California Focus: Why gas is higher in California
State fuel policy drives up the price at the pump, study says.
Wallace Walrod, Vice president of Economic Development and Research for the Orange
County Business Council | Tuesday, September 1, 2009
The Orange County Register
When it comes to a gallon of gas, living in California comes at a premium, no
matter what grade of fuel you pump. Fuel costs are higher here than the
rest of the nation because of state government taxes, fees and regulations,
putting
consumers continually at risk of price spikes and supply interruptions.
A
new study by UC Irvine, UCLA, Cal State Long Beach and Orange County
Business Council economists shows that California gasoline prices, on average,
are 30 cents higher per gallon than the national average – and this differential
has been growing for nearly two decades. State gas taxes are 43 percent
higher than the national average.
The study, sponsored by the nonprofit
group Fueling California, shows that gas taxes are only part of the reasons
California gas is so much costlier.
The state's tough environmental policies also continue to drive up fuel
costs and create even more economic uncertainty.
Fueling California, a coalition
of major industries doing business in the state, initiated the study
to provide the governor's office, legislators,
decision-makers, regulators, the media and the public with more information
and a greater understanding of the state's volatile fuel costs and to
outline policy changes that could help ease the financial burden in these
tough
times.
The study shows that California has among the most demanding set
of fuel policies in the world, leading to a myriad of distinct fuel standards
and
blends.
Californians pay five to 15 cents extra per gallon solely due to
the special blends required in the state. While these special blends
help the environment,
they also can cause price spikes when supplies run low.
As our fuel standards
grow increasingly differentiated from the rest of the country, it also
is harder to find supplies that comply with state
regulations. This effectively renders California a "fuel island" since we also have no pipelines linking us to petroleum or crude oil supplies,
and our storage capacity is limited.
The state must import an increasing
share of fuel from shrinking domestic and distant international sources.
Our study found that this already tenuous
situation is complicated further by the fact that California's own refining
capacity has stagnated for decades
despite a rapidly growing demand for gasoline. Recent court action shutting
down a refinery enhancement project in Richmond casts yet another shadow
on California's ability to fend for ourselves in the event the supply
of our specially blended fuel runs short.
All of this suggests that our elected
leaders and regulators need to consider carefully the ripple effect of
the state's fuel policies.
Policies can change
when the true impact on consumers and the economy are clearly understood.
Among other things, the state could:
- Alleviate future
fuel price spikes by reconsidering the economic impact or timing
of otherwise worthwhile environmental policy goals during a
time of severe recession, like right now with unemployment at 12 percent
and millions of families struggling to pay their mortgages.
- Temporarily
reduce gas taxes during periods of supply disruption.
- Allow special
fuel blend requirements to be eased temporarily if prices rise above
a certain pre-determined point.
- Ease the regulatory difficulty to build
and expand storage and refining capacity
There is no inevitable
reason why California fuels need to be more expensive in the future
than in other regions.
