Dan Walters: The reality of what's happening with California gas prices

dwalters@sacbee.comOctober 16, 2012 

When California gasoline prices suddenly spiked upward this month, the state's motorists, media – and politicians – characteristically overreacted.

A visitor from Australia who heard the reaction would have thought that the state had been devastated by an earthquake or crushed by a meteorite, instead of a fractional increase in the cost of driving.

Let's put the price hike, about 50 cents a gallon, in perspective.

Someone driving 300 miles a week in a car that gets 20 miles per gallon would consume 15 gallons of fuel, so the price spike would cost an extra $7.50 a week, or about $30 per month. That would sting a low-income working stiff, but for most of us, it's an annoyance, not a cataclysm.

U.S. Sen. Dianne Feinstein led the parade of political hysteria, demanding a federal investigation, and several other politicians followed suit. Some political operatives quickly retooled their TV ads and mailers to depict opponents as tools of the oil industry, a usual political whipping boy.

The political reaction was especially ironic because it's evident that political policy, rather than market manipulation, played the major role in what happened.

When it comes to gasoline, California could just as well be Australia – an island nation. In the name of battling smog, the state mandates a summer blend of gasoline unlike any other. And that fuel is produced, for all intents and purposes, only in California, which makes its fuel market especially sensitive to any production interruption.

The price spike was caused by supply shortages, which were caused, in turn, by several production glitches, such as the fire that closed a portion of Chevron's refinery in Richmond.

California's summer blend and high taxes already make our gas prices about 50 cents a gallon higher than those in other states, so when they jumped, the differential widened to about a dollar.

Gov. Jerry Brown didn't demagogue, and did the smart thing.

He directed the state Air Resources Board to allow refiners to shift to the winter blend a bit earlier than usual, which expanded supplies from refineries elsewhere. Prices are now drifting downward.

Looking ahead, however, California's gasoline prices will continue to climb, at least slowly, because the same Air Resources Board is planning to mandate even more exotic gasoline blends to reduce carbon emissions in the name of reducing global warming.

Once again, California will be going it alone. Once again, Californians will pay the price, whatever it may be, and once again, those most affected by gasoline prices won't be politicians or those who campaign self-righteously for stricter environmental regulations.

Those most affected will be those in the lower reaches of the economic pecking order.

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