California loses billions because of rising gas prices

High gasoline prices in California are taking a bite out of many things. In July alone, they trimmed $113 million out of state’s economic output, according to a new forecast from the nonpartisan Legislative Analyst’s Office. That’s the equivalent of losing half a full state senator, the report notes.

The Legislature’s budget analyst also found that California would lose $3.3 billion in consumer spending, and 175,000 jobs, if there was no relief from rising gasoline prices by the end of the fiscal year in June.

Oil and gas companies have been raising prices steadily to recoup losses from oil-price volatility over the past year. Brent crude rose from around $40 a barrel at the beginning of the year to its peak near $80 in May, and gasoline prices have followed suit.

California lawmakers have struggled with how to respond. They have hit the high-speed rail project, pushed to create incentives for consumers to buy fuel-efficient cars and restricted the ability of large trucks to drive on highway shoulders, among other things. A range of new fees has been approved, including a new $2-per-gallon excise tax on gasoline.

The state, or at least Governor Jerry Brown, hopes to ease the pain at the pump by increasing gas taxes, dropping the tax on diesel fuel and expanding an existing sales tax credit for people who buy fuel-efficient cars. The state Assembly recently approved the expansion and lowered the excise tax on diesel by one cent. Brown has expressed frustration with its failure to clear the Senate, but has avoided a public veto of the legislation, preferring instead to work with lawmakers toward a deal.

Brown won’t need to worry about that if gasoline prices stay where they are, or go even higher. The Legislative Analyst’s Office estimates the average state resident will pay an extra $1.50 per gallon by the end of the fiscal year.

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