EDITORIAL: California’s policies drive up gas prices, but Newsom wants you to look the other way

Oct. 24-- Oct. 24--Back in April, Gov. Gavin Newsom asked the California Energy Commission to investigate why California's gasoline prices are so much higher than the rest of the country. Now that the report is complete, he'd better hope nobody reads it.

The 10-page report from the CEC found that "in 2018, Californians paid an average of 30 cents more per gallon of gasoline at higher-priced retail outlets such as 76, Chevron and Shell, than the average American paid for gasoline in other states." If you've driven across the state border recently, you know that 30 cents is a fraction of the price differential that Californians are paying for gasoline relative to the rest of the country.

According to AAA, the state's average price for a gallon of gasoline on Monday was $4.14, while the national average was about $2.65.

That's a difference of $1.49. Even if 30 cents of that is an unexplained mark-up at brand-name gas stations, what explains the other $1.19?

This is why Newsom will not want Californians to read the CEC's report. The rest of the up-charge is due to "a number of readily explainable factors like California's additional program costs."

These costs include the expense of producing a unique special formulation of gasoline that is sold in no other state. That exclusive requirement also prevents the import of gasoline from other states when there is a supply disruption due to a refinery problem. Tight supplies cause short-term price spikes.

The "program costs" also include the cap-and-trade program and the low carbon fuel standard, both designed to decrease greenhouse gas emissions. And, of course, the gas tax was raised by 12 cents per gallon with Gov. Jerry Brown's signature on Senate Bill 1 in 2017. The tax now rises with inflation every year.

Instead of reviewing these costs and considering temporary or permanent changes to ease high gas prices in California, Newsom has asked Attorney General Xavier Becerra to open an investigation into whether oil companies are engaging in illegal practices such as price-fixing.

The CEC's report states that no evidence of illegal practices was found. It concludes that the unexplained price differential appears to be caused by brand-name gas stations simply charging higher prices, which consumers are voluntarily choosing to pay.

The CEC determined that unbranded gasoline stations had a lower retail mark-up, as did Arco and "hypermart" stations such as Costco and Safeway. Retail brands 76, Chevron and Shell had roughly double the retail margin of their lower-priced competitors.

"CEC's analysis did not reveal the exact reasons why California consumers continue to purchase higher-priced gasoline," the report said. "It is possible that they simply prefer the products and services these brands offer."

There's nothing illegal about that. The CEC said consumers might pay more for reasons of location, credit-card acceptance, brand loyalty or perception of quality. But politicians need villains to distract from the costs and consequences of their own policies.

The report stated, "Although the CEC found no evidence of unlawful activities by the higher-priced gasoline retailers, the CEC could not rule out the possibility."

That was enough for Newsom to ask Becerra to investigate further. Even though there is no evidence that the oil companies did anything illegal, they will be subjected to a wide-ranging criminal investigation by the California Department of Justice.

This is a blatantly political abuse of the state's law enforcement power. It will not help consumers. It's a disgrace.

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