One of California’s longer-running political arguments is over whether increasing taxes on oil production would result in higher gasoline prices for consumers.
Advocates of a “severance tax” or other forms of petroleum levies have contended that they would have no bottom-line impact on gas prices because oil is an international commodity.
Those who extract oil from California’s subterranean strata, their argument goes, must abide by the global market and therefore would be unable to change prices to pass on new taxes to motorists.
The counterargument, voiced by the industry and other opponents, has been that anything that adds to the cost of production, including new levies, would of course affect prices.
The debate has been conducted in the Legislature and over ballot measures, and so far, at least, the anti-tax faction has prevailed. However, with the possibility that producers will begin exploiting California’s potentially vast reserves of shale oil, the debate will undoubtedly be renewed.
Those arguing that new oil taxes would not necessarily affect consumer prices come, not surprisingly, from political liberals who look upon oil production as a potentially huge source of new revenues for their much-cherished education, health and welfare services.
However, those same liberals voted for a bill in the Legislature this year that, at its core, undercuts their argument about the effect of new oil taxes.
The measure was Senate Bill 448, by Sen. Mark Leno, D-San Francisco. If signed by Gov. Jerry Brown, it would have directed the California Energy Commission to, in the words of a staff analysis, “investigate suspected motor vehicle fuel price manipulation and make recommendations to the Legislature on how to limit motor vehicle fuel price volatility.”
The usual liberal environmental, consumer and labor groups lined up behind the bill, and the usual business groups, including the Western States Petroleum Association, opposed it. It whipped through the Legislature on party-line votes and landed on Brown’s desk.
However, at the deadline on bill action, Brown rejected SB 448, saying the Energy Commission already had the power to analyze petroleum markets and pledging that it and the state Department of Justice would “evaluate market trends and ways to respond to price volatility.”
Brown dipped his toe into the gasoline price issue 30-plus years ago during his first stint as governor and got politically burned. He’s clearly leery about going there again.
The most ironic aspect, however, is that in declaring in SB 448 that gas prices are being manipulated by oil companies, the Legislature undercut the liberal argument vis-à-vis oil taxes that gas pump prices cannot be manipulated.
It’s either one or the other, but it cannot – logically at least – be both.