Why Gasoline is Going Higher in California

Todd Royal
Todd Royal is an independent public policy consultant focusing on the geopolitical implications of energy based in Los Angeles, California.

It has become raison d’etre to blame President Trump for everything wrong with California; including higher gasoline prices plaguing our state and contributing to a slowing statewide GDP. But in today’s world that is connected via air, land, sea and increasingly cyberspace; globalization and policies knit countries and states together like never before. Many times rendering geography and borders on maps obsolete – consequently, events in one region or country – affect continents, countries and states. California’s decision to never allow pipelines into the state, drill for oil and natural gas off our coasts and certainly not explore the billions in untapped fossil fuel reserves trapped in the Monterrey Shale is rippling across our state in the form of higher gas prices.

The Monterrey Shale – though considered technically hard to recover – is 64% larger than all other shale plays in the lower 48 US states. To believe the Monterrey Shale can’t be unlocked is economically unwise when you consider that in September Kuwaiti oil exports to the US dropped to zero for the first time since the first Persian Gulf War over rising US production. Furthermore, “U.S. net imports of foreign oil have dropped to a 45-year low.”

If California voters and policymakers wanted to lower gasoline prices, unlock poverty-alleviating affordable energy and create millions of high paying jobs then begin working with our world class universities to unlock the Monterrey Shale. It would be like when Governor Pat Brown built universities, highways and water systems that California and the US are still prospering from today. Our high gasoline prices have nothing to do with Trump, Iranian sanctions tightening supply or OPEC. This is a California problem that historically has some of the highest gas prices in the US, a newly instituted 12-cent per gallon tax and, “the most stringent regulations for its gasoline in the nation(US).”

On the ground it means few refineries are willing to produce gasoline for California and the situation becomes more dire when it was announced in September that the South Coast Quality Air Quality Management District (SCAQMD):

“Proposed an option that would ban a critical refinery process technology at two Southern California refineries that is required for manufacturing cleaner-burning gasoline.”

Consider this – of the 5 largest US states – California is #1 in poverty and Texas is #1 for growth. Texas is also the #3 exploration and production (E&P) producer in the world. Former Texas Governor Rick Perry used fracking as a policy tool, which achieved scientific breakthroughs, and corporate investment unlocking Texas shale basins into tax revenue that now has Texas being the #1 wind power generator in the US as well. Texas figured out how to use wind to their advantage and California could do the same with the Monterrey Shale.

The greatest impact a society can have on poverty, homelessness, and inequality along with overall human flourishing is abundant energy. California is blessed with billions of barrels of oil within our state and coastal waters. Moreover, we have enough natural gas to clean our air and continue dramatically cutting emissions like no continent, country or state can imagine. When the US began converting coal-fired power plants to natural gas this caused America to be the only industrialized country in the world to meet the Kyoto Protocol by dramatically lowering its carbon output and emissions through natural gas.

California should be the leader in natural gas E&P instead of legislating through Senate Bill 100 (SB 100) that our advanced society can only be powered by renewable energy (wind & solar). Imagine what gas prices will be like when renewable energy tries to replace the 6,000 modern-day products that originate from crude oil. Moreover, the 2015 US Department of Energy Quadrennial Energy Review (QER) unveils the biggest reason renewable energy will cause gas prices to continue rising in California when it states:

“Energy storage is a key functionality that can provide flexibility, but there is little information on benefits and costs of storage deployment at the state and regional levels, and there is not broadly accepted framework.”

If California fully deploys SB 100 and there isn’t available energy storage – and currently there isn’t according to the Los Angeles Times – then energy from electricity and gasoline prices will naturally rise. Supply will not be able to keep up with demand based upon storage capacity alone.

Back to no interstate pipelines – if California doesn’t alleviate that problem – then gasoline refined outside the state will increase and this will cause intensifying the carbon-intensive use of trucking and shipping petroleum for economic continuity. Domestic and foreign refineries that have less environmental regulations will lead to increased global emissions; and ironically trucking and shipping crude oil, petroleum and gasoline have higher carbon footprints. California will then continue increasing gasoline prices, its carbon footprint and endangering environmental safety since pipelines are the safest method to import oil over ships, trucks or railways. The wise environmental policy choice would be to build pipelines.

Our policymakers should begin understanding that unweaving the intricacies of fossil fuel from our economy is like undoing globalization for trade and commerce. Everything is now interlinked whether we like it or not. Oil and natural gas can power our future or increasing our use of renewable energy and demonizing anyone who doesn’t share the belief that the environment takes precedence over California economic activity can be our downfall.

But with gas prices rising and foolishly slashing fossil fuel use instead of taking Texas’ approach to energy (the all of the above approach: fossil fuels and renewables working together) California voters, citizens and policymakers only have ourselves to blame when gas prices rocket into the $5 per gallon range. With the US shale revolution taking place there is no reason why our prices shouldn’t be in the $2.50-$3 range. Environmental taxes and regulations are choking our economy, increasing our poverty and a big reason business is leaving California.

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