by Kenneth Schrupp
The Democratic governor of Arizona and Republican governor of Nevada signed a bipartisan letter warning against California Gov. Gavin Newsom’s gasoline refinery proposal they say could result in gasoline supply shortages and raise gasoline prices.
“It is evident that increased regulatory burdens on refiners and forced supply shortages will result in higher costs for consumers in all of our states,” wrote Arizona Gov. Katie Hobbs and Nevada Gov. Joe Lombardo in their letter to Newsom. “With both of our states reliant on California pipelines for significant amounts of our fuel, these looming cost increases and supply shortages are of tremendous concern to Arizona and Nevada.”
Newsom’s proposal would require refineries to build vast storage tanks to hold more than the two weeks of output currently required; Chevron, which operates the plurality of the state’s dwindling refinery capacity, says building each storage tank in California would cost $35 million and take ten years, and that the costs of building, filling, and maintaining these tanks would be passed on to consumers.
Hobbs and Lombardo also cited the Newsom’s own California Energy Commission’s finding that the proposal may “may artificially create shortages in downstream markets,” which they say would “raise costs for consumers in Arizona and Nevada.”
Newsom has publicly blamed gas refiners for “greed” and “price gouging,” but his own CEC appointee said increasing the supply of gasoline is key to preventing price spikes for consumers when one of the state’s handful of refineries shuts down. California’s refineries have dwindled to just 10, and with a moratorium on the sale of new gasoline-powered passenger vehicle sales starting in 2035, energy companies are reluctant to spend billions of dollars building refineries that would soon have no new customers.
Federal, state, and local taxes and fees add approximately $1.62 to the cost of every gallon sold in California, which has the highest gas taxes and gas prices in the nation. With California’s average currently at $4.75 per gallon, according to AAA, and the national average at $3.25 per gallon the gap between California and national gas prices is $1.50 per gallon. After deducting 18 cents per gallon in federal taxes, California state and local gas taxes and fees add $1.44 to the cost of each gallon of gasoline, or 96% of the cost difference between California and American gas. California uses its own special blend of fuel, which limits production to a handful in refineries California and in Washington state and also increases production costs.
Last year, the U.S. Environmental Protection Agency required that gas stations in Phoenix, Arizona, begin selling reformulated, lower-emission gas, reversing the 1998 opt-out secured by Arizona’s governor at the time.
“Our proposal will save consumers — including those in Arizona and Nevada — hundreds of millions of dollars every year by helping prevent these price spikes. It’s time to act,” said Newsom on X after the governors’ opposition letter was published.
Hearings for the bill will be held via special session on September 18, 19, and 26, with a vote on October 1.
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Kenneth Schrupp is the California reporter for The Center Square. His commentary and analysis have been published by Newsweek, RealClearPolitics, and the Pacific Research Institute.
Photo “Gavin Newsom” by California Governor.
