Wednesday, April 29, 2015

What the heck is going on with California's gas prices?


By: Nicholas Ventrone, Community Engagement Director
riversidetransit@gmail.com


Unfortunately, I have no straight answer as to why prices at California's gas pumps are soaring at sharp rates. But I will reiterate some reported facts and that should negate much of the spin that is being broadcasted into the public square of debate.

Let's start with crude oil. Current U.S. inventories are showing record levels of supply. Over the past few weeks however, the price of a barrel of oil has increased to 2015 highs because the rate of supply growth declined which was not predicted by some major analysts. Despite the rate decline, inventories are still going up. Meanwhile, North Dakota continues to be a major domestic producer, with the state government reforming and streamlining its oil tax code to be more business friendly.

I'll keep a close watch on this to see whether or not the Dakota oil boom becomes a direct pollutant of itself. We don't need lax oversight leading to spills. I well know that many environmentalists want to do away with oil consumption completely, but doing away with our dependence on foreign oil is a step in the right direction as domestic supplies go up. The OPEC monopoly needs to end.

Enter in California's gasoline supplies, where yet another refinery issue within the state has cut production and supply of the state's regulated special blend of gasoline. This occurs only after two months when a refinery in Torrance had an explosion combined with a labor dispute that sent California gas prices to $3.50-$4.00 per gallon back then while many other western states continued to enjoy gas prices in the low $2's.

State law currently mandates that California gas stations sell this special blend during the summer months citing environmental reasons. Traditional fuel refined elsewhere in the nation cannot be imported. Because this blend is both sold and mainly produced exclusively within California, the state is isolated from the rest of the market. Therefore, the state's gasoline supply is low while the rest of nation continues to enjoy a record supply in crude oil.

There's a number of things wrong with this picture. First, it encourages the oil oligopoly within the state to keep gas supplies low which drives up prices and panic whenever something goes wrong during production. That encourages price gouging. Oil companies therefore make big money. Because oil consumption is a major polluter, environmentalists should be upset about this pattern and be actively lobbying the state for regulatory reform.

The special blend regulation may be well-intended to keep the air cleaner, but one of its unintended consequences is that it is allowing the oil industry to reap huge profits due to their oligopoly power statewide. To me, the status quo makes no sense. We have an environmental law that is allowing a global pollutant to profit from hardworking Californians.

This has to be dealt with right away.

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