CALIFORNIA GAS PRICES: WHAT CAN BE DONE?

Image via GasBuddy.com

UPDATE (10/17/12): Presidential Energy Debate

California’s strict air pollutant regulations (well worth it!) and higher gas taxes are the usual culprits for the state’s more expensive fueling costs in comparison with the rest of the country, but why have prices at the pump hit an all time high this week? Experts say disruptions at key California refineries, including a production halting fire and a contaminated pipeline, on top of California’s use of special ozone sparing “blends,” are to share the blame. Some suggest it is also possible that refiners are taking advantage of the disruptions by withholding supplies in order to drive costs up even further. No matter what the combination of causes may be, experts agree there is no easy fix.

Is there anything California can do? While there is no easy way out California has several options, including:

• Wait it out. These issues tend to be temporary and survivable through easy adaptation. The U.S. Green Chamber encourages ride sharing, public transportation, and other alternatives.

• Push early “Winter blend.” This is Governor Jerry Brown’s attempt. On Sunday, Brown ordered pollution regulators to let service stations stock  less expensive, but higher polluting, winter-grade gasoline earlier than the scheduled Oct. 31st transition date.

• Suspend pollution laws. The U.S. Green Chamber opposes this extreme measure, and is in agreement with UC Berkeley energy expert Severin Borenstein who wrote, “California blend gasoline has significantly greater health benefits than gasoline that only meets the federal standard, benefits that almost certainly exceed the extra costs we pay.”

• Plan for future shortages. Borenstein suggests that in times of shortage, California could approve the temporary sale of lower-grade gas from other states with an additional tax. This would limit major price spikes, and the tax would provide revenue for other measures to offset the temporary increase in pollution.

• Call for Investigation. While prices have already begun to decline, the reduction is significantly slower than the spike. Senator Dianne Feinstein wrote two letters asking federal regulators to investigate possible price manipulation. However, according to Borenstein, “it’s just extremely difficult to prove and, even then, not a violation of any law.”

What do you think California should do? 

Sources: Ezra Klein’s Wonkblog, Washington Post, Econbrowser, Severin Borenstein: Energy Institute at Haas, Reuters