Jan 20, 2022

After weeks of Californians paying record high gas prices – and as analysts are expecting prices to keep climbing higher in the months ahead – Governor Newsom finally addressed the issue of high fuel costs last week.

At a press conference unveiling his annual budget proposal, Newsom called for the legislature to delay the state’s gas tax inflation adjustment scheduled for July. He dubbed the proposal “a gas tax holiday of sorts.”

But while the headline savings figure may seem large – Newsom highlighted how the tax deferral would lower state revenues by $523 million – the actual impact on households will be marginal. 

Budget projections show that, as scheduled, the inflation adjustment would raise the state gas tax $0.03 per gallon starting with the new fiscal year on July 1st. Delaying the adjustment would save the average California driver around $16 over the course of a year.

But, of course, Californians are paying the highest gas prices in the country by far – an average of $4.65 per gallon as of mid-January. Given that the national average for a gallon of gas has hovered around $3.30, a typical driver is paying $706 more per year for gas in California compared to the national average.

With Newsom’s proposed inflation adjustment holiday, the average California driver would still pay $690 more per year for gas, given current prices.

While the governor’s proposal finally recognizes the problem of high gas prices, it sorely misses the mark. In the face of a massive and historic cost burden today, Newsom proposes to defer an increase to gas prices in five and a half months.

At last week’s press conference, even the governor himself called the proposal “modest.” Yet, obvious to anyone currently paying for gas in California, the challenge of high prices at the pump is no cause for restraint.

Instead of meddling around the edges with performative budget gimmicks, Newsom could address the real issue driving gas prices higher: the fact that the supply of oil is falling well short of demand.

The solution that will truly address this challenge is no secret. If Newsom actually wants to provide Californians relief from high gas prices, he could allow for more in-state production of oil under the world’s strictest public health, environmental and safety regulations, and quit forcing California to rely on expensive foreign oil imports from halfway around the planet.

Until then, California consumers and businesses should not expect Newsom’s modesty to truly move the needle on skyrocketing gas prices.