Californians weigh a new tax on oil companies
STUDIO CITY, CALIF.
As Los Angeles motorist Jill Cantrell removes the pump nozzle from her Honda Civic gas tank, she spouts out two figures: "$56 for a gas tank for me and $78 billion in profits last year for the oil companies," she says. "I'm livid."Skip to next paragraph
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How many other Californians are angry about gasoline prices – and ready for their state to take action – will be clear this November, when voters decide whether to levy a new tax on oil companies that drill in California and use the money for in-state development of alternative fuels.
The fight over Proposition 87 is no small matter. Not only will the vote give Congress and other states a first reading of public disgruntlement over gasoline prices, but it might even affect the domestic oil market. California crude, after all, accounts for 12 percent of US production – supplying 37 percent of the state's oil demand, according to the Legislative Analyst's Office.
Prop. 87 aims to raise and spend $4 billion on alternative-fuel programs over time, with the goal of cutting Californians' use of gasoline and diesel 25 percent by 2017. It also would prohibit oil companies from simply raising prices at the pump to cover their costs of the new tax.
"Politicians across the country will be watching this to see if the voters want to get back at the oil companies through higher taxes," says Robert Stern, president of the nonpartisan Center for Governmental Studies in Los Angeles. One TV ad in support of Prop. 87, he notes, shows an unflattering picture of former Exxon CEO Lee Raymond, who last year received a retirement package valued at about $400 million. "Will the voters want to punish the oil companies," Mr. Stern asks, "or will they worry that the [ballot] measure will increase gas prices?"
Californians paid an average of $3.16 last week for a gallon of regular gasoline. Prop. 87 proponents say the initiative will eventually reduce oil use by supplying new technologies and alternative fuels for California motorists. It will also provide incentives to make clean energy more affordable, cutting polluting emissions, they say.
"We want to get California off its dependence on oil," says Beth Wilson of YesOn87. "It will bring cheaper and cleaner alternatives to market in an innovative way so that consumers can choose."
Opponents say Prop. 87 would reduce revenue for local government, schools, public safety, and healthcare and drive up the price of gasoline, diesel, and jet fuel. Refineries in California would simply seek cheaper oil from out of state (not subject to the in-state tax), they argue, and demand for California crude would slacken.
"No one disputes the need to pursue alternative energy, but is 87 the way? We say no," says Al Lundeen, spokesman for the campaign against Prop. 87. "This will cost consumers more and will create a new agency of government that gives out $4 billion without any demand for results. That is not a wise investment of money."