California Fuel Prices Going Up in 2015

SAN JOSE, Calif. (San Jose Mercury News/TNS) -

After months of seeing gas prices sink ever lower, Californians will ring in 2015 by paying more at the pump as a result of the state’s landmark greenhouse-gas-emissions law.

But how much more California’s residents will pay, and whether it’s worth it, remains bitterly debated among oil companies, some state lawmakers and environmentalists.

Starting Thursday, gasoline and diesel producers will be subject to the state’s cap-and-trade system, forcing them either to supply lower-carbon fuels — which are more expensive to produce — or to buy pollution permits for the greenhouse gases created when the conventional fuel they supply is burned. In the short term, at least, that will mean higher prices at the pump, starting almost immediately.

“My understanding from the economists that we’ve talked to is that it will be very quick, sometime in January — if not on the first, then shortly thereafter,” said Dave Clegern, spokesman for the California Air Resources Board.

Opposition groups backed by the oil industry have claimed prices will rise 16 to 76 cents per gallon, although that’s admittedly based on an underlying price of about $4 per gallon — far higher than recent prices. On Monday, drivers in the East and South Bay Area were paying an average of $2.68 per gallon for regular gas, according to the American Automobile Association. A University of California, Berkeley energy and economics expert says the increase will be more like nine or ten cents per gallon, which supporters say isn’t so high a price to pay for the environmental good it will do.

Some Democrats want to delay the program; most Republicans want to stop it entirely. But at present, there is little prospect of either happening, given Gov. Jerry Brown’s strong support of the program, which is enshrined in an eight-year-old law.

“A lot of Californians still don’t know this is coming,” said Republican state Sen. Andy Vidak, who has a bill to exempt transportation fuels from the cap-and-trade requirements. “It’s going to hurt the poorest people in the state … Gasoline is not a luxury; it’s essential for folks.”

But the Air Resources Board says the state’s plan to ease climate change would be gutted without the program, and delaying it would only delay the incentive for oil companies to produce cleaner fuels.

“This is a move for the good of public health and the environment,” Clegern said. “Greenhouse-gas emissions are causing increasing problems, more people are seeing the impacts of climate change and transportation is the source of 40 percent of our greenhouse-gas emissions.”

California’s Global Warming Solutions Act of 2006 called for a cap-and-trade program placing an economy-wide limit that has been phased in over time on major greenhouse-gas sources such as refineries, power plants, industrial facilities and transportation fuels. The cap is lowered by about 3 percent per year to steadily reduce the state’s overall emissions. Industries in the program must either reduce their emissions or buy from a limited pool of pollution permits in quarterly auctions managed by the Air Board.

Clegern said hundreds of millions of dollars from the auctions will go to the same disadvantaged parts of the state that the cap-and-trade foes say they’re trying to defend and will pay for energy-efficient affordable housing, mass transit, cleaner cars and more. “That’s as opposed to that money leaving the state, as most oil profit does,” he said.

But nobody likes paying more at the pump. Two self-proclaimed “grassroots” groups have gathered petition signatures, organized letter-writing campaigns and exerted other pressure to halt what they call a “hidden gas tax” that will hurt ordinary Californians.

The California Drivers Alliance says it “serves as the voice of consumers, farmers, small businesses and fuel suppliers,” but it’s funded by the Western States Petroleum Association, a trade group with members including Chevron, Valero, BP, ExxonMobil and Shell. Another group, Fed Up At the Pump, calls itself “a grassroots coalition of consumers, businesses, and advocates” but includes the California Independent Oil Marketers Association — a group of oil retailers and distributors — as well as many individual oil-related companies.

In June, 16 Assembly Democrats urged California Air Resources Board Chairwoman Mary Nichols to “delay expanding the cap-and-trade program to cover transportation fuels, or at least change the program” to avoid price hikes that could weaken the still-fragile economy.

Nichols replied in July that the state has been phasing in its cap-and-trade program since 2011, on a schedule set after extensive public hearings.

With many businesses already having planned for this, “to remove fuels from the program at this late date would be disruptive and a major setback,” she wrote.

Vidak said that California’s recent drop in gas prices has given residents a much-needed chance for them to “catch up a little bit” after years of belt-tightening. Taking money out of their pockets now is wrong, he said.

“If it was going to clean the air (of) the Central Valley, then we could have another conversation, but it’s not going to clean the air,” he insisted.

Clegern said that’s exactly what it will do, as transportation fuel creates 80 percent of the state’s smog-causing pollution.

“The fuel suppliers have known they were going to be doing this now for more than five years, and they have been at the table with us throughout the process,” he said.