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California Continues to Triple Down on Policies to Drive Up the Cost of Gasoline

ABX2-1 only one of many policies coming online to drive up the cost of gasoline for California residents

SACRAMENTO—California State Assembly today passed ABX2-1, which even state regulators admit will increase the price of gasoline. But this is just one of many policies the state is pursuing that will drive up the cost of gasoline and the price of everything we use and buy.

“ABX2-1 is yet another example of state policymakers trying to distract the public while they work quietly behind the scenes to drive up the cost of gasoline even higher. The high cost of gasoline not only affects working families but drives up inflation as well. It’s time for legislators and the governor to take responsibility for the role they continue to play in California’s highest-in-the-nation gasoline prices. We need policies that will actually help drive down the cost of gas and cost of living for all residents and stop with these unworkable ideas that do the opposite of their intended purpose,” said Rob Lapsley, president of the California Business Roundtable.

Source: AAA [[link removed]], October 14, 2024

How California Is Driving Up the Cost of Gasoline

Aside from the more than $1.20 per gallon the state adds on to a gallon of gas right now, there are several policies coming online in the coming months that will make those costs even higher:

ABX2-1 will increase the price of gasoline. Based on research from the Center for Jobs and the Economy [[link removed]], this cost increase is likely to be between 5 and 15 cents per gallon.

ABX2-1 will not lead to savings at the pump. The math just doesn’t support the claim. Unless the governor plans to interfere with gas prices on a daily basis to affect normal fluctuations in gas prices within the standard deviation, ABX2-1 will not save consumers a penny.

Increased Low Carbon Fuel Standard Costs. As reported earlier this week, in just a few weeks, the California Air Resources Board (CARB) will vote on stricter limitations to the state’s Low Carbon Fuel Standard, which will drive up the cost of gasoline anywhere from 47 cents to 65 cents higher per gallon [[link removed]] beginning next year and increasing every year after.

Increased Cap and Trade Costs. Based on CARB’s economic impact statement [1], pending amendments to the Cap-and-Trade program would raise gasoline prices by an additional 22 cents [[link removed]] per gallon (based on levelized costs for a family of four).

Increased Gas Tax Under SB 1: SB 1 includes an annual increase in the statewide gas tax to support transportation projects.

Please note that LCFS, cap and trade, and SB 1 gas taxes are ongoing cost increases and will grow beyond the estimates provided here.

Unquantifiable Cost Increases

Beyond just the policies with an attributable direct dollar amount, California is also pursuing several additional policies that will drive up the cost of gas as well by further limiting the ability of California to import gasoline from other countries.

Since California policies have reduced in-state oil production, the state has become increasingly reliant on imported oil from other states and countries. This oil is already more expensive given the added transportation costs, but a series of new port regulations will significantly impact the state’s ability to import needed oil to meet with consumer demand.

CARB Limits Imports at Our Ports. CARB’s Ocean Going At-Berth Regulation [[link removed]] takes effect for tankers that bring gasoline into California beginning January 2025. Similar requirements currently limit the number of container vessels able to use the San Pedro Bay ports to essentially a “California fleet” of vessels equipped with the necessary environmental components including those related to shore power and fuels. These new rules will directly impact supply, limit flexibility and response to production shortfalls, and once again driving up gasoline costs.

Local Port Regulations Will Also Limit Imports. In addition to the At-Berth regulations going into effect on January 1, 2024, the South Coast Air Quality Management District (SCAQMD) continues to evaluate an Indirect Source Rule (ISR) for the San Pedro Bay ports that could lead to limits on all cargo, including tanker traffic, coming into the ports.

Again, while these costs are unquantifiable at present, they pose a significant risk to disrupt necessary oil imports, leading to gasoline shortages directly tied to these and other state and regional policies.

California Business Roundtable

1301 I Street, Sacramento, CA 95814

916.553.4093

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