Gas Station Inflation

How the Walz Administration’s “Clean Fuel Standard” would increase pain at the pump.

Americans are struggling under the highest inflation in 40 years. The Bureau of Labor Statistics reports that prices for food, housing, cars, and energy are rising faster than wage growth. Unsurprisingly, recent Quinnipiac University polling found Americans consider inflation to be the most urgent issue facing the country.

Rampant inflation has also affected the price of gasoline and diesel. As of March 10, 2022, Minnesota families and businesses were paying more than $3.95 per gallon for gasoline and $4.75 per gallon of diesel fuel, the highest prices since 2013. Unfortunately, gasoline and diesel prices could continue to rise because Minnesota Governor Tim Walz and other Democratic lawmakers are seeking to enact new California fuel regulations in Minnesota that will further increase prices, as they have in California and Oregon.

These regulations, which originated in California, are called a Low Carbon Fuel Standard (LCFS), and they caused Golden State gasoline prices to increase by 22 cents per gallon in 2020, according to an analysis by Stillwater Associates.

If enacted in Minnesota, Stillwater Associates estimates the California fuel standard would increase gasoline prices by 20 cents per gallon in the near term, with costs eventually rising to 54 cents per gallon by 2035 as the regulations become more stringent over time. Diesel prices would eventually hit 53 cents per gallon, according to the analysis.

The additional costs resulting from adopting the California fuel standard in Minnesota would increase yearly costs for Minnesota families and businesses by $210 to $568 per household. Rural families, single-parent households, and new arrivals to Minnesota would be hit hardest by these steep cost increases.

Unsurprisingly, these proposed regulations are deeply unpopular. According to American Experiment’s Thinking Minnesota poll, 50 percent of Minnesotans strongly oppose the new mandates, 9 percent somewhat oppose them, 16 percent somewhat support them, and 21 percent strongly support them. Only 4 percent had no opinion, and 1 percent refused to answer.

Rising gas prices are harmful to Minnesota families and businesses because it leaves them with less money for other important expenses like healthcare, education, or saving for a rainy day. Higher fuel costs will also lead to higher levels of inflation because businesses will have higher overhead costs, and they will attempt to raise the cost of their goods
or services to make up for higher energy prices.

Recognizing the harmful impact of high gas prices on family budgets, and perhaps their electoral prospects, several Democratic lawmakers in the Minnesota House of Representatives have proposed a gas tax holiday from Memorial Day to Labor Day. This temporary tax holiday would save the average Minnesota family $73 during this three-month period. These savings are dwarfed by the permanent high prices Minnesotans would pay under the California fuel standard.

Rather than offering gas tax gimmicks during an election year, Minnesota policymakers should focus on making our energy supplies as secure and affordable as possible. Unfortunately, the California fuel standard increases prices for no measurable environmental benefits.

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