Prop 87 has many really interesting arguments about what will happen after nominal taxes are added for an “oil extract fee”. Most have missed a fundamental issue with crude here in California vs Texas, or UAE. And that is the oil is here. It is cheaper, and it does not need to be transported 1000 or ten thousand miles to get here for refining. Diane Fienstein asked for a GAO investigation in 2005 as to why CA crude was so much less expensive than WestTexas benchmark. To date, no answer but the oil companies have lost a lot of litigation on the issue. (If the oil companies can keep the cost artifically low, they pay less under current royalty agreements. link http://www.mms.gov/ooc/PDFs/cahis.pdf
Our current cost of fuel is not based on price of manufacture, but nominal utility of the product – what the market will bear. Nominal taxes will not effect the marginal utility of gasoline or even close. Their only comments about the higher cost California mixture is that “it is more expensive to produce” even with lower cost California crude. The oil companies do not discuss production costs, only world prices of crude – not impacted by the lower cost California crude even at 106%% of its lower cost. They will not stop producing “California” crude, because it is too profitable.