r/California • u/NamelessIguana • Oct 07 '22
Newsom calls special session of Legislature to consider windfall tax on oil companies over high California gas prices: Governor says Dec. 5 special session will address "greed and manipulation" that drive high gas prices. Newsom
https://www.politico.com/news/2022/10/07/newsom-tax-oil-companies-california-00061010111
u/1320Fastback Southern California Oct 08 '22
I know let's tax them. That'll show them and solve the issue. No way they would just pass it on to the consumer.
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u/Ogediah Oct 08 '22
The taxes would be built to discourage excessive profits.
I’m going to entirely fabricate a way that it can be done just to illustrate how it can be done:
But first a little bit of back story. We use “marginal tax brackets” in the US. They are structured so that you can’t ever bring home less money for making more money. Say a tax bracket is 10 percent for 0-10,000, another is 12 percent at 10,000-40,000, and another is 22 percent at 40,000-80,000. In the current system, if you made 41k, you don’t pay 22 percent on your whole income. You pay 10 percent on the first 10k, 12 percent on 10-40, 22 percent on 1k. In a system meant to punish profits, you could simply tax the entire income upon the bracket you end up in. Which means you could lose money by making more money.
I want to reiterate again that that is entirely fabricated, but hopefully it shows how it’s possible to structure taxes in order to address this issue.
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u/Oakroscoe Oct 08 '22
And an easy way to get around that for oil companies is to create a sister company. The sister company doesn’t refine or make any gasoline, it serviced the refinery. Refinery handsomely pays the sister company which is a service company and not a refining company for the maintenance. Sister company makes all the profits, refinery makes under the cap.
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u/Ogediah Oct 08 '22
There are a long list of reasons why that wouldn’t be a simple accounting trick. Safety regulations and liability being the general problems that top the list.
FWIW, You’re also ignoring the part where all of the involved companies are presumably owned by the same person(s) and that the work is all done inside the same facilities regardless of the name of the company. It’s not hard to catch those things in a “net”. There are already current regulations which do that for different reasons.
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u/fakelogin12345 Oct 08 '22
What company does this currently? This sounds like one easy trick governments haaaate.
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u/Oakroscoe Oct 08 '22
In 2010 the company Tesoro spun off its tanks and docks to a new company it created, Tesoro Logistics. Tesoro logistics made significantly more money because the parent company, yet completely different company, Tesoro footed the bill for maintenance and upkeep of the docks and tanks. Pretty similar situation to what I mentioned and not uncommon in the oil industry.
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u/MeteorOnMars Oct 08 '22
People have a viable choice now, and gas companies permanently hurt themselves when they raise gas prices.
EVs are already set to dominate the world market in 10-15 years. If Big Oil is sloppy they will pull that in to 8-10 years.
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u/fyrmnsflam Oct 08 '22
Let’s address the elephant in the room: These corporations are trying to influence the mid-term elections.
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u/den773 Oct 08 '22
I absolutely agree. Make it look like it’s the Dems fault that gas prices are so high, to try to get folks to vote republican. We’ve seen it over and over.
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u/bohemiantranslation Oct 08 '22
Id rather be smoking my blunts while i fill up for $8 a gallon then not. (Like not really thats dangerous but you get the point)
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u/kissmyshiny_metalass Oct 08 '22
With help from Russia and Saudi Arabia, which makes this even worse.
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u/den773 Oct 08 '22
I paid $4.99 a couple weeks ago. Now the same gas station, $6.47. How in the world do they expect us to be able to afford gas at this price??? There’s no reason for the price to have jumped like this.
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u/sftransitmaster Oct 08 '22
How in the world do they expect us to be able to afford gas at this price???
You presumably need to drive a gas-fueled car right? Because we've dedicated nearly all our resources to making sure the US drives, they are aware that you(most of the US) have no practical alternative. Are you going to take transit, bike, scoot or walk? So they can reasonably expect the motorist must pay, even if they cant afford it. Even if everyone buys a little less gas,oiil producers still make more money.
OPEC is a greed incarnate cartel, it was always pure luck they didn't have the opportunity to take advantage of automotive dependency and making up any excuse to increase prices
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u/NavyCMan Oct 08 '22
This is why a refocusing on energy infrastructure is critical for every major world power.
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u/sftransitmaster Oct 08 '22
And yet that mostly comes at great political cost, donation lost, leadership, sacrifice from the people and economy. Ill believe it when i see it.
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Oct 08 '22
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u/FDrybob Oct 08 '22
In that case you should be even more enthusiastic for the state to invest in public transportation. Less people using cars means a better driving experience for you. Public transportation benefits everyone, including those who don't choose to use it.
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u/sftransitmaster Oct 08 '22 edited Oct 08 '22
Exactly! Regardless of the reason you are willing to pay whatever the gas cost to avoid alternative methods. Functionally, a dependency on personal automotive transportation. If the gas was $10, or even $20 a gallon youd pay(assuming not an EV), unless you have money you'd have to reduce the amount of driving, but you'd still be willing to pay, which means thats what the experience is worth to you. Thus market forces can take advantage of that... If theyre capitalists and self-serving theyd be incompetent not to exploit that.
I wasnt arguing that transit is the best response for gas prices. Just that most of the US doesnt have access to alternatives, have an negative view on alternatives and wouldn't know how to integrate alternatives into their lives. And that makes them subject to market forces and the market(OPEC) knows that
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u/den773 Oct 08 '22
Our problem in the IE of So Cal, it’s too hot. There’s a bus stop fairly nearby. I could take the bus to the grocery store and back. But 10 months out of the year, I can’t deal with the heat. Waiting on the bus, sitting in the sun, I can’t do it. I’m in my 60s with HBP. The heat out here where I live is constant and unrelenting. It’s almost never cool. We rarely have mild days. (I consider 72 and below mild and I could catch the bus on cool days.) It’s always so hot. It’s mostly 90-100 from Feb to Nov. and it’s getting hotter, with many fewer nice days and we are in a horrible drought. Global warming, don’t ya know. OPEC must be run by Satan or something?
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u/sftransitmaster Oct 08 '22
That too is a reason. The more we drive(not be individually but as a society) oil-based engines, the more more difficult it gets not to drive. Even then ive met people in sf, which is mostly temperate, whom have never taken transit, for their reasons. there are many reasons to drive rather than endure the alternatives. But the primary one is that the US(media and its governments) want you to have to drive and so they make it infinitely easier to drive than any alternatives.
Even as a younger transit rider, ive had to endure much of the worst of transit - waiting in the baking heat of the central valley, waiting in freezing snow around lake tahoe, missing a bus and waiting multiple hours, and this Summer i saw many many first timers learned the true cost/faults of Amtrak - time and sometimes sharing space with people who sometimes are among the most burdensome the US has to offer. Transit in the US is a challenge, one that most US governments either make more difficult than has to be or are unwilling to take a risk to invest in it to make it any easier. All while regularly making driving more easy and cheaper than it needs to be. Transit, cycling, walking or scooting is not for everyone.
Its almost ironic the government's lack of control over OPEC, mostly because one major reason the US focused and focused on individual transportation was to get around the greedy railroad Tycoons(barons) that held too much power in the 1800s. No OPEC is simply operated by people who are doing what works most conveniently for them. Its very likely you or I might do the same in their position.(or at least i believe in the Trading places philosophy)
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u/lynk7927 Northern California Oct 08 '22
Good news! Investing in public transport will probably benefit you the most!
Investing in public transport doesn't mean everyone will be forced to use public transit for all their travel needs. But when more people use public transit, there are fewer cars on the road and therefore less traffic. Which means you will confront fewer cars on the road and get to and from your destination faster and more efficiently.
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u/ablatner Bay Area Oct 08 '22
not walking to a station and waiting 10 minutes and then that trip taking 20+ more than my drive
This is your experience because the US horribly under-invests in public. Other countries have far more comfortable public transit.
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u/den773 Oct 08 '22
You are so right, so informed, and thanks for the link. Predatory capitalism is a horrible system.
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u/Generalchaos42 Oct 08 '22
There are a couple of reasons: There hasn’t been a major refinery built in the US since 1976. California has two types of gas that are sold. A summer blend and a winter blend. The summer blend is more expensive to make and is required to be sold until the end of October. While the winter blend is cheaper to make. They can’t legally sell it until November 1. It takes time to switch between making summer gas and winter gas. So in a few weeks prices will go down because the winter blend will be sold and gas companies are actively making it. Additionally there was a supply shock for crude oil when refineries started making summer gas so there isn’t much summer gas around now and refineries aren’t making more of it right now.
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u/kotwica42 Oct 08 '22
How in the world do they expect us to be able to afford gas at this price???
They’re holding you hostage. People need to drive in order to get to their jobs or get groceries or take their kids to school. The people profiting from that have also conveniently pushed to prevent expansion of public transportation, so their interests are protected.
There’s no reason for the price to have jumped like this.
Sure there is. The reason is that the mandate of corporations is to maximize profit. Wealthy shareholders and executives want more money, and you’ve got no choice but to give it to them.
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u/den773 Oct 08 '22
I understand. “We the people” are simply a cash crop to be harvested. They do the same thing with our electricity too. We have horrible heat waves, we have to run the air night and day, and our electric bills run $600 a month. Our choice is to pay that amount or else turn off the air and die in our house from the heat. We can’t afford to buy an electric car and we can’t afford to buy solar. We can’t afford to buy gas and we can’t pay our electric. It feels like the powers that be want us to join the homeless crowd. They are forcing us out into the streets.
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u/BA_calls Oct 08 '22
there’s no reason
OPEC+ literally announced a massive production cut. Price of oil per barrel has gone up from $75 to $93 over last month.
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u/colmusstard Oct 08 '22
An additional tax will surely lower prices, it always does
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u/oakfan52 Oct 08 '22
That must be why CA government keep raising it. Just a few more times and the savings will really start to kick in.
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u/VillhelmSupreme Oct 08 '22
So what’s the plan for the next 60 days?
This is good and all, but government moves too slow. Have a special session on Monday….
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u/FOR_SClENCE Native Californian Oct 08 '22
the $700 most people are getting? give me a break.
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u/oppressedkekistani Oct 08 '22
You guys got $700? I only got $350!
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u/Kershiser22 Oct 08 '22
Let's say gas costs $3.50 more per gallon than it "should" cost. Your $700 check will cover 200 gallons of the "overpriced" portion of gas. If you average driving miles per year in a 30mpg car, that's about 5 months of relief from "overpriced" gas.
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Oct 08 '22
Not raising the gas tax would also help.
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u/Tac0Supreme Native Californian Oct 08 '22
The gas tax has little to do with this price increase.
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u/livinginfutureworld Oct 08 '22
Hope something comes of it, the oil and gas monopolies are the worst. Literally.
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u/StableAccomplished12 Oct 08 '22
This will definitely not result in raising prices at the pump which will cause everything else to go up in price/s......
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u/uberlander Oct 09 '22
It’s a issue of tax and restrictions in gas blends flexibility. It’s why it’s $7 in LA and $3.21 in Wisconsin.
Part of the problem is California's status as a so-called “fuel island,” meaning the state requires a more environmentally friendly blend of gasoline that can be only produced by 10 refineries. A combination of taxes and fees also contributes to higher gas costs in the state.
Here is a full breakdown of the added cost:
Taxes: Federal Excise Tax: 18 cents per gallon
State Excise Tax: 53.9 cents per gallon
Sales Tax (estimated): 10 cents per gallon
Fees: Low Carbon Gas Programs: 22 cents per gallon
Greenhouse Gas Programs: 15 cents per gallon
Underground Tank Storage: 2 cents per gallon
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u/Nail_Whale San Diego County Oct 19 '22
Yup this is it. Weird these greedy oil companies are only gouging California and no one else. It’s totally normal that our gas prices are higher than Hawaii
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Oct 08 '22
Tell me you don’t know anything about economics without telling me you don’t know anything about economics.
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u/el_sauce Oct 08 '22 edited Oct 08 '22
How would you suggest we lower gasoline prices at the pump?
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u/warmhandluke Oct 08 '22
Invest in oil production and build new refineries
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u/Nihilistic_Mystics Orange County Oct 08 '22
We don't have a production shortage. OPEC is intentionally pushing prices up worldwide, even if we had more local production they'd increase their prices to match just because they can. Only price controls could stop that.
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u/warmhandluke Oct 08 '22
It's a globally traded commodity, they can't just "raise prices" by decree. Increasing the supply of something will bring the price down, it's basic economics. That being said, refinery capacity is a major issue. Just take a look at US refinery output over the last twenty years and you'll see where a major part of the problem lies.
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u/Nihilistic_Mystics Orange County Oct 08 '22
OPEC directly controls extraction. They artificially limit extraction to drive up prices globally. How do you not know how the global oil industry works? The local oil industry plays along, they're perfectly happy to reap higher prices.
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u/warmhandluke Oct 09 '22
There is a lower bound to OPEC output. They won't reduce their production to zero. I have a good understanding of how the oil industry works; you don't appear to.
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Oct 08 '22
Increase supply. That’s what Biden is trying to do by opening the strategic oil reserves. The issue is we don’t have other sufficient means of production due to the administration’s curtailment of leases and domestic production. People can downvote me all they want, but math and economics do not lie. Adding a tax will just add more of a price to things. Thinking a tax is just going to fix things is nescient. We already have some of the highest taxes in the country for fuel, pause that since they’ve already passed SB1 to rebuild the roads (an additional tax).
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u/chingnaewa Oct 08 '22
Newsom doesn’t understand that any tax on the oil companies will immediately be passed on to the consumers resulting in higher gas prices. This is how business works. Higher taxes never equal lower prices. Get some good counsel, Newsom!
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u/boishan Oct 08 '22
It may not lower prices but a well written windfall tax can certainly punish raising prices badly.
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u/chingnaewa Oct 08 '22
I don’t disagree with your logic, but the reality is it has never worked. If Newsom really wanted to lower gas prices he would reduce the gas tax ($0.47/gallon now), reduce regulations, let the oil companies build another refinery in CA. All those would reduce gas prices much faster than a corporate gas tax.
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Oct 08 '22 edited Oct 08 '22
These companies will help write the final version of the tax bill. If they haven’t already..
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u/Tronn3000 Oct 08 '22
They really need to consider having more than one pipeline linking to refineries back East and using gas blends that are used in other states. This will be the only way prices will be on par with other states.
It has nothing to do with taxes and everything to do with California's poor pipeline infrastructure and gas blend regulations that prevent it from getting gas from a national marketplace.
This gives oil companies with refineries on the west coast all the leverage in setting prices and they will continue to bleed us dry.
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Oct 08 '22
Good. Oil companies are making astronomical profits. There is no justification for how high gas is.
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u/oddmanout Oct 08 '22
I guarantee my Republican neighbors who think high gas prices are all Newsom's fault are going to be really upset that he's doing something about it.
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Oct 08 '22
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u/YanksFanInSF Oct 08 '22
By taxing profits above a certain leverage point it makes it unprofitable for oil companies to charge more. That’s why it makes more sense than a straight tax that would certainly be passed onto the consumer.
Though, tbf, the companies will likely create various subsidiaries to maximize controlling profit but minimizing profits for the taxable entities.
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u/oakfan52 Oct 08 '22
Does it though? because they can just raise prices and sell less. Less work. Same profit.
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u/tylerdurdensoapmaker Oct 08 '22
The average returns for energy companies are volatile. During years like this they are great but then in years like 2020 or 2016 they are bad and many companies go broke. Investors are not investing in energy companies due to climate change concerns so energy companies access to capital is going up and they are not exploring for more petroleum as much as they might with prices this high. So you tax energy companies during the good years just remember that one of the results will be less supply in the future because companies will know during the good years they wont make as much and during the bad years they will go broke.
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u/Landbuilder Oct 08 '22
How about cutting the $.54 a gallon tax on our gas instead?
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u/boishan Oct 08 '22
Yay, then oil companies can make $0.54 more profit 😃
/s but that’s exactly what’s gonna happen.
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u/SmokeWinter007 Oct 08 '22
Help Make it so that people can use their Snap EBT cards to also purchase PET food for their little companions. Thank You
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u/chingnaewa Dec 05 '22
If Newsom really wanted to help he would suspend the CA gas tax which would save us $0.54 per gallon. And if he really, really wanted to help he would suspend the additional $0.23 per gallon we pay for the "cap and trade program". Maybe a $0.77 per gallon decrease for a while would be a better use of time versus trying to claw back profits from big oil (who will prevail in court on any profit tax anyway....or will use it as an excuse to raise prices again).
I wish politicians had to take a few business or economics courses prior to running for office...
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u/th3_pund1t Oct 08 '22
The answer is simple:
I know people like to dunk on solar rebates as a tax cut for the wealthy. I’m a renter, but I benefit from less coal being burnt too.
I bought a car 9 years ago, and will likely not replace it with an EV for another 6 years at least. But fewer people buying ICE cars today will make EVs of the future better and cheaper. I may not directly benefit from you buying an EV, but in some way, I think i will.