David Crane’s article about the low carbon fuel standard, fuel prices and market forces truly represents “misplaced priorities” on behalf of the author. Somehow he connects the dots between high oil prices and the need for a low carbon fuel standard. If the oil market was being truly driven by market forces, their may be an inkling of a connection here. However oil markets are now driven by Wall Street investment decisions and the switching of investment bundles into different classes of products, including oil commodities. Oil prices have very little to do with market forces and very much to do with currently-legalized gambling.
Right now there is a huge abundance of oil and fuel in the global economy – a glut. But oil prices hover in the high seventies/low eighties for no other reason than investment firms deciding to abandon the poker table in favor of the dice table.
The truly impressive leap of logic in Mr. Cranes’ article is that somehow he equates that a low carbon fuel standard will decrease demand for oil, thereby resulting in lower fuel costs. California gasoline prices averaged about 35 cents/gallon higher than the national average for the last year. This is because California has a unique blend of fuel and among the one of the highest tax burdens in the nation. That’s over $5 billion/year extra cash California motorists had to shell out to drive in this state. When California mandates different fuel recipes from everyone else, California motorists pay the price – the evidence is clear and compelling.
So now we move (boldly) into the new frontier of low carbon fuels. The fuels CARB has – by formula – designated as low carbon: 1) don’t exist; or 2) come from Brazil. Yet, they have adopted a regulation with mandates forcing this type of market reaction. And, they are quickly designing a regulation that will make blending biodiesel prohibitive. There is no “low cost” element to their low carbon fuel regulations, regardless of how creative CARB economists try to be. Consumers are likely to see at least a dollar added to the current premium they are paying for California fuels, if they are able to get fuels at all. And this doesn’t include any of the petro fuel tax increases or carbon-reduction-by-price schemes floating around.
The prescription to low fuel prices is simple: 1), put rules on the Wall Street gamblers using our energy and food commodity markets as their personal gaming devices; 2) stop double-taxing fuels (sales tax on excise tax); and 3) step away from train-wreck fuels mandates – no matter how cleverly disguised or envisioned. That will stop misplaced priorities.