Newsom’s Oil-Price Show Hearings

California doesn’t have “show trials” (at least not yet), but it does have its share of show hearings — emergency legislative sessions that aren’t designed to address a serious problem but to provide plenty of showboating opportunities for the governor and lawmakers. Gov. Gavin Newsom seems proud of his recent and politically successful extraordinary legislative session that resulted in a new law designed to battle against gasoline price shocks.

“Price spikes have cost Californians billions of dollars over the years, and we’re not waiting around for the industry to do the right thing — we’re taking action to prevent these price spikes and save consumers money at the pump,” Newsom said after signing Assembly Bill X2-1. “Now, the state has the tools to make sure they backfill supplies and plan ahead for maintenance so there aren’t shortages that drive up prices.” Few Californians seriously expect gas prices to subside as a result.

Newsom forced the Legislature to stay in Sacramento after the close of the regular session — and at a time when many of them hoped to be out campaigning — to address the supposedly pressing problem of California’s sky-high oil prices. The problem is indeed pressing, as Californians pay around $1.50 a gallon more than the national average. But this is nothing urgent or new. It’s the direct result of public policies promoted by Democratic leaders for years.

I’ve written for The American Spectator about the obvious reasons for this price disparity. California imposes the highest gas prices in the nation. It requires a special “environmentally friendly” gas formulation that reduces supply and makes consumers susceptible to price shocks. It imposes the strictest regulations in the nation. Newsom and the Legislature are trying to shutter the industry and replace gas vehicles with electric ones, which has discouraged refiners from expanding capacity.

But Californians are experiencing pain at the pump and are upset about it. So state officials have to do something, so they’ve proposed a variety of ideas ranging from the wacky to the pointless. Regarding the former, the California Energy Commission recently released a report calling for the state to possibly “purchase and own refineries in the state to manage the supply and price of gasoline.” That’s unlikely to happen even in California, but the other ideas aren’t great, either.

One bill, which was shelved, would have had the state mandate expanded ethanol percentages in gasoline formulations to stretch supply. The final AB X2-1 legislation requires refiners to “develop and impose requirements for refiners operating in the state to maintain minimum levels of inventories of refined transportation fuels meeting California specifications.” That’s likely to increase prices given the cost of maintaining larger inventories.

In response to this special-session solution, Chevron reiterated its objections in a letter to lawmakers: “Across the three dozen states in which we work, the California government remains unique in its focus on marketplace interference with negative effects on consumers resulting in the highest U.S. gasoline prices.” Regarding the new law, the company — which has operated in California for 140 years, but recently announced that it’s moving its headquarters to Texas — explained specifically why mandating larger reserves won’t reduce prices:

These capacity constraints may reduce storage available during higher demand months. Furthermore, mandatory inventory thresholds remove significant supply from the market that refiners would otherwise sell, creating an economic fundamental of driving up wholesale prices. When refiners build and maintain inventories, it reduces the quantity available for immediate sale, thus restricting supply.

With show hearings and show trials, the actual facts and evidence don’t matter. It’s all about appearances and posturing. But what’s really astounding is that the state bureaucracy currently is working on a regulation that, by its own calculations, will raise gas prices by 47 cents to 65 cents a gallon. If Newsom were concerned about lowering gas prices, he would address that particular rule-making by the California Air Resources Board called the Low Carbon Fuel Standard. It promotes the use of lower-emission fuels.

The Sacramento Bee reported Wednesday on a letter from legislative Republicans calling on CARB to postpone a vote on the matter. It’s even getting attention from Democrats, per the Bee: “The state Legislature has stayed out of CARB rulemaking in recent years, but even Democratic elected officials are beginning to weigh in on the agency’s climate policies and their impact on consumers.”

Newsom and some lawmakers have called for more CARB transparency after the agency has backed away from its specific predictions about how much the rules will raise prices. But most of those calls might also be for show. The Republican letter got it right: “If CARB wants the public, through their elected representatives, to be supportive of new initiatives to protect the environment, CARB should be forthcoming with all information – so the public can consider the costs and benefits.”

Democrats have for years blathered about a so-called “mystery surcharge” to explain why California consumers pay more at the pump than consumers in other states. I never found our higher prices to be much of a mystery. But there’s no mystery at all about the latest CARB rules that will — to whatever exact degree — further drive up prices. If Newsom and the Legislature are serious about protecting consumers, they should knock off the public-relations stunts and hold this bureaucracy accountable.

Steven Greenhut is Western region director for the R Street Institute. Write to him at sgreenhut@rstreet.org.

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