(The Center Square) – Sen. Joe Nguyen, D-White Center, thinks Washington state’s high gas prices are the result of oil companies gouging customers, not the state’s cap-and-trade law that went into effect at the beginning of the year.
Washington’s cap-and-trade law, part of the Climate Commitment Act of 2021, involves polluters buying allowances at state-run auctions to offset their carbon emissions. The money raised – more than $1.4 billion so far – is meant to go to programs to fight climate change and improve the environment.
Drivers in Washington currently pay the second-highest gas prices in the nation, an average of more than $5.13 a gallon, according to AAA.
The national average cost of a gallon of gas, per AAA, is just under $3.80.
Nguyen, who chairs the Senate Environment, Energy & Technology Committee, is the legislative lead in crafting anti-profiteering legislation for oil companies that could be introduced in the state Legislature next year.
“The reason why gas prices are so high in Washington state is that there is only one pipeline from Alaska to Canada down through Oregon and California and Washington state,” the senator explained. “There’s only a handful of refineries. So they effectively have a monopoly in terms of fuel in Washington state and we end up being a cash cow.”
The average profit per gallon of gas in Washington state is 20 times higher than the national average, Nguyen contended.
That demands more scrutiny from the state, according to the senator, in the form of legislation he is working on that mirrors a new law in California, which also has a cap-and-trade program, that creates an independent division of the state to monitor the fuel market on a daily basis for any unethical or illegal behavior.
California’s law is keeping oil companies there honest, Nguyen said, and reducing volatility when it comes to the price at the pump.
“So they knew that when somebody was watching, they couldn’t just randomly do things like shut down pipelines, for instance, say maintenance,” he said.
That kind of thing – scheduling maintenance that affects British Petroleum’s Olympic Pipeline carrying fuel through the state, which can cause gas prices to go up – is a concern in Washington, according to Nguyen.
“That’s what happened to us in Washington state,” Nguyen said. “We don’t actually know when they’re going to shut down a pipeline for maintenance and for some reason, it seems to correlate oftentimes with high-demand weekends like July Fourth or Labor Day weekend.”
Nguyen laid out how a gas-price gouging bill might work.
“And what ends up happening is that we’re going to request and get proprietary information that won’t necessarily be shared publicly, but it’s going to be reviewed by some sort of tribunal or organization or entity that can then sift to see if there’s nefarious behavior,” he said.
The state Attorney General’s Office has a subdivision that does this kind of work, Nguyen noted, but it only has access to public information in that effort.
He said the U.S. Constitution’s dormant commerce clause, which bars states from regulating interstate commerce, means Washington can’t regulate oil companies’ profit margins.
Efforts to root out “nefarious behavior” could nevertheless be strengthened, according to the senator, under any new anti-profiteering legislation.
“What you can do is see if there is, for instance, collusion, price gouging or things like that where there’s anti-competitive behavior,” Nguyen said.
Others remain skeptical that California’s gas price-gouging law is a good model for Washington.
“The working families of the Golden State are currently paying the highest gas prices in the entire country, so anyone who feels the need to copy California’s abysmal energy policies needs a serious reality check,” Larry Behrens, communications director at energy advocacy organization Power The Future, emailed The Center Square.
With an average price of $6.02 a gallon, California has the most expensive gas in the nation, according to AAA.
Steven Greenhut, western region director at the R Street Institute think tank, was even more blunt in his criticism of California’s overall energy policy and its gas price-gouging law.
“[Gov.] Newsome and Democrats in this state have been playing this game of trying to blame price gouging for our exceedingly high prices,” he said. “They’re pushing this idea that it’s corporate greed. It’s amazing how the refiners are less greedy in other parts of the country than they are in California.”
Several other factors are responsible for the state’s high gas prices, Greenhut said.
“It’s not hard to trace California’s high prices,” he continued, noting the state’s special blend of gas, which is formulated to reduce pollutants and makes it more difficult to import gas from other states, as well as high gas taxes and banning the sale of new gas-powered cars by 2035.
Washington, following California’s lead, also plans to ban the sale of new gas-powered cars by 2035.
“So, if you are a refiner, you would probably not be investing in more capacity when the state is trying to put you out of business,” Greenhut said. “So that all reduces supply and we end up with prices well above the national average.”
He has no confidence in the state’s gas price-gouging law or that any such law would work better in Washington.
“And I don’t think commissions, new regulatory bodies and new reporting requirements, I don’t think in and of themselves … are going to do much one way or the other, but it’s yet another regulatory hurdle, another way that this state is signaling to refiners that they don’t want them here,” Greenhut concluded.
Nguyen is confident a gas price-gouging bill will pass Washington’s Legislature next session and that it will be good for the people of the state.
“We want to make sure as we’re doing this [decarbonizing] that we’re not going to be gouged by oil companies, and this is kind of that protection that consumers deserve that we should have in Washington state,” he said.