Californians have been paying a heavy price since 2015 for state officials’ failure to solve the mystery of an unexplained gas surcharge that may be going into the pockets of oil companies.
The governor and legislators have offered little more than lip service even though the mystery surcharge in 2021 cost motorists about $4 billion, or about $400 for an average family of four.
The Legislature should pass state Sen. Ben Allen’s bill that would require oil refiners to disclose the average price they pay for crude oil along with the profit margins on the gasoline they sell every month. But that is only the first step toward bringing much needed transparency to California gas prices. The Legislature should also empower a state body with the authority it needs to investigate the oil industry’s pricing patterns.
It won’t bring immediate relief to soaring prices. But it would get to the heart of an issue that has been costing consumers between 30 cents to 50 cents a gallon since 2015.
Make no mistake, Russia’s invasion of Ukraine is primarily responsible for the recent spike in California gas prices to an average of $5.75 a gallon on Tuesday. The rapid increase is pressuring Gov. Gavin Newsom and the Legislature into action. But as we noted in Sunday’s editorial, the governor’s gas tax rebate proposal is a bad idea. So is the notion of a gas tax “holiday.”
The price of gas in California is the highest in the nation. That’s in part due to our high tax rate on fuel and the cost of producing our special blend of gas that has helped reduce pollution levels in the state. And then there’s the mystery surcharge.
It was UC Berkeley Professor Severin Borenstein who uncovered the surcharge. Borenstein says it pretty much didn’t exist before 2015. But ever since an Exxon Mobil refinery explosion that year, a large, unexplained premium has been going to gasoline sellers. He estimates the current surcharge at an outrageous 48 cents a gallon.
The California Energy Commission assigned an independent panel of energy experts to investigate the issue, with Borenstein as its chairman. But it didn’t provide the panel with the power needed to bring oil companies to the table, much less reveal their pricing practices. Newsom later asked the state Attorney General’s Office to investigate California’s gas prices, but the AG is primarily concerned with looking for criminal behavior, such as price-fixing, when what may be needed to solve the problem is more regulatory in nature.
One way or another, California must get to the bottom of the mystery gas surcharge. The sooner, the better, given the likelihood of an extended war in Ukraine and continued high prices. The governor and the Legislature should act immediately to provide a clear picture of whether oil companies are unfairly profiting at the expense of California drivers.
Editor’s note: Severin Borenstein, a professor of business and public policy at UC Berkeley’s Haas School of Business, is the brother of East Bay Times Editorial Page Editor Daniel Borenstein. Mercury News Editorial Page Editor Ed Clendaniel wrote this editorial.
