Monday, July 13, 2015

California's Special Blend Fuel Mandates and High Gas Prices

Is a well-intended 1996 California environmental rule exacerbating fuel prices statewide?



Transit Talking Points by: Nicholas Ventrone, Community Engagement Director
riversidetransit@gmail.com


Does California's Summer Gasoline Blend actually reduce emissions and provide for cleaner air, or does it simply choke off supply and contribute to higher gas prices? I will do what I can to answer that question.

According to government documents, The Clean Air Act, as amended in 1990, requires areas with poor air quality to sell fuel that uses a "special gasoline blend" designed to reduce vehicle emissions that pollute the air. The law went into effect in 1995 which also allows states, with EPA approval, to require the use of other special blends as part of their effort to meet air quality standards.

The Greater Los Angeles area was certainly no exception. LA's transportation system was much different 25 years ago. Dirty, gas-guzzling cars made their way into the central city every day of the workweek during this time. Prior to 1990, LA generally had dirty, car-centric transportation infrastructure. This period of Southern California pre-dated today's fuel efficient cars and hybrids, Metrolink, Metro Rail, Metro Rapid, several park & ride lots, and most of Southern California's carpool lanes. The only real transit/HOV infrastructure LA enjoyed back then was the El Monte Busway. Orange County also had carpool lanes along SR-55 and the I-405 freeways north of Santa Ana. That meant too many people drove alone into LA in their cars everyday because there were no other efficient means to do so.

Through the early 90's, LA's mass transit system was in its infancy with the birth of Metrolink, and the Metro Blue and Red Lines. But LA still had dirty air. In an effort to address LA's smog-infested air quality back then, California required the statewide introduction of its special blend gasoline in 1996 with the California Reformulated Gasoline Program, going beyond what the feds had mandated. It was to provide greater pollution reduction during the summer months, than what was federally required. The special blend gasoline was designed to provide the same performance of traditional fuel but with much lower emissions. Because LA's air was so dirty, especially during the summer months, such a well-intended law was needed to clean up the smog.

For the record, Riverside, Moreno Valley and other nearby regions within the Inland Empire still experience bad air quality days no thanks to LA smog that gets blown in throughout the hot summer months without an outlet.

Studying the Special Blend Impacts with the Clunkers Cash for Clunkers - Dodge Caravan

A 2005 study (GAO-05-421) by the United States Government Accountability Office shows that California's special blend did reduce emissions by substantial margins.

The GAO's estimates were based, in part, on data regarding how special gasoline blends affect emissions from older vehicles--aka, the dirty clunkers. However, this data according to the GAO has not been comprehensively tested on current vehicle types with newer emissions controls.

Current vehicles sold in the marketplace are much more cleaner and fuel efficient than they were back in the 90's. In fact, they have become even more efficient between the time of this study in 2005 and 2015. That includes SUV's and pick-up trucks; both were the gas guzzlers of the past. Part of the reason why LA's air was cleaner in 2005 than in the 90's could be attributed to the use of special blends; however today's newer fuel efficient cars may yield the similar cleaner air results with either the federally-mandated blend or even traditional fuel. I believe another updated study is needed using the newer cars.

Isolated California Fuel Market

But here's the main issue of this well-intended fuel policy. The rules governing California's special blend fuel has certainly strained our gasoline supply system and there is no question about that.

When disruptions cause supply shortages of this special type of fuel, oil companies can hike the price. That's because neither the federal special blend fuel nor traditional fuel can be imported into the state. California's fuel market is isolated.

Five days ago last Wednesday, a federal report was released that documented dismal fuel supply and import numbers for the state. Almost instantly, fuel prices took off. Five days later, several gas stations in the Inland Empire posted 80 cents-per-gallon price hikes with many crossing well over the $4.00 mark. Some gas stations in the Inland Empire have yet to adopt the higher gas prices according to GasBuddy with some still in the $3.25-$3.45 range. If you're near one these stations, you should fill up.

Because several of the Inland gas stations have yet to post the higher fuel prices, we don't have an accurate average price at the time of this post. However, the 80 cent price jump that I have been seeing at several gas stations may give us some answers of where the Inland Empire's average price is headed.

This GasBuddy chart shows that Riverside County's average price of fuel prior to release of the federal report was around $3.48. San Bernardino County averaged around the same amount. If the real-time price hike does turn out be 80 cents across the board, the average price of gas within the Inland Empire will be headed to $4.28 per gallon. At the time of this post, the Inland Empire average was just below $4.00

To compare, the national average according to the gas price website is around $2.77. That means we are already paying $1.23 more than the national average and may be paying a whopping $1.51 more per gallon once every gas station adopts the higher prices. To compare directly with out-of-state neighboring metropolitan areas, Seattle's average was $3.23, Portland was $3.13, Boise $3.09, Las Vegas $3.29, Phoenix $2.77, Tuscon $2.48, and Salt Lake City $2.90. To be fair, some of these regions too recently experienced some price increases, but nowhere near the range of California's.

Righteous Anger at the Pump

California motorists have every right to be angry about this latest spike in gas prices due to the degree of this shortage. Many will blame the oil companies directly, but supply-and-demand economics combined with a flawed but well-intended environmental state law is what's driving this instability.

Because special-blend fuel supplies are lacking, we are facing yet another statewide "shortage" and spiking prices while prices remain relatively stable elsewhere. That is a factual side effect of a well-intended law.

These negative consequences of the 1996 California Reformulated Gasoline Program have been going on for far too long. The law's reasoning that California's special blend emits few pollutants into the air is valid and has been proven using older clunker vehicles. The law is noble and should be studied with newer cars given the fact that portions of Southern California still has to deal with dirty air quality during the summer. But that does not excuse the severe price impacts caused by the shortened supply that sends massive sums of profits over to the oil industry paid for by hard-working Californians. High gas prices negate the entire California market economy, reduces our spending power, and costs us jobs while the oil industry enjoys massive profits. We are not slaves to big oil; we are free people. Yes, high gas prices incentivizes people to consume less, use public transit or carpool but the cost-to-benefit ratio does not add up in favor of a Better Inland Empire nor freedom in general. The side effects are just too great.

Moving Forward both Short Range and Long Range

The GAO had a sound recommendation back in '05: The feds should develop a plan to balance the environmental benefits of using special fuels with the impacts of these fuels on the gasoline supply infrastructure. If warranted, the EPA would work with other agencies within the federal government to identify what statutory or other changes are required to implement this plan and request those authorities from Congress. Whatever the feds did, California's fuel market still remains isolated.

The state government may want to adopt and act on a similar plan to reform the California Reformulated Gasoline Program which should include temporary waivers on the state's strict fuel mandates during special blend supply disruptions as a short to mid-range solution. That way, Big Oil cannot exploit the law for their financial gain off of the backs of We the People. No environmentalist should want a pollutant to profit from environmental laws. That just makes no sense.

GasBuddy has an active petition on that. For the longer range, the marketplace needs to be incentivized to bring in efficient zero-emission cars where robust competition can make them more affordable which would considerably cut down on fuel consumption and clean up LA's air quality. Plus, improved public transportation infrastructure and services would also incentivize more commuters to take the bus or train to work instead of driving alone. Both Metrolink and connecting express bus services need to be expanded.

Both of these solutions would spell freedom from high gas prices.

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