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Note: This an October 2014 blog post about an oil industry PR campaign against the implementation of the Low Carbon Fuel Standard, part of California’s global warming legislation. This article is NOT about the April 2017 California transportation funding bill which entails an actual CA gas tax increase!
Here’s who’s behind the “Hidden Gas Tax” ads you may have seen in California, and how they’re misleading. We also explain the Low Carbon Fuel Standard (LCFS) that they’re attacking and how it fits into California’s Cap and Trade law (AB32). Last, we explain how, as with the California Climate Credit, it’s smart policy designed to drive down Californians’ CO2 footprint from driving. That said, if your car burns gasoline, LCFS won’t significantly reduce your CO2 footprint from driving anytime soon, but you can still reduce your gasoline use and offset the CO2 from driving that you can’t avoid.
Who’s Behind The “Hidden Gas Tax” Ads
The ads are the work of the California Drivers Alliance, a group created by Wayne Johnson Agency. They’re a Sacramento public affairs firm hired by the Western States Petroleum Association (WSPA), which includes major petroleum producers like Chevron, Exxon, BP, and Shell. The campaign is similar to that of the California Independent Oil Marketers Association’s (CIOMA) Fed Up At The Pump. This is the latest of many efforts against AB32, as outlined by the NRDC here.
LCFS Should Really Be Called “Fuel Savings In Plain Sight”
The California Air Resources Board (CARB) openly shared its 2010 analysis of a projected 4 to 19% fuel price increase by 2020 as a result of the LCFS (explained below). A CARB spokesman recently said the range is actually outdated and that “we don’t believe there will be any discernible increase in pricing next year.” Further, the same 2010 CARB analysis estimated that CA’s annual per capita fuels expenditure will drop by over $400 by 2020 because of increased car efficiency.
What The “Hidden Gas Tax Ads” Hide
The ads exclude both the revised estimate of no gas price increases and the projected $400/year savings. They don’t mention gas prices are nosediving to below $3 per gallon for the first time in 4 years as refineries are making solid progress reducing their GHG emissions, demonstrating that the latter doesn’t cause the former. What’s also hidden is how much the California Drivers Alliance receives from from WSPA and what CMIOMA is spending on the Fed Up At The Pump campaign.
Why Oil Companies Understandably Hate The LCFS
Government incentives and manufacturing advances have made alternative fuel vehicles accessibly-priced before the LCFS even goes into effect. Case in point is the Nissan Leaf. My sister-in-law leased a Leaf. Over $10K in federal and state rebates significantly reduced the $28K MSRP and canceled out the $2.5K downpayment. The $220 lease payment, less than what she was spending monthly on gas, is canceled out by free charging at work and from Nissan. The car is not free, but switching to it, and taking gasoline out of the picture altogether, is.
The Bigger Picture
As with hybrids, electric and hydrogen fuel cell cars will proliferate and come down in price. Receding demand will create downward price pressure on petroleum-based fuels. That in turn benefits users of light trucks, delivery vehicles, and construction equipment – those for whom alternative fuels are not an option. That’s a virtuous cycle for everyone, even for those who continue to burn gasoline and diesel. Everyone except oil companies. The permanent contraction in price and volume means goodbye to an extremely profitable status quo.
The LCFS is not going to trigger this dynamic or push it past a tipping point, which has already happened. As mentioned, gas prices are going down, refineries are cleaning up, and people are buying alternative fuel vehicles before LCFS goes into effect. LCFS is going to accelerate this, and that’s why oil companies understandably hate it. And the stakes are much higher when one considers “As California Goes, So Goes The Nation.”
So What Should Oil Companies Do Instead, Then?
One way CA refineries can meet their targets is to clean up their processes by installing equipment like flue gas scrubbers. And technologies exist which create gasoline, diesel, and other fuels from non-fossil sources (like agricultural waste); burning a gallon of non-fossil gasoline does not count in the eyes of LCFS.
Right now, it’s more profitable road for oil companies to fight policies like LCFS than invest considerably more money in adaptation. The argument that it’s oil executives’ fiduciary duty to forestall adapting as long as possible in the name of maximum profits is flawed, obviously from a stakeholder standpoint but also even from a shareholder one. How they’ll do it is unclear, but if the old dog doesn’t itself some new tricks, that’ll hurt shareholder value too because they’ll become a lot more obsolete than if they had adapted.
More About The Low Carbon Fuel Standard (LCFS)
Transportation causes about 40% of California’s greenhouse gas emissions because we rely on petroleum based fuels for 97% of our transportation needs. The LCFS, which goes along with the Global Warming Solutions Act of 2006 (also known as AB32), is set to go in effect on January 1, 2015. The LCFS addresses the carbon dioxide emissions associated with the production, refining, distribution, and consumption of transportation fuels. It seeks to cut those emissions 10% by 2020.
Though it’s designed to be agnostic about fuel type, LCFS heavily disfavors petroleum-based fuels not only because their extraction, refinement, and distribution produces lots of CO2, but also because 19.4 pounds of CO2 are released when each gallon of gasoline is burned. Here’s a brief ARB video about the LCFS:
COTAP and Carbon Offsetting in The Context of LCFS
As mentioned above, LCFS is designed to address the lifecycle CO2 emissions from extracting, refining, distributing, and burning any transportation fuel. For a gallon of gas, that includes the 19.4 pounds of CO2 that are released when you buy and burn it. The LCFS goal is a modest 10% reduction in carbon intensity by 2020, and if they hit that goal it means you would only need to offset 90% of the gasoline you buy and burn. But right now the carbon intensity requirement is capped at 1% due to lawsuits (guess who?). So right now, despite LCFS passing, you’re still creating 99% of the same gasoline carbon pollution as you did before LCFS.
Our Favorite Hidden Gas Tax Ad…
We especially love this one with the little girl in the back seat, complaining about the cost of gas while riding around town only with her Dad… in a minivan… that seats seven. “I guess I can kiss my grape slushie goodby,” she laments. Decrease your car-to-people ratio, young lady, and you can have all the slushies you want!