In brief: California, AB5, and the future of fuel

California to vote on transportation tax proposals, AB5 law continues to cause controversy, and EIA shares predictions of fuel prices by 2025

California voters face key decisions on transportation funding and tax proposals

On November 5, California voters will decide on several tax proposals to fund transportation projects and other purposes. The cities and counties with pending proposals include:

San Diego: Voters will decide whether to increase the sales tax by 1% (from 7.75% to 8.75%) to raise approximately $400 million annually. Of this amount, 62% would go to transit projects and 27% to road maintenance and safety. The proposal requires a simple majority for approval.

Placer County: Three cities (Lincoln, Rocklin, and Roseville) will vote on a half-cent increase in the sales tax, generating approximately $1.58 billion over 30 years for road improvements. Additionally, Auburn will consider raising the transient occupancy tax to collect $162,000 annually for street maintenance.

Napa: Voters will decide whether to raise the city’s sales tax by 1%, generating $22 million annually to repair streets and cover budget deficits.

San Francisco: A proposal will be made for a graduated tax on the revenues of robo-taxi and transit companies, starting at 1% and potentially reaching 4.5%. This tax is expected to generate between $20 and $30 million annually to fund municipal transportation.

Additionally, there will be a proposal to amend the California Constitution to lower the approval threshold for local electoral measures.

AB5: Constitutional violation, truckers argue

In an appeal to the U.S. Ninth Circuit Court of Appeals, the Owner-Operator Independent Drivers Association (OOIDA) and the California Trucking Association argue that California’s AB5 law, which regulates worker classification, violates the Constitution by specifically targeting truckers.

Enacted in 2019, AB5 requires workers to meet the ABC Test to be classified as independent contractors, impacting owner-operators particularly. OOIDA claims that AB5’s blanket ban on these owner-operators imposes an excessive burden on interstate commerce, violating the U.S. Commerce Clause. The law, according to OOIDA, prevents truckers from operating in California and discriminates against interstate truckers while granting an exemption to intrastate truckers within California.

The lawsuit was initially filed by the California Trucking Association after AB5 was enacted, and although a preliminary injunction was issued to suspend its enforcement, the case was sent back to lower courts. In March, a district court ruled in favor of the state, prompting OOIDA and the California Trucking Association to appeal to the Ninth Circuit.

The state and the Teamsters have until September 4 to respond to the appeal.

Oil prices may rise, EIA reports

The Energy Information Administration (EIA) forecasts that Brent crude oil prices, currently below $80 per barrel, will increase to $87 by the end of 2024. This rise is expected due to OPEC+ production cuts and reduced global inventories.

Despite the higher oil prices, gasoline prices are expected to remain below 2023 levels, averaging $3.77 per gallon in Q3 2024 and $3.79 by year-end. Electricity prices will also increase, but by only 1%, the smallest rise since 2020. Jet fuel consumption will grow due to increased air travel, while a milder August will reduce natural gas consumption in the U.S.

For 2024 and 2025, global liquid fuel consumption is projected to grow by 1.1 million barrels per day in 2024 and 1.6 million in 2025, down from previous forecasts of 1.1 and 1.8 million. Brent crude spot prices are expected to average $84 per barrel in 2024 and $86 in 2025, reflecting a reduction from earlier projections, with percentage changes of -2.2% for 2024 and -3.0% for 2025.