What’s Up with California’s Gas Prices?

by Greg Karras, Senior Scientist

Families choking on the air pollution from unsafe refining practices were hit again when state gasoline prices rose sharply July 30-October 8, 2012. Some public officials blamed price gouging.(1) Others blamed clean air laws-they said standards requiring cleaner burning gasoline led to a supply shortage when industrial “incidents” caused the state to produce less of that fuel.(2)

In fact, refiners statewide made more gasoline after the refinery incidents at Chevron-Richmond on August 6 and ConocoPhillips-Wilmington on September 15, 2012. (3) State “cleaner” gasoline production stayed in the normal range for this time of year(3) as our gas prices soared. (Chart 1.) Clean air laws did not cause this price spike.

Price gouging should be investigated. Gas prices often exceed crude prices by larger margins and spike higher when inventories of gas are lower.(4) (Chart 2). And inventories remain lower in key months despite more refinery capacity and less gasoline demand in 2012 than in 2005 or 2006.(5)

But gasoline costs more mostly because the oil it is made from costs more. Crude costs drive more than 90% of changes in West Coast retail gas prices since 2004.(6) Rising global crude oil prices have already increased Californians’ gas prices by more than $2/gallon.(7) (Chart 3.)

We will be vulnerable to higher and even more volatile fuel costs until we switch from oil to alternative energy. This can be done,(8) but unfair subsidies for dirtier energy(9) make it much harder to do-and exemptions from environmental laws are among the most unfair of these subsidies. To blame environmental protections for our problems with oil is just plain wrong.

View the references list here.

Read other Fall 2012 newsletter articles.