Gas price hike is test run for Cap and Trade

Oct. 9, 2012

By Wayne Lusvardi

Think today’s high gas prices are bad? Wait until Cap and Trade’s surtax on gasoline hits starting Jan. 1, 2013. Cap and Trade is being imposed as part of AB 32, the Global Warming Solutions Act of 2006.

Under Cap and Trade, gas prices are expected to increase from $0.26 to $1.61 per gallon. One study concluded that, if all the provisions of Cap and Trade were loaded into the price of gasoline, it would reflect about a $2.70 per gallon gasoline price increase above prices as they were before the current surge.  In other words, California’s current gas price bump may be a pimple of what is to come in three months when Cap and Trade kicks in on Jan. 1.

Average gasoline prices in California shot up 50 cents per gallon in the last two weeks from $4.11 to $4.61 per gallon, according Reuters.  The price difference between Jackson, Miss. at $3.43 per gallon and California at $4.61 was $1.18 higher. That’s about a 34 percent price spread.  Many independent gas stations were reportedly shutting down — not because of lack of supply of gas, but due to the jump in price that reduced profit margins to zero.

Governor Declares Emergency

On Oct. 7, Gov. Jerry Brown called a fiscal emergency due to the high gasoline prices.  Brown ordered state pollution regulators to allow the early sale of winter-blend gasoline ahead of the scheduled Oct. 31 date.

Supporters of Proposition 31 on the November 6 California ballot claim that their initiative will allow Brown to call a fiscal emergency.  Well, the governor just called one and apparently didn’t need Prop. 31 to do so.  Only in California  is voter approval required for a state constitutional amendment to expand the powers of the governor that he already has. Rest assured, however, that Brown would not declare a fiscal emergency to suspend California’s Cap and Trade law. Yet he has the power to do so, one year at a time, under AB 32.

There were many reasons for the jump in prices.  Most of the reasons centered around California’s unusual green laws, unfavorable regulations and taxes against new or expanded oil refineries, and circumstantial causes. The Exxon refinery in Torrance was shut down last week due to a power outage.  Some refineries were shut down for planned maintenance due to the state’s mandated shift to a winter fuel blend for vehicles that reduces air pollution.

All 14 oil refineries run at maximum levels, as if you were to drive your car with the pedal to the floor 24 hours a day, seven days a week. There is little room for planned maintenance shutdowns of refineries.

Green Price Hikes

In 2015, the “low carbon fuel standard” provision of the state’s Cap and Trade law will kick in.  That will only compound the problem. Regulators will be mandating bio-fuels like ethanol.  Today it is reported that bio-fuel prices are not commercially feasible.  Which could lead to another joke: possibly the only place to find the true market price of gasoline in 2015 in California will be in tax-exempt gasoline dispensing stations for fleets of government vehicles.

To show the sheer absurdity of California voters, Brown’s $8.5 billion proposed income and sales tax increase, Proposition 30, was leading in opinion polls conducted around Sept. 23 by a margin of 51 to 36 percent. Perhaps the ongoing high gas prices will curb voters’ masochistic tendencies.

In old Soviet Russia, elections were rigged and candidates for office all received 99 percent of the vote.  In California in 2012, elections are not rigged.  But the joke will be on those who voted for Prop. 30’s income and sales tax increase just before a huge jump in regulated gasoline and energy prices hit.

Soviet centrally planned government in Sacramento is once again failing due to a huge hike in gasoline prices, while other states’ prices remain flat.

Which reminds me of an old Soviet joke that I’ll adapt: “Is it true that California is the most progressive place on the planet? Of course! Life was already better yesterday than it’s going to be tomorrow!”