Featured Gas Prices Shrink as Inventory Swells

CA enacted a carbon tax on oil companies as of 1-Jan-2015, so the question is: what's the impact? Being smart politicians, CA decided to invoice the oil companies directly for their carbon taxes, so therefore the carbon tax does not show up as a pump tax in the gasoline taxes. Therefore it is a "hidden" tax.

 

The california refinery issue is completely caused by regulation, and the biggest one is cap and trade the second is LCF applying to refineries instead of a simple tax, and some fund from the tax available for refinery maintenance. When you put up a big unknown tax making it look like refineries will be unprofitable in the future, the refiners cut back on proper maintenance and upgrades. That means when problems occur, the other refiners can make more money, until CARB decides to tax them again. They are getting their money out, instead of investing for the future. What will likely happen is in 10 years when the tax may be really high, some of the refineries will shut down, and California will be forced to import much more fuel from other countries and states, then apply a simple tax to it, because out of state refineries are not subject to cap and trade.

 

If you agree with taxing CO2, how would you prefer CA do it. CA tax entirely at the pump? Other?

Personally, I would prefer that CA tax at the pump. Not the biggest fan of the cap-and-trade scheme, but it's better than nothing, no?

 

The best way to tax oil is to tax oil directly by the gallon. That way you can allow imports of motor fuels and tax, without providing a reason for refiners to simply cash out and leave. I would have a part of the tax set to subsidize refinery maintenance. Let the tax slowly rise each year, but don't use it to artificially constrain the amount refined in the state, that doesn't make any economic sense.

The originators of cap and trade for power plant emissions don't think the california scheme will work at all. It will enrich some people, harm others, and mainly act as a mechanism to transfer money. The refiners aren't dumb. They are simply slowly pulling out, then california will end up paying more for in state refining, and have to pay their out of state refiners.

Think of it this way. If you decide that widgets take too much fossil fuel to make, so you tax the widget maker. The widget maker just moves out of state, and when you have a widget shortage they ship you out of state widgets that produce more ghg. You are punnishing the people in the state, not the widget maker.

A simple tax can reduce demand, which isn't as popular because there is no emotional "punnishing big oil" part of it. By the way saudi is punnishing big oil. There are 150,000 workers that have been laid off. Is it really smart to try to punish the few oil workers left in california?

 

If you notice, it is illegal to show gaso taxes on your gaso receipt. With all the local taxes and all, it is near impossible to figure out what your taxes are per gallon (since it is not provided to the consumer).

The best you can do is get the API data for average pump taxes in your state, and then if you know a little about local taxes you can estimate. Virginia has 16.2 cents/gal but the actual average is 22 cents/gal when you include fees and local taxes. I estimate my region is about 26 cents/gal whereas lower tax areas are closer to 19 cents or so (ballpark nos. of course).

 

A federal tax on oil that compensated for the entirety of its negative externalities would be ideal, but how does this work in California alone? California seem to lead in all of these things. If CA only instead taxed oil that went to its refineries, would we not end up in the same suboptimal scenario and get refined products from out of State?

Agree that there are many problems here and that the load is unfairly shifted to the CA refiners. But there must already be some significant positive impact to reduced transportation GHG in CA - as long as gasoline continues its even greater expensive margin in CA compared to national historic trends.

 

The correct sollution is to tax oil and refined products. Taxing refined imports is fairly straightforward to level the field between in state and out of state refiners. Still if california cuts its ghg, but the rest of the country does not, very little ghg will be cut. Congress just passed up a perfect oportunity to tax oil based fuels to at least cover road repair, but decided not to do it.

Ideally the taxes reduce oil consumption, and the money goes to further pollution reduction or reduction to other taxes. The system california is adopting simply makes refining get more expensive adding to costs. There is little revenue generated compared to the higher costs, so california citizens are simply paying to make refining less efficient. Most people outside the state think that doesn't make much sense.