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Below are the monthly updates from the most current January 2023 fuel price data (GasBuddy.com) and November 2022 electricity and natural gas price data (US Energy Information Administration). To view additional data and analysis related to the California economy visit our website at www.centerforjobs.org/ca.
California gasoline prices were up only marginally in January, remaining down 30% from the year’s high in June as supplies returned to—at least for California—near normal and due to regulatory easing through the annual shift to the less costly winter formulation. Diesel was largely unchanged, down 19% from the June high. Still, California prices for both fuels were the 2nd highest in the nation as the result of the state’s higher cost regulations, highest-in-the-nation fuel taxes, and state policies isolating the California market from a broader supply base.
In the latest results from CSAA as of February 6, gasoline prices in California were 2.9% higher than January at $4.62 a gallon, and 2.1% for the overall US average at $3.47. Prices, however, are expected to ease at least nationally in February as inventories have recovered, demand remains low due to seasonal factors, and as crude oil prices have eased due to the strength of the US dollar.
As reflected in the January budget proposal, the governor remains focused on raising taxes and consequent costs of fuels even higher. But in sharp contrast to the relative easing of fuel prices, the latest data shows state policies pushing the costs of electricity and natural gas even higher. The November data shows the average (12-month moving average) residential electricity price up 16% from a year ago, and the average (12-month moving average) residential natural gas price up even higher at 24%.
These costs have risen even faster since. While natural gas prices have generally eased in the rest of the US, limited pipeline capacity into the state, colder temperatures, and declining in-state production have seen California spot prices rising to five times higher than in the rest of the nation. The results are adding to costs of utility bills for heating and cooking, electricity production from natural gas plants, and input prices for products made from this energy source.
The reaction of the state to these rising costs again shows the weakness of the state’s approach to rising energy costs in general. When faced with the cost-of-living impact realities from the state’s policies, the state agencies have yet to consider a reassessment of their regulations in any of their actions affecting the supply and cost of energy. Instead, these reactions have focused almost solely on crafting some sort of compensation to households—but not to employers—for the resulting rising costs.
In the current actions, the Public Utilities Commission (PUC) recently approved an acceleration of the annual Climate Credit payments, moving up the spring credit payment to February or March depending on utility instead of the normal April payout. The Climate Credit is essentially a refund mechanism. Electricity and gas utilities along with other industries in the state are required to purchase emission credits under the state’s Cap and Trade Program. The cost of these credits adds to the cost of electricity and natural gas. However, a portion of the state’s proceeds from auctioning these credits is used by the PUC to fund the partial reimbursements to residential users. In other words, the state imposes a (rising)
regulatory tax on energy use in the state, processes the proceeds through the state’s systems, and then returns a portion to a portion of the energy users faced with the resulting higher energy bills. The PUC’s action gives the appearance of reacting to the economic harm by moving up the otherwise required credits, not taking actions to deal with that harm directly and increase the reliability of supply and control the rising costs of energy in the state.
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