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Lawmakers debate about oil production and local gas prices

‘By California for California.’
Posted: 5:02 PM, Mar 21, 2022
Updated: 2022-03-22 13:11:44-04
Gas Prices

BAKERSFIELD, Calif. (KERO) — As we all feel the stress of increasingly high gas prices, our congressman, the GOP House Minority Leader Kevin McCarthy, along with other local and oil leaders are pushing for the state to become energy independent by using only California produced oil.

Congressman McCarthy would like to see more working wells in the state to increase domestic production which he believes will alleviate the gas prices we are seeing.

“We should become not just energy independent in America, we should be dominant. God has blessed us with the ability to do that. In doing so, America would be stronger, and the world would be safer.”

Strong words from House Minority Leader Kevin McCarthy who went on to say Russian President Vladimir Putin is getting the money that should be going to more local jobs.

However, in early March, President Biden put a ban on Russian oil and gas imports.

Although McCarthy argues the U.S. simply moved on to another foreign country like Venezuela for supply.

Cutting ties with foreign countries for oil is something most on both sides of the political aisle seem to agree on, it's how we make up for that energy that is causing the divide.

“Making California be able to produce more and lower our prices,” said McCarthy.

“We actually need to break our dependence on fossil fuels, which are unpredictable and volatile,” said Dan Ress, Staff Attorney with the Center on Race, Poverty, and the Environment.

Ress said instead of doubling down on gas, this would be the time to move towards renewable energy.

“Communities are suffering because of oil extraction here and fighting the existential threat of climate change and so there are other options. Instead, we can invest in renewable energy like batteries.”

Now for those in the oil industry, the solution is ramping up production which has been decreasing for years.

Even with the decline the U.S Department of Energy shows in 2019, Kern County was the seventh highest oil producing county in the nation.

But Michael Gooding, The President of the San Joaquin Facilities Management said the decline is because of the restrictive policies coming down from the state, referring to the permits that have been denied for more wells to be built.

“If the permits were approved by the Newsom administration, all of the producers would ramp up overnight, our energy producers are ready to go. They have been waiting for the permits some as much as four years,” said California State Representative Vince Fong.

During his state of the state address recently, Governor Newsom refused to address an increase in production to offset rising prices saying he wouldn't return to energy from the 20th century, calling the industry "petro-dictators".

But even if he did sign those permits, it might take a while to actually see that make a difference at the pump.

“It is going to take time, I mean a thousand permits, it is going to a while. All the wells can’t be drilled at once, it takes manpower, it is going to take a serious amount of time,” said Gooding.

Something Dan Ress echoes, but also adding the oil industry is a global market and California alone is not able to make the impact needed to affect gas prices.

“Certainly, what is happening in Ukraine, and with Russia, and all the sanctions, is impacting global prices. Russia is the major exporter but the small amount that California produces could increase, on top of our production, especially given our aging reserves that are already over tapped, is a drop in the bucket. It doesn't have any slight comparison to what is going on in Russia.”

While all of this is being debated, people are still struggling with the increasing gas prices. That is why now lawmakers on both sides are looking for way to create immediate relief. Again, how it is done will be the issue.

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According to the National Association for Convenience and Fuel Retailing (NCAS), gas prices differ for three reasons: taxes, fuel blends, and margins. This means the role taxes play in price varies by state.

The average price of regular gas right now in Bakersfield is $5.78 per gallon.

All retailers must assess the 18.4-cent federal gas excise tax. That's on top of the state's additional taxes and fees.

The California gas tax is 51.1 cents per gallon and is expected to rise again in July.

Sales tax accounts for about 10 cents per gallon.

So, you paying about 80 cents per gallon in taxes.

Now let's talk fees. According to Stillwater Associates, an organization that deals in transportation fuels markets, there are three fees that you pay for gas.

The Underground Storage Tank fee is about 2 cents per gallon. This fee goes into a fund that provides "financial assistance to the owners and operators of underground storage tanks to remediate conditions caused by leaks, reimbursement for third-party damage and liability, and assistance in meeting federal financial responsibility requirements."

The Fuels Under the Cap fee, which is part of the state's Cap & Trade (C&T) program, which looks to offset greenhouse gas emissions, is about 15 cents per gallon.

And finally, the Low Carbon Fuel Standard fee is about 22 cents per gallon. This is tied to the fact that California is the only state that requires unique fuel blends. It's more costly to produce and raises the cost at the pump.

You are paying 39 cents per gallon in fees.

In total, you are paying an average of $1.19 in taxes and fees per gallon of gas.

Lastly, let's talk margins. The price of a gallon of gas can vary depending on the location of the store, nearby competition from other businesses and retailers, and the brand of fuel sold.

For example, according to the NCAS, "In the U.S., gas sales at convenience stores account for 53% of revenue dollars but only 42% of profit dollars. In other words, gas sales drive customer traffic but in-store sales drive the business—and increasingly in-store sales are generated by prepared food sales."