While the whole country is hurting over high gas prices, in part due to the Russian invasion of Ukraine and sanctions, California drivers are hurting really bad California currently has the highest gas prices in the country hitting a statewide average of $5.44 a gallon earlier this month. A lot of that price is taxes. But, as KTLA reports, California drivers have been paying a secret tax since 2015 that no one really knows about and lawmakers haven’t done much about.
Late last year, a report found that $1.18 of California’s gas prices were made up of taxes and fees. But in 2015, things changed, and an additional tax quietly appeared, hitting the wallets of California drivers even more.
That change was the explosion at the Exxon Mobil refinery in Torrance in 2015. That explosion sent the state’s gas prices higher. Damage from the explosion caused the refinery to run at half capacity, costing drivers some $2.4 billion. The tax came and never left, with UC Berkley economist Severin Borenstein calling it a “mystery gas surcharge.” Not much is known about it. From the LA Times:
Borenstein said, the average mystery gas surcharge in California was 48 cents. That’s 17 cents higher than the average mystery surcharge in 2021, but only 1 cent higher than the average surcharge for December.
Kara Greene, a spokeswoman for the Western States Petroleum Assn., said an average of $1.27 of each gallon of gas sold in California goes to taxes, fees and climate programs. Of that amount, 10 cents on average goes toward state and local sales taxes, the latter of which can vary widely, Greene said.
Borenstein broke down how much drivers have paid in the tax since 2015 in a blog that goes in-depth about the tax. Taking into account the spot price of gas (spot price is the current market price of gas or any other commodity that can be bought and sold immediately) and the upcharge many gas stations have just because he estimates that drivers have paid billions in the mystery tax over the years:
This decomposition of California’s elevated gasoline prices shows the significant source of the problem. Comparing 2010-2014 to 2015-2019, the spot price of California gasoline rose just 2 cents relative to spot gasoline elsewhere in the country, but the distribution and retailing margins increased 29 cents relative to the rest of the country. 29 cents per gallon translates to over $22 billion of the $26 billion MGS since 2015.
So what have lawmakers done about this mystery tax? Not much. Governor Newsom called for an investigation into the state’s gas prices by the attorney general… and that’s it. Not much has been said about it since then. Unfortunately, it could take years to do something about it while drivers continue paying a tax not many are paying attention to.