Bob Sturtz: California strangles itself with fuel prices

Special to The Bee | Sunday, September 13, 2009
The Sacramento Bee

California’s gasoline taxes are 43 percent higher than the national average, according to a recent study by University of California and California State University economists. Since 1997, Californians have paid up to 60 cents more per gallon of gas than residents of other states. That is simply unacceptable. Major fuel consumers and employers in this state, like United Airlines, whorely heavily on affordable fuel prices, are being hit hard by these California-only fuel polices.

What causes this disparity in fuel prices? It’s simple: California prices are increasingly inflated by the state’s policies, taxes and fees. These California-specific rules and regulations ignore the ripple effect on fuel prices and availability for businesses and consumers alike, especially during these economically challenging times.

The cost of petroleum here – including the thousands of pounds of jet fuel that keep my company’s airplanes flying – is well above the national average. A recent media report noted that average fuel prices in three California cities – Bakersfield, San Francisco and Santa Barbara – are higher than Honolulu, where every drop of fuel must come by ship, with shipping costs passed on directly to consumers. In Sacramento, fuel prices recently rose more than 18 cents per gallon in a single week, drastically outpacing the national average.

As California fuel prices continue to soar, the new UC/CSU study details the disastrous effects this unchecked upward momentum could have on large and small industries and companies that do business here. The impacts on movement of goods, services and people is profound, ultimately diminishing the state’s quality of living and further highlighting the advantages offered by other states.

The urgency of this situation brought together some major industries – including United Airlines, UPS, Con-way Inc., Harris Ranch, Chevron, Avis Budget Group, Ambassador International and Union Pacific – to launch Fueling California, a new nonprofit coalition. Combined, our companies employ more than 350,000 Californians and contribute approximately $2.1 billion annually in tax revenues to the state.

Our goal is to help policymakers and regulators clearly understand the often unintended consequences of laws and rules that ratchet up the price and endanger the availability of fuel, and to help shape reasonable policies that address these issues. We also want to encourage active, responsible development of worthwhile alternative fuel options that help ensure a broad range of fuel choices.

If the present single-minded approach to fuel policies in California continues, such as the present proposal to impose new oil, carbon and "pollution" taxes, it could be catastrophic for the state’s economy. The higher costs affect literally everything manufactured or produced here. More businesses will determine it is just too expensive and too unpredictable to operate and will decide to shut down or move away, leaving tens of thousands more Californians looking for work.

For example, as fuel costs escalate, air-cargo shippers are less likely to use California airports due to the higher cost of jet fuel. And the state’s ports already attract fewer direct inbound vessel calls because of rising fuel costs for the vehicles that move goods off the ships onto the trucks and rail cars to their destinations.

California can be environmentally progressive and still have flexible fuel initiatives that respond readily to economic fluctuations and downturns. Legislators and regulators also must facilitate enhancement and expansion of California’s capacity to produce its own special fuel blends in modernized refineries to ensure against shortages that leave businesses and consumers stranded until supplies are transported from other areas of the country.

There has never been a more critical moment to re-examine the state’s transportation fuel policies and their impact on the broader economy.

Bob Sturtz, board chairman of Fueling California, a nonprofit group, is managing director of strategic fuel sourcing for United Airlines.

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