California’s “summer blend” of fuel is hitting the gas stations and your wallet. The switch to the more ecologically friendly fuel was expected to increase prices by $0.30 per gallon. Wish that was true. It turned out to be more like a $1.00 per gallon, and it doesn’t seem to be stopping there.
CALIFORNIA’S FUEL PRICES WILL INCREASE
An effort in the California legislature to postpone the inclusion of vehicle fuels in the Cap-and-Trade program was killed by Senate President Pro Tem Darryl Steinberg (D). Therefore, the program will go forward on January 1, 2015, as will our fuel prices.
Fuel refineries in the state (remember California has a unique blend of fuel that is only refined in California) will have to purchase carbon credits from the Cap-and-Trade market to offset their emissions. In turn, they will pass along this increased cost to the distributors, who will pass along to the retailers, who will pass along to the consumer.
It is estimated the initial increase will be $0.13-$0.18 per gallon. The cost in the short and long term will depend upon the cost of carbon credits.
Get your shocked face ready…. Outside of Hawaii and Alaska, with their transportation and distribution issues, California’s fuel prices rank as the 3rd highest in the nation. Our whopping $0.498/gallon in fuel taxes does not help, nor will the estimated $0.14/gallon increase in 2015 as a result of the state’s Cap and Trade program. As part of the program, California’s refineries will be required to pay a tax based on their emissions. This tax will, of course, be passed along to the consumer.
California cannot source fuel from other states as it requires a unique blend of fuel. Refineries in other parts of the country do not find it cost effective to produce and ship into California when it is the only market requiring this boutique blend of fuel.
CAP-AND-TRADE AND FUEL PRICES AND YOU
Why, you ask? Because that’s when California’s cap-and-trade regulations take effect. Fuel refiners will have to buy credits (i.e., pay a tax) to off-set their emissions. The total “tax” to be paid by the oil companies is expected to be $3.6B/year. They will, of course, increase their prices to the distributors, who will increase their prices to retailers, who will increase their prices to consumers.
Why doesn’t California source its fuel from other states, you ask? Because California has a special formula of fuel that is only required in this state. It is not cost effective for producers in other states to reconfigure their lines to refine our boutique brand of gas and diesel and then ship into the state.
How is the money collected via the cap-and-trade tax going to be spent, you ask? The state expects to collect $9B/year in taxes and have earmarked 20% of that amount to subsidize a high speed rail project.