Does Joe Biden Want to Do to Car Prices What California Has Done to Gas Prices?

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Most Americans taking to the roads this Memorial Day weekend will be paying around $3 per gallon of gasoline, but in California the number is well over $4 per gallon. The difference is due in significant part to costly state environmental measures, including ones imposed in the name of fighting climate change. The bad news for non-Californians is that President Biden wants to impose the same agenda nationally. The only difference is that Sacramento has targeted gasoline for price hikes while Washington is focused more on the vehicles using it.

The underlying cost of oil is the single biggest contributor to the price at the pump, and oil has been trending upward as the world gradually emerges from the COVID-19 pandemic and lockdowns. That explains why gas prices nationwide have risen in recent months, but it cannot explain why California is so far out in front. The state’s ultra-stringent environmental measures are a big part of the reason.

This includes California’s Carbon Cap and Trade (C&T) and Low Carbon Fuel Standard (LCFS) programs, both of which penalize gasoline because its production and use releases greenhouse gases. According to transportation fuels consulting firm Stillwater Associates, C&T adds about 14 cents per gallon while the LCFS adds another 22 to 24 cents per gallon. Both programs get more stringent each year, so that the added cost by 2030 is projected to be 89 to 210 cents per gallon. These relatively new climate polices add to the burden of California’s older environmental requirements, such as extra-stringent smog-fighting gasoline specifications required in several of the state’s major markets during the summer months.

California’s high gas tax, which at 62 cents per gallon is more than double the average of the other 49 states, also adds to the disparity. Though not strictly an environmental measure, the recent increase in the California state tax has been justified in part by climate change concerns.

Thus, extra environmental regulations and taxes explain the lion’s share of the additional dollar per gallon that Californians pay. Given that the average household uses more than 1,000 gallons of gasoline annually, this is no small matter for struggling families.

While President Biden has wholeheartedly embraced California-style climate alarmism, a gasoline price-raising agenda will be harder to adopt nationally. The last attempt at federal cap and trade legislation went down in flames in 2009-2010 and  was part of the reason Republicans retook the House in 2010. A national LCFS is also unlikely, although the federal Renewable Fuel Standard can impose some of the same damage and could get worse in 2022 when the Environmental Protection Agency (EPA) is handed more implementation flexibility. California-style gasoline tax hikes are on the table (the federal tax of 18.4 cents per gallon has not been raised since 1993), but face an uphill battle. Most likely, the President and Congressional Democrats can’t count on enough Republicans to provide bipartisan cover for such an unpopular measure.

While it won’t be easy for the Biden administration to substantially boost gasoline prices, it can act to raise vehicle prices, something it may be able to accomplish without Congress. Tough Obama-era fuel economy/greenhouse gas emissions standards for cars, which were relaxed under Trump, are now under review by the Biden EPA. The agency could come up with standards even more stringent than the Obama-era ones, which may have added as much as $3,800 to sticker prices. The price boost would be highest for the larger gas-powered SUVs and pickup trucks many Americans prefer. The Biden administration has also proposed allowing California to set standards even more stringent than any new federal ones.

It is all part of the Biden administration’s one-two punch to make a wholesale switch from gasoline powered vehicles to electric vehicles (EV) by artificially raising the cost of the former while heavily subsidizing the latter. Expect carrots for EVs to go along with sticks for gasoline-vehicles, including the proposed infrastructure package, which would give away $174 billion to subsidize EV charging stations as well as up to $10,000 per vehicle in tax credits for EVs.  California and copycat states are even more all in on EVs, with generous state provisions added to the federal ones.

Longer term, the Biden administration’s crackdown on oil leasing and permitting on federal lands, on new pipelines to transport it, and on the ability of banks to lend money for such activities, can only add upward pressure to the future price at the pump. Other price-boosting regulatory measures, like going after carbon dioxide as a criteria pollutant under the Clean Air Act, are also possible.

Whether its more pain at the pump, more pain at the car dealership, or both, the Biden administration is likely to do all it can to wage a California-style war on gasoline-powered vehicles.