It seems that California Governor Gavin Newsom might just be, inadvertently, the largest benefactor of Donald Trump’s 2024 presidential campaign in crucial swing states. Newsom’s policies are poised to escalate gasoline prices not only in California but in pivotal battleground states like Nevada and Arizona.
California, known for its sky-high gasoline prices, can attribute these inflated figures to a plethora of taxes and stringent environmental regulations. The cap-and-trade program and a low-carbon fuel standard are just the tip of the regulatory iceberg that makes operating refineries in the state a daunting task. As a result, over 60% of the refineries established in the past century have shut down, leading to a significant drop in supply and a spike in prices.
The economic ripple does not stop at the California border. Nevada and Arizona, heavily reliant on California for their gasoline supply—90% and 50%, respectively—are feeling the pinch. Their gas prices mirror those in California due to their dependency, and with Newsom ramping up his crusade against the oil industry, it’s only going to get worse. The California Energy Commission is considering a new tax on refinery gross margins, which could further drive up costs, inevitably impacting the wallets of consumers in neighboring states.
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The Wall Street Journal’s Allysia Finley wrote:
California has become a billboard advertisement for Mr. Trump, from its rampant vagrancy to unemployment, taxes, energy costs and housing prices that are the highest in the nation. To top it off, the state also has a ballooning budget deficit.
Hundreds of thousands of affluent and working-class Californians have moved to Arizona and Nevada in recent years to escape left-wing policies and their consequences. Now Mr. Newsom is exporting the costs to them and folks in other states. Welcome to Hotel California: You can check out but never truly leave.
As another example, consider CARB’s zero-emissions rail locomotive rule, which BNSF Railway CEO Kathryn Farmerrecently called “a tax on movement of goods through the U.S. supply chain.” Or California’s electric-vehicle mandate, which is forcing automakers to raise costs on gasoline-powered cars to offset losses on EVs they must sell in the Golden State.
Arizona and Nevada are increasingly trending in Mr. Trump’s direction as working-class Hispanics bear the brunt of the Biden administration’s policies. Many migrated from California—and like America’s émigrés from socialist countries, they don’t want to relive the misery from their former lands.
The move comes at a critical time as gasoline prices in California have surged, leading Newsom to push through legislation that imposes a penalty on refiners for gross margins that exceed a certain cap. Ostensibly, this is to prevent price gouging, but effectively, it’s a revenue-raising tool for the state, which faces a staggering $45 billion budget deficit.
The problem with Newsom’s strategy, Finley argues, is its shortsightedness. By conflating profits with gross margins and ignoring the operational losses refiners face (data suggests losses of up to 38 cents per gallon according to Finley), Newsom is essentially punishing producers for the inefficiencies his policies create. These costs, once escalated, will not remain confined to California. They will spill over into Nevada and Arizona, affecting everyday consumers.
Nevada Governor Joe Lombardo (R-NV) has already raised alarms, indicating that these policies might lead to limited supplies and even higher costs, exacerbating the economic strain on his state’s residents. Newsom’s response was dismissive, suggesting that Lombardo was echoing the rhetoric of oil industry backers rather than addressing the imminent fiscal repercussions.