SACRAMENTO COUNTY, Calif. — The average price of gas in California jumped again overnight by a few cents. As of Tuesday, it’s now $6.41.
Governor Gavin Newsom said in a Tweet on Friday that it’s because oil companies are ripping people off, but several energy experts disagree.
University of Houston Energy Fellow Ed Hirs said several refineries are offline right now in California for planned and unplanned maintenance.
“There are four, maybe five refineries that are offline, at least temporarily, and so the supply of California blended gasoline is a lot lighter than everybody had planned,” Hirs said.
Mark Agerton, an assistant professor at UC Davis focusing on energy and resource economics, pointed to California's environmental policies that make it difficult to supplement California's gas when interruptions like that occur.
“What's unique about California is that we have a special blend of gasoline that's mandated by the Air Resources Board to help deal with local air pollution from our cars," Agerton said, "And so, not a lot of places make that kind of gasoline, we really make most of it here in California, so because of that, our import options are really limited to kind of help offset this shortage.”
Patrick De Haan agreed that strict environmental guidelines make it hard to meet demand when there’s a cutoff in supply. He is a market analyst and fuel forecaster. He said Newsom is wrong.
"What we're seeing is simply misinformation," De Haan said. "This is simply supply and demand related, very similar to the California housing market. Prices have gone through the roof. Why? Well because there's just not enough homes on the market to supply the amount of buyers looking to purchase.”
He said if extortion were behind it, California would not be alone in pointing fingers.
"All sorts of government entities would be filing lawsuits left and right," he said. "They would have won those lawsuits in the past when these issues have come up."
Agerton does not want to call it extortion.
“I am hesitant to blame high prices on greed," he said. "As an economist, the way we look at high prices a time like this is a way for the market to allocate a commodity that's in short supply."
Hirs won't call it greed either.
"The governor's kind of playing fast and loose with the rhetoric and the facts," Hirs said. "It really is an issue of supply. If if there's not enough gasoline being produced in California, it has to come from someplace else."
If supply is the issue, why not expand California refineries? Severin Borenstein, the director at the UC Berkeley Energy Institute, said it’s hard to convince businesses to invest or expand in California gasoline.
"We're at the same time telling refineries that we're actually phasing out gasoline," Borenstein said. "The problem is we want to ratchet down gasoline consumption, and that means that supply has to ratchet down and we need policies to do that in a much smoother way than we have been doing."
Jamie Court, with Consumer Watchdog, disagrees with everyone and everything the experts said.
“I find that just a phony argument," Court said about businesses choosing not to invest in California. "The gas economy is not going away anytime soon.”
He believes the refineries planned maintenance at the same time on purpose.
“When you have five refiners that make 97% of our gasoline, they can control the supply to drive up the price, and they are limiting supplies to drive up the price," Court said.
He said environmental policies are not the real reason behind the high costs, but they are, in a way, still at play.
"The oil refiners are trying to make an example of California," he said. "You want to enact tough environmental laws? You want to protect your communities from drilling? We're gonna raise the price of your gas."
He said that the cost to create California's gasoline or the cost to import from elsewhere does not account for the drastic difference in California's average cost of gas and the national average cost.
“The actual cost that environmental laws and taxes add on to a gallon of gas is no more than 69 cents," Court said, "But they are angry, and they are taking it out on the state of California."
As far as solutions go, Agerton said there are longer term solutions the state could address, like creating a stockpile of oil like the federal government does, and Hirs said the governor could temporarily waive requirements and import standard oil.
Meanwhile, Court said the governor’s new tax proposal on the oil companies profits is the perfect solution.
Severin Borenstein said switching early to the winter blend of gas is a good short term solution, which Newsom has requested to do.
"Winter blend gasoline can use some components that summer blend can't, and so that can potentially stretch the supply," Borenstein said.
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