Dan Walters

Opinion: Gasoline prices fall but will climb under cap-and-trade

Gasoline prices in California – and everywhere else in the nation – have been dropping sharply in recent months, down as much as $1 a gallon from several years ago.

Regular gasoline was as low as $3.09 a gallon in some California stations this week.

The savings to California motorists, who drive more than 300 billion miles a year, are immense. A $1 price drop means $15 billion less that they must shell out each year.

Fast-dropping gas prices stem from sharp drops in crude oil prices, which stem from a global oil glut, which stems largely from declining demand and rising production from American shale deposits via fracking.

While motorists are happy, the situation doesn’t please everyone, particularly environmentalists who dislike fracking and believe that higher gas prices are needed to curb consumption in the name of reducing greenhouse gas emissions.

The phenomenon has a unique political effect in California because early next year – after this year’s elections, conveniently – gasoline will be added to the state Air Resources Board’s “cap-and-trade” program of reducing greenhouse gases.

Bringing gasoline refiners under the program will raise their costs, and to some extent – how much is still unknown – they will shift those costs to motorists in the form of higher pump prices.

It could be a few cents a gallon or as much as 70 cents, according to official estimates. Officially, it’s a fee, but in effect it’s a gasoline tax; in fact, a lawsuit by business groups wants cap-and-trade fees branded as taxes, which would require legislative votes, not just ARB approval.

Advocates of including fuel in cap-and-trade hope that with prices in decline, the extra “fee” won’t become a serious political issue. But some Democratic legislators were concerned enough that they publicly called for a delay in implementation, citing its effect on the poor.

The legislators knew it wouldn’t be delayed; they were just buying insurance policies against voter/motorist backlash. And the oil industry has spent some money on campaign ads for those who made the call.

Actually, the decline in gas prices might make the cap-and-trade boost, whatever it is, stand out more because it would be, proportionately, a bigger bite on motorists’ wallets.

Moreover, there is more at stake than simply the price of gasoline or its presumed effect on climate change.

Capitol politicians depend on cap-and-trade revenue, from other hydrocarbons as well as gasoline, for high-dollar pet projects and programs.

Gov. Jerry Brown, for instance, counts on hundreds of millions of dollars each year from fees to finance his bullet train.

He and his aides are mulling a massive bullet train construction loan, backed by fees, to replace money he had hoped to get from the federal government or outside investors.

Call The Bee’s Dan Walters, (916) 321-1195. Back columns, www.sacbee.com/walters. Follow him on Twitter @WaltersBee.