In the realm of social media, the platform X, previously known as Twitter, has a feature that allows users to add context to posts from politicians or influencers.
This feature recently came into play when California Governor Gavin Newsom posted a video attributing the state's soaring gas prices to price gouging. "Don't buy the scare tactics from Big Oil. California's clean air policies aren't the problemgreed is," the video from the governor's office stated, citing record-high oil company profits as the main evidence.
However, as reported by Reason.com, users of X pointed out that the governor's claim was not entirely accurate. They cited the lack of competition among refiners, the unique clean-burning gasoline supply constraints, and higher state taxes as the primary factors driving up prices. They also noted that there was no concrete evidence of price gouging. This is a critical point, as oil companies operate nationally, making it difficult to understand why greed would only be an issue in California.
The concept of supply and demand, a fundamental economic principle, seems to elude some progressives. Sellers aim to get the highest price possible, while buyers seek the lowest. In a competitive market, there is no room for "gouging." Governor Newsom's new law to combat price gouging seems to overlook the fact that his own government policies are at the heart of the issue.
So, what factors contribute to the lack of competition among refiners in California? Firstly, the state's environmental regulations mandate a specific formulation of gasoline, which is not available in neighboring states like Nevada or Oregon. The U.S. Energy Information Agency explains that these restrictions limit supply from other markets, making fuels more expensive to produce and leaving California vulnerable to supply disruptions.
Secondly, California has the highest state gas tax rate in the country at 77.9 cents per gallon, according to the Tax Foundation. The state also increased its gas taxes in July. Additionally, new low-carbon fuel standards issued by the California Air Resources Board are expected to raise prices by 52 cents a gallon in 2026. These policies, supported by Governor Newsom, will further widen the gap between state and national gas prices.
Thirdly, the state's climate-change policies aim to phase out the oil industry. Newsom supports a law that will prohibit the sale of new internal-combustion-engine vehicles by 2035, requiring all new cars to have zero tailpipe emissions. "Cars shouldn't melt glaciers or raise sea levels, threatening our cherished beaches and coastlines," Newsom stated in support of these regulations. The governor also recently signed a law requiring oil companies to disclose their climate impacts, adding to their operational costs.
Attorney General Rob Bonta, with Newsom's backing, has filed a lawsuit against top oil companies, accusing them of deceiving the public about the reality of climate change and its connection to fossil fuel combustion. This has resulted in climate change-related harms in California, according to a statement from Bonta's office.
The shortage of oil refineries in California, as noted by an X user, further exacerbates the situation. Oil companies are reluctant to invest in additional refinery capacity in a state that seems unwelcoming. This lack of refineries further limits supply and increases prices. It's no wonder that Chevron decided to move its San Ramon headquarters and 2,000 jobs to Houston, ending a presence in California that dates back to the 1870s.
Despite evidence suggesting that California's specific policies keep gas prices high, Governor Newsom continues to push the narrative of price gouging. Recent surveys show that while most Californians blame high taxes as the primary cause of high gas prices, they rank price gouging second. "Newsom's gas price gambit is working," a July headline read.
However, the facts remain unchanged. The users of X seem to have a better understanding of the state's high gas prices than the governor. It's a sobering reality that the state's policies, not price gouging, are the root cause of the issue.
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