As the leading oil economist Severin Borenstein of UC Berkeley told me last week, California producers couldn't raise their prices to cover the tax, because California refineries have too many other options for the purchase of crude.
"California refineries can buy from anywhere in the world, and they do," he says. Indeed, California oil drillers sell their crude for the market price even when their production costs would allow them to offer a discount. (Only 38% of the state's crude supply comes from within our borders, with 13.4% coming from Alaska and the rest from overseas.) "Producers would have to absorb the tax," Borenstein says.
Here's an important piece of evidence that drillers knew it would be hard for them to stick consumers with the bill: The oil industry went to extraordinary lengths to kill Proposition 87.
The oil companies outspent the Yes on 87 side -- which was bankrolled mostly by Stephen L. Bing, a movie producer and backer of green causes -- nearly 2 to 1 during a campaign whose total cost of $150 million was the largest in any state on an initiative campaign.
It's possible that Chevron and its cronies spent their $95-million share purely to save California residents from paying a few more cents at the pump. My skeptic's soul tells me, however, that they probably did so because they knew the tax levy would come out of their hide.
One other argument against the severance tax deserves attention. This is the claim that it will drive marginal producers out of business. UC Riverside economist Mason Gaffney says we shouldn't swallow this idea.
It's natural, he says, for the industry to trot out marginal victims of a tax bite as though they're typical. "These are the 'widows and orphans' of every tax debate, advanced to distract attention" from the big oxen getting gored, he says. Keep your eye on the big players -- Chevron acknowledged that Proposition 87 would have cost it $200 million a year.
An oil severance tax in this state is long overdue. It might even serve as the vanguard of a new approach to overlooked sources of revenue. Gaffney mentions sand and gravel, undertaxed timberlands, water pumped for commercial sale and, yes, marijuana.
And why not? California has bestowed much of its natural wealth on the rest of the country for free, like a beribboned gift. In our time of need, we deserve to get something back.
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Michael Hiltzik's column appears Mondays and Thursdays.
Reach him at michael.hiltzik@latimes.com, read his previous columns at www.latimes.com/hiltzik, and follow @latimeshiltzik on Twitter.
