Sacramento Bills that are driving up states’ costs of fuels

Ronald Stein
Founder and Ambassador for Energy & Infrastructure of PTS Advance, headquartered in Irvine, California

Next time you feel like cursing the oil industry when confronted with California gas prices that far exceed those almost anywhere else in the country, think again.  We have state lawmakers and regulatory agencies to thank for much of the difference.

Most recently SB 1, effective November 1st gasoline excise tax increased from 18 to 30 cents, and diesel from 16 to 36 cents, as well as higher vehicle registration fees to finance transportation infrastructure.

The union labor bill SB 54, signed by Governor Brown in 2013 and effective January 1, 2018, requires the use of a “skilled and trained workforce” – i.e. union labor – to perform all onsite work of maintenance or repair, supply services, turnaround, major renovation or specialty work on or adjacent to a process within an apprenticeable craft occupation in the building and construction trades, and to pay at least the equivalent to the applicable prevailing hourly wage rate. 

PREVAILING WAGE LAW is California’s “other” minimum wage. It originally required workers to be paid union wages on “publicly” funded construction projects but in recent years has EXPANDED well beyond its initial purpose and become a tool for workers to demand union wages on virtually any construction project in California, public or private, potentially increasing the cost of a major construction project by millions of dollars.

It is one of the first laws of its kind in the nation requiring private entities to pay prevailing wages, which are typically much higher than market wages, for work performed under private construction contracts. This opens the door to extending prevailing wage to other types of privately funded construction, such as housing which is already unaffordable in the first place.

Proponents of SB 54 cloaked this thinly veiled hidden gas tax as a safety measure, despite the fact that U.S. Bureau of Labor Statistics (BLS) data shows that working in a refinery is safer than working in an office building, and the American Society of Civil Engineers (ASCE) Infrastructure Report Card cited BLS data showing that downstream refining businesses have been reducing the risk of all injuries for the last 20 years.

Yet ironically, as a result of SB 54, many non-union contractors that have helped reduce injuries to record low levels and have materially contributed to the stellar BLS safety data for refining may no longer be eligible to enter into contracts to perform that work. It’s unclear whether forcing contractors to hire union workers will improve one of the already safest industries. But it will surely result in millions of dollars in added operations costs per site, making California refiners even less competitive with out-of-state facilities than they already are.

Other cost increases are driven by legislative actions intended to reduce emissions for which the public has been very supportive of the emissions crusade regardless of costs. For example AB 32, California’s Global Warming Solutions Act, has already extracted billions of dollars from the public for the government since 2006 and will continue to add to fuel costs.

Collectively, these legislative driven-cost increases will add significant increases to our fuel costs: 1) The SB1 tax increases to gasoline and diesel fuels, as well as higher registration fees to finance transportation infrastructure that go into effect November 1st; 2) The union labor bill SB54 could cost refiners here potentially hundreds of millions of dollars to supposedly improve safety within one of the state’s already safest industries; 3). Four years from now, according to estimates from the state’s non-partisan Legislative Analyst’s Office, the Cap & Trade bill AB 398 could raise gas prices by another 63 cents per gallon in 2021, increasing to 73 cents per gallon in 2031, and 4)under the AB 32 Scoping Plan, California’s Low Carbon Fuel Standard (LCFS) costs are expected to grow and overtake those of cap and trade.

It’s largely our Legislators’ actions, not oil companies’, which are causing the price of California fuels to increase and provides the public with a dim forecast in the coming years as the burden of additional fuel costs will be falling completely on motorists and businesses. So when you get the urge to scream at the pump, remember that the decisions of California’s top politicians have a lot to do with what consumers will spend for gasoline, diesel and aviation fuels, and a myriad of other products and services, for many years to come.

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