October 11 2012

California Gas Prices Struggle Under Regulation

Emily Wismer

 

Californians across the state are breathing a very slight sigh of relief as gasoline prices slide downward half a cent for the first time in a week. Yet eyes remain on the price at the pump as leaders explore the causes of record high gas prices that peaked at $4.671 per gallon, 50 cents higher than the week before. The national gas average was high --$3.81 per gallon—though still well below those in California.

This is nothing new for the Golden State:  California is  particularly susceptible to price spikes due to very strict restrictions on cleanliness of gas during the summer months. Few refineries can make this standard, and the state is isolated from several main refineries.

In her recent column, Diana Furchtgott-Roth explains several factors contributed to the gas shortage and price spike:

The price spike started with an August fire in Chevron's Richmond refinery. Then, two other refineries, operated by Tesoro and Exxon Mobil, went down for maintenance. Because California requires different blends of gasoline from other states, and pipelines across the Rockies are limited, gasoline can't be shipped in from elsewhere.

Furchtgott-Roth goes on to explain these price spikes can be avoided if policymakers would increase supply and revamp regulations.  Specifically, by approving Keystone, expanding oil exploration at home, streamlining fuel blend requirements, ending the mandate that requires 13 billion gallons of biofuel be blended into gasoline, and ending carbon-reduction requirements would greatly decrease future vulnerability for California’s drivers.

Furtchgott-Roth nailed a simple concept: excessive regulations often have unexpected impacts. In this case, Californians—10.6 percent of whom are unemployed—are being hit with higher gas bills when they can least afford it. 

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