26/ Apr’19

Trump blames high California gas tax for ‘mystery’ price surge in state

Gas prices soaring in California

FBN’s Robert Gray on the surge in gas prices in California.

As gasoline prices in California soar past the national average, President Trump on Friday suggested it was the state’s high gas tax that was to blame as state lawmakers seek answers.

As of Friday, the average price of gasoline in the state was about $4.04 per gallon, compared with the national average of $2.88 per gallon, according to AAA.

California’s prices are at five-year highs.

The state charges one of the highest taxes on gasoline in the U.S. and the rate is set to go up again in July. The state legislature approved a 12-cent gas tax increase in 2016.

California Gov. Gavin Newsom on Tuesday requested that the California Energy Commission investigate why the state’s gasoline prices are so much higher than the rest of the country, citing independent analysis that suggests there could be an “unaccounted-for price differential” resulting from “inappropriate industry practices.”

Newsom's concerns appears to refer to analysis conducted by University of California Berkeley professor and former chair of the California Energy Commission’s Petroleum Market Advisory Committee, Severin Borenstein, who found there is a “mystery surcharge” for California drivers that cannot be explained by higher taxes – among the highest in the country – and producer costs.

“In the past few years, the price gap with other states has jumped much more than costs and taxes can explain,” Severin wrote in an October blog post.

Other experts, however, say it’s simple economics, considering there have been refinery outages in Los Angeles and San Francisco.

“When a refinery in a tight market like the West Coast goes down, knowing few refineries produce California's one-off gasoline mix, is a recipe for a course in Econ 101: supply drops, and demand is inelastic, meaning motorists still need fuel, so prices can soar,” Patrick DeHaan, a senior petroleum analyst at GasBuddy, told FOX Business. “I don't see much/if any manipulation here, this is how markets work.”

Trump also addressed concerns about a potential tightening of the global oil supply, resulting from his decision to end waivers that were granted to several countries allowing them to continue importing oil from Iran. Those waivers will end next week.

While experts have said a decrease in the global supply would hurt U.S. gas prices, the administration has insisted that it is in talks with other countries – including Saudi Arabia – about increasing its supply to make up for any short fall.