The price of gas at the pump is expected to drop more in coming days and weeks: The national average price for a gallon of gas was $3.40 on Tuesday, down a penny since last week, AAA said.  

After persisting at above $80 a barrel since Labor Day, the price of crude oil dropped into the mid-$70s this week, AAA said. 

“The price of crude oil accounts for about 50–60% of what consumers pay at the pump, so a lower oil price should translate into better gasoline prices for drivers,” Andrew Gross, a AAA spokesperson, said in a statement. “But until global oil production ramps back up to pre-pandemic levels, this recent dip in the price of crude may only be temporary.” 

California had the highest average price in the nation Tuesday at $4.705 a gallon, slightly less than Monday’s average of $4.706, AAA said. 

“California prices have increased a little bit more than the rest of the country, but basically we are in line and it is due to rising crude oil prices,” Borenstein explained. “It is possible that refinery outages associated with the heavy rains a couple weeks ago had a small impact, but mostly it is just higher crude oil prices.”

But California prices are also higher for other reasons beyond the cost of crude oil, and those are complicated.

Gas prices approach $6 per gallon at a Shell Station on Bryant Street in San Francisco, on Tuesday, Nov. 23. 

Gas prices approach $6 per gallon at a Shell Station on Bryant Street in San Francisco, on Tuesday, Nov. 23. 

Charles Russo/SFGATE

Californians pay higher gas taxes and environmental fees 

Californians generally pay more for gas than in any other state — even when there aren’t supply or demand issues — and that’s due to taxes and environmental fees. The federal government charges an excise tax of 18.4 cents per gallon. States can implement additional taxes, and in California, they’re higher than in any other state, totaling 66.98 cents, data from the American Petroleum Institute shows.

The California gas taxes are made up of a combination of the following:

—California gas excise tax: 51.10 cents per gallon
—California sales tax: 2.25%
—Underground storage tank fee: 2 cents per gallon
—Local sales tax: about 1% on average

Californians are also hit with more fees due to the state’s cap-and-trade program (which puts a cap on greenhouse emissions and charges large emitters, including fuel wholesalers, for emitting excess carbon dioxide) and the low carbon fuel standard. Borenstein said these fluctuate and are currently at about 35 cents a gallon. 

“Making California’s cleaner burning gasoline costs a bit more, probably less than $0.10 per gallon, but that varies by refinery and location,” Borenstein wrote in an email for a previous story on SFGATE on why Californians pay more at the pump.

He added, “The environmental programs are primarily intended to address greenhouse gas emissions, which has huge benefits, but they are dispersed across the globe. California has made a decision to be a leader on addressing climate change. I think the cost is worth it.”

Drivers select from various fuels priced near of above over $5.99 at a Shell gas station in Los Angeles in mid-November 2021.

Drivers select from various fuels priced near of above over $5.99 at a Shell gas station in Los Angeles in mid-November 2021.

Al Seib/Los Angeles Times via Getty Imag

California hits residents with ‘mystery gasoline surcharge’

Californians have been paying what Borenstein calls “a mystery gasoline surcharge” since 2015, which he calculates by finding the difference between California’s gas price and the average price in the rest of the country after subtracting the state’s higher taxes and environmental fees, as well as the cost of making cleaner-burning gasoline.  

“These days that is adding about an extra $0.30 per gallon,” wrote Borenstein, who has written extensively about the mystery surcharge on the Energy Institute at Haas blog. “The Bay Area has fewer offbrand gas stations, which seem to be the factor that most effectively exerts downward pressure on prices. That may be because Bay Area residents are less willing to go out of their way to buy cheaper gasoline, though I have never seen convincing evidence on that.”

Borenstein wrote in a blog that the mystery charged appeared after an explosion at an ExxonMobile refinery in Torrance, Calif., in February 2015. Prices skyrocketed but never came back down. 

“For the rest of the year, the mystery surcharge was about 48 cents a gallon,” he wrote. “What was more disturbing was that it continued at unprecedented levels in 2016 (29 cents) and 2017 (27 cents), long after the Torrance refinery was back at full production.”

Sorgente articolo:
Why Biden isn’t to blame for California’s astronomical gas prices – SFGate

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