California will always be at risk of gasoline price spikes caused by disruptions at refineries because it is a “fuel island,” stranded by time and distance from quick delivery of gasoline from outside the state. Without interstate pipelines, California relies primarily on maritime tankers for oil and gasoline imports, which cannot move fast enough to make up for a sudden drop in supply.
Spikes in California gasoline prices experienced in 2012 were in large part due to significant, unplanned outages at three major oil refineries. When the most recent outage occurred, in Torrance on October 1, the wholesale price for gasoline followed a pattern typical of such price spikes – rising, peaking and starting to decline within a week, fewer days than it would take a gasoline shipment to arrive at a California port.
Although the state’s clean-air requirements add to the price of gasoline, the health benefits are substantial, and studies show their value exceeds the additional cost at the pump. Furthermore, the requirements are not the primary driver of price spikes, nor do they prohibit importing gasoline from elsewhere.
In fact, refiners outside California can, and sometimes do, make gasoline that meets the state’s specifications. That said, in the wake of the recent price spike, the state eased summer-blend fuel requirements, which benefited motorists by allowing in-state refiners to immediately boost gasoline production by 3% to 5%.
But there is a larger lesson here: It’s time to think beyond the gas tank.
Instead of running on fossil fuels and driving toward empty, California needs to diversify its array of transportation fuels to include more electricity, biofuels, natural gas, propane and hydrogen.
The California Energy Commission is working to do just that as it helps the state meet ambitious climate change goals. The commission supports the development and use of new vehicle technology and alternative and renewable fuels through competitive awards of AB 118 funds — made available through legislation adopted in 2007 and funded by a small surcharge on vehicle and boat registrations and smog-check and license plate fees.
The commission has awarded more than $250 million to more than 120 clean transportation projects across the state. These awards have leveraged more than $500 million in private and public investment.
These investments support a wide range of projects, including the installation of about 6,000 electric vehicle charging stations and the rollout of hundreds of alternative fuel vehicles on the road. These investments also support the innovative development of biofuels made from algae and restaurant and agricultural waste.
The efforts are already paying off: They are reducing gasoline dependency, creating more than 5,000 long-term jobs, bolstering energy security and economic competitiveness, and reducing the risk of lung cancer and asthma for all Californians by cleaning up the air.
In the longer term, these crucial investments will lead to more options for consumers and smooth out the road to a clean transportation future for California.
Seeking a fix for California's gasoline market problems
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Seeking a fix for California's gasoline market problems
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Seeking a fix for California's gasoline market problems
