SACRAMENTO — Although gas prices have moderated slightly, President Joe Biden and Democratic leaders continue to launch their usual attacks on the country’s oil companies. They blame corporate “greed” for the nearly $5-a-gallon prices drivers face nationwide, and offer a slew of predictable government “fixes.”
In a letter to oil companies last month, Biden blamed Russian despot Vladimir Putin’s war on Ukraine for drying up crude oil supplies, but also said pump prices are “the result of markups.” historically high profits for refining oil into gasoline, diesel and other refined products”. products.” He instructed Energy Secretary Jennifer Granholm to call an emergency meeting with oil executives to demand an explanation.
For their part, legislative Democrats want to launch an investigation into California’s high nationwide prices of around $6.50 a gallon. They will get to the bottom of a fictitious “mystery” gas surcharge. They gloviate and posturing – and demand “accountability” from Big Oil culprits. The only mystery is why lawmakers aren’t smart enough to recognize the real culprit (check a mirror).
“Oil companies are raking in record profits, while hard-working Californians are struggling to pay record prices,” Assembly Speaker Anthony Rendon, D-Los Angeles, tweeted in March. “Some believe the solution is to give #BigOil even more money through a gas tax waiver. We’re working on a plan to provide relief that doesn’t rely on Big Oil’s kindness.
It has always been unwise to expect much kindness from a state government that is largely responsible for California’s unaffordable prices. California’s Legislature and Governor finally approved a modest means-adjusted gasoline tax rebate, but shrugged it off when new gasoline tax increases took effect last week, increasing prices of 3 cents per gallon.
Our state has the second highest gasoline taxes in the nation. “Then there’s the 2-cent underground storage fee, the 14-cent state sales tax, an estimated 25-cent cap-and-trade fee, and an estimated low-carbon fuel standard fee. at 22 cents,” the Sacramento Bee reported. “Gasoline prices also fluctuate 10 to 15 cents as California switches to its special summer gasoline blend.”
This adds up to $1.32 to the cost of a gallon of gas, which could give a clue to our unaffordable prices. I’m writing from Washington, where gas prices are $1.50 lower than back home. Does a serious person believe that Evergreen State distributors are somehow less greedy than those based in Golden State?
The price of oil – and everything else in the private market – is driven by supply and demand. I just sold a four year old car to a dealer for more than I paid for it new. Was I greedy – or (like everyone else) was I just operating under current market conditions? If you choose “greed,” I urge you to sell your home at a 20% discount.
In April 2020, oil companies faced a glut amid the pandemic downturn in stay-at-home orders. The price of crude fell below zero. “A global oil glut sent prices plummeting on Monday as sellers holding U.S. crude contracts paid buyers up to $30 a barrel to get rid of it,” the Washington Post reported. Companies were storing oil offshore because they had no place to sell it.
The federal government was worried about falling prices. President Donald Trump tweeted (remember those days?) that he “has instructed the Secretary of Energy and the Secretary of the Treasury to formulate a plan that will make funds available so that these very are guaranteed long into the future!
Did the oil companies behave altruistically in 2020 and then greedily in 2022? Only a President or a Speaker of the Assembly would suggest it. People who sell things charge as much as the market can bear. People who buy stuff try to pay as little as possible. When prices skyrocket, suppliers increase production, which ultimately leads to lower prices.
This balance works beautifully most of the time, except when the government decides to shut down the entire economy due to a pandemic. This is how the system works and explains the remarkable standard of living of Americans. The alternative is government pricing, which distorts price signals and leads buyers to line up for potatoes and fields of useless rusty tractors. (Google: Soviet Union).
We don’t need an investigation to find out why California has outrageous gas prices. It is because of government intervention. Tax rates, regulations, and special state gas formulation (which limits supplies from elsewhere) reduce supply and increase costs. California leaders — including a certain governor who could run for president — are proud of their efforts to drive the fossil fuel industry out of business. Policies have consequences.
The latest gas price spikes have specific market reasons (post-pandemic demand, war in Russia, etc.), but the ultimate problem comes from government policies impeding the market. The feds haven’t gone that far, but they’re on the same path as California. If you are looking for greed, then look at a government that is addicted to tax revenue and regulatory power.
Steven Greenhut is director of the West Region of the R Street Institute and a member of the editorial board of the Southern California News Group. Email him at [email protected]