
Subject: California, here we come Date: 10/8/2012 5:12 PM
Recommendations: 3

Gas prices in California have soared by 55 cents in a week to an historic high of $4.65 per gallon, about 84 cents higher than the national average. The immediate cause was a power outage at an Exxon refinery in Torrance. A Chevron refinery in Richmond that caught fire in August has also been operating at reduced capacity. The resulting fuel shortage has forced wholesalers to ration deliveries, and retailers that buy on the spot market to close.

This gas crisis is self-inflicted, like so many problems in the state. Because California's fuel regulations are the most stringent in the country, the state is isolated from other energy markets. Few refineries in the world can produce the unique reformulated gasoline blend that the state requires, and almost all are located in California. Over the last two decades four refineries in the state have shut down rather than invest in expensive upgrades to comply with fuel regulations... even "normal" gas prices in California are about 30 cents higher than the national average thanks to its fuel standards and a 50.5-cent gas tax that is second only to New York's.

The state's cap-and-trade program will take effect this November. Oil companies warn they'll pass on the costs to consumers. Meanwhile, a low-carbon fuel standard kicks into high gear in 2015. That's when regulators expect the new generation of biofuels like cellulosic ethanol to be plentiful, though such fuels aren't now commercially viable. A Boston Consulting Group study warns that the limited availability of biofuels could force five to seven more refineries to close. Midwest corn ethanol wouldn't qualify. If all of California's 2006 global warming law were implemented, the study estimates the cost of gas would increase by up to $2.70 per gallon. By the way, Californians are already paying up to 50% more for their electricity than the rest of the country thanks to their renewable-energy portfolio standard.

The cost of such environmental regulations, which is baked into everything Californians consume, is one more reason that jobs are leaking to other states. In related news, EPA chief Lisa Jackson says California is her model for the nation.

I'm retired so my job is not leaking anywhere. And I can afford $7/gallon gasoline and a doubling of my electricity bills. I think I'll vote for Obama just to watch his supporters squirm in the next few years.

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