Streetsblog Voter Guide: Proposition O

Did you know that California is one of the few states, Los Angeles is one of the few cities, where oil is extracted from the ground and there is no extraction tax on each barrel of oil pumped?  Proposition O added to the March 8 ballot by the Los Angeles City Council seeks to change that reality and close a small, $4 million, portion of the city’s deficit by charging a $1.44 tax on every barrel of oil extracted within city limits.

There isn’t an official website pushing Prop. 0, but it has been endorsed by the League of Women’s Voters who cite the city’s deficit and the almost complete lack of impact on Southern California consumers.  However, the official opposition organization, “No on O, Stop the L.A. Oil Tax” foresees doom for Southern California jobs and consumers.

Instead of noting that the cost of the tax would be passed on to every person across the country who buys gas harvested from Los Angeles’ oil fields, “No on O” takes the opposite tact of noting that it increases the cost of extracting oil in Los Angeles and not elsewhere.  The ripple effect will cost the area an untold amount of jobs by making Los Angeles oil less competitive with oil extracted elsewhere.  They later claim that the tax will mean increased gas prices for all Californians.

“No on O’s” point would be well taken, if there were any sign that demand for oil wouldn’t easily absorb this small tax increase on one of the nation’s many oil extraction locations.

Which isn’t to say that there aren’t any good-government issues with the proposal.  The $4 million that would be added to the budget isn’t dedicated toward any need, which will doubtless lead to charges of corruption and doesn’t inspire confidence in voters that the funds will be well spent.

The “No on Prop. O” campaign is a coalition of business interests, Chambers of Commerce and petroleum producers.

  • Doug

    This bill will have zero impact on oil production in LA. The simple reason is that it costs less than $20 per barrel to extract oil (that’s being generous – see link below which puts the price at $6/bbl in 2006), whereas the market price is around $100 today. $1.44 doesn’t make a difference in the decision to keep producing oil.

    http://www.kanabona.com/energy_cost_of_oil_production

  • Doug

    *puts the COST at $6/bbl in 2006

  • General Fund

    “The $4 million that would be added to the budget isn’t dedicated toward any need, which will doubtless lead to charges of corruption and doesn’t inspire confidence in voters that the funds will be well spent.”

    Ballot box budgeting is what has got us into this mess.

    By having Measure O’s revenue go to the general fund, it helps reduce the budget deficit, which is exactly where it needs go.

    We need more taxes that go into the general fund and fewer taxes that are dedicated to a specific line item.

  • Why Is Streetsblog “No on O?”

    Why does Streetsblog support “No on Measure O?”

    That’s what it seems like by featuring their logo without having any “Yes on Measure O” – which might not exist.

  • To the best of my search engine, “Yes on O” doesn’t exist or we would have used that too. Streetsblog does not formally oppose or support ballot propositions. I just wanted to spare you all this image, which was my other choice:

    http://www.flickr.com/photos/26949909@N00/4547372754/

  • Something like this really ought to be statewide. Even if the money goes into the general fund, that’s less money that they have to steal from transportation.

  • Matt

    James, I couldn’t agree more. I think even Republicans would agree with it, if they would use proceeds to reduce other taxes like income, or sales, or even other business taxes. The firms can’t relocate the oil to another area like you can a normal business. Also, just about everywhere else in the world has these taxes including conservative strongholds Texas and Alaska, which has one of the highest oil severance taxes in the world.

    Oil is a world product that is easily tradable. Whatever tax money raised would be born by users of oil across the world fairly evenly. The argument that local Californians would pay higher gas prices is just wrong. If that were true, wouldn’t people in North Dakota and Minnesota, where there is no oil pay more now for gas prices than we do now?

  • Yuri

    I agree it should be statewide. Texas is a “low tax” state and it taxes oil extraction. The petroleum companies here are getting a free ride.

  • We had a statewide ballot measure for this in 2006, Prop. 87 (http://en.wikipedia.org/wiki/California_Proposition_87_(2006)). Oil companies spent $90MM to defeat it, and they did. Even our “liberal” Republican governor opposed it. Opinion about oil companies has changed a bit since then, but I wouldn’t be surprised to see the same result for a statewide measure.

    Having some direct revenue for the City, which contributes far far more to dysfunctional state coffers than it gets back, doesn’t seem like a bad thing.

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