California Gas Prices to Jump 13-to-20 Cents per Gallon Jan. 1— This is Not a Joke

It isn’t often that I’m speechless — but I’m speechless.

California Gov. Jerry Brown and the legislature refuse to stop an unprecedented increase in gasoline prices. So, effective January 1st, the cost of a gallon of gasoline in California will spike between 13 and 20 cents per gallon. No other state will do this.

The price hike is an outgrowth of a state law, the California Global Warming Solutions Act, AB 32, which created a cap-and-trade system relating to carbon emissions. Even though the state issues only about 1 percent of the world’s greenhouse gases, it nevertheless has instituted draconian regulations that will cost industry billions of dollars in fees to purchase carbon credit allowances. The gasoline price increase will result from energy companies being required to pay higher fees, which will be passed onto businesses and consumers.

And it could get even more expensive. California’s Legislative Accounting Office found that increases resulting from cap-and-trade penalties could exceed 50 cents per gallon by 2020.

All of this is on top of California’s current gasoline tax. The Tax Foundation puts the state in 1st place nationwide with the highest rate of 52.89 cents per gallon. Adding in the 18.4 cent federal excise tax means California consumers now pay 71.29 cents per gallon to various public treasuries.

The new requirement will harm business operations in California for several reasons:

  • Any company with a union agreement that ties compensation to the cost-of-living will see an increase in labor costs as soon as contract provisions permit. (Keep in mind that Californians are now seeing costs increase for taxes, apartment rentals, utilities and food.)
  • Next, countless small businesses that rely on gasoline-powered pickup trucks and delivery vans (e.g., farmers, contractors, retailers) will see costs rise.
  • Finally, much of the new “river of  revenue” to the state will be wasted, in typical Sacramento fashion, further entrenching the state’s 373 public agencies, commissions and boards.

Anyone with a heart will recognize the harm done to individuals, particularly the poor, or people in agricultural areas who must drive long distances for their jobs.

Measures like cap-and-trade are supported by more than environmentalists — they are promoted by the ultra-rich and celebrities living in their San Francisco, Silicon Valley and Los Angeles enclaves.  That group, I presume, will celebrate the New Year with extra high-fives all around. That is, before they head off to their limousines.

See more about this sad state of affairs in two stories in the Sacramento Business Journal“Steinberg: Cap-and-trade expansion will not be delayed” (Aug. 26 story) and “Analyst: Cap-and-trade will push gas prices up as much as 20 cents” (Aug. 7 story).

One focus of this blog has been to address California’s perennially difficult business environment. Joseph Vranich is known as The Business Relocation Coach while the formal name of his business is Spectrum Location Solutions. Joe helps companies find great locations in which to grow.