In a remarkable reversal, California Democrats have dropped a main provision in landmark legislation ratcheting up emissions regulations. As Republicans cheered, liberals nationwide decried the turnabout, with Golden State environmentalists blaming a sizable campaign against the bills launched by a nervous oil industry.

Fueling fears

Petroleum interests were able to use Democrats’ dramatic objectives to raise an effective alarm in one of the most reliably anti-carbon states in the union. “The oil industry has poured money into a campaign against SB350, calling the legislation the ‘California Gas Restriction Act of 2015’ and warning that it could lead to bans on SUVs,” as ThinkProgress noted; according to the original terms of the bill, passed by the state Senate, California would be committed to a 50 percent reduction in gasoline use in both cars and trucks. In the new bill, expected to clear the Assembly, that provision has been removed.

Substantial curbs on emissions remained, however. “The amended bill still aims to curb carbon emissions from two other sectors of the energy industry,” the Wall Street Journal observed. “Using 2016 levels as the starting point, the legislation would require the state’s utilities to get half their power from renewable sources and all buildings in the state to increase their energy efficiency by 50 percent.”

Nevertheless, the more modest version of SB350 marked the second of two big disappointments for environmentalist policy advocates in California and around the country. As the Journal added, SB32, which would slash state emissions by 80 percent from 1990 levels before 2050, also passed a vote in the Senate only to run aground in the Assembly.

Sharp rhetoric

Supporters of SB350, including Senate Leader Kevin de Leon, were adamant that industry scaremongering scuttled the 50 percent petroleum cut. Remarking on the bill’s modification, the New York Times reported, he said, “Big Oil might be on the right side of their shareholder reports, but we’re on the right side of history.”

Activists sharpened the message on their own terms. “Kathryn Phillips, who runs the Sierra Club’s California chapter, went even further, saying that the oil industry was waging ‘war on humanity’ by blocking efforts to reduce heat-emissions as much as scientists say is necessary to avert catastrophe,” MSNBC noted. Phillips, the network added, described the industry as “ruthless” and “determined to tell every lie they can and to scare people to death just so they can keep as much market share as possible.”

But a different, more practical factor weighed heavily on the minds of skittish Democrats. “The decision on how to carry out the proposed cuts would have been left to the state’s Air Resources Board, a matter of strong concern to many lawmakers,” according to the Times. If the board made decisions adversely impacting constituents, many of whom have already been struggling economically, the consequences could be dire. What’s more, angry voters would have little way to respond but at the ballot box.

An uncertain future

For now, however, anger was concentrated among climate activists convinced that the world’s fortunes depend in outsized measure on California’s ability to demonstrate a path forward on strict emissions reductions. “If they can’t succeed in their ambitions,” MSNBC suggested of Sacramento’s liberals, “it raises serious questions about the fate of a hoped for global climate agreement this December in Paris.”

Their dismay was compounded by the outright defeat of this year’s other embattled emissions bill, SB32, introduced by state Sen. Fran Pavley, D-Agoura Hills. “Pavley tried to overcome opposition to her measure by changing it to provide more legislative oversight of the state’s powerful Air Resources Board,” the Los Angeles Times noted. But skeptics were unmoved, the Times reported. Meanwhile, Gov. Jerry Brown’s office pulled its support out of concerns that it had become toothless, leaving Pavley to promise she would reintroduce the bill next year.

“Wholesale prices in Southern California jumped by about 70 cents late last week. A report on gasoline inventories from the U.S Department of Energy appears to have sparked the run-up,” as U-T San Diego reported. “Statewide inventories of low-polluting gasoline blends, meanwhile, shrank to 10.04 million barrels on July 3 — the lowest in 12 months, according to the California Energy Commission.”

Regulators in Washington, D.C. added more bad news. According to the San Jose Mercury News, “federal energy officials say California refiners had to use 1.1 million barrels from their storage tanks. It’s so bleak that imports to the West Coast sank to zero last week after averaging more than 100,000 barrels a day over the previous four weeks.”

Infrastructure problems

Despite concern over the state’s gasoline infrastructure, California has remained an outlier relative to the rest of the continental United States. “They have their own refining system. They can’t get the imports the rest of the world does and they have an adversarial relationship system between the refiners and the regulatory community,” Tom Kloza, global head of energy analysis at Oil Price Information Services, told CNBC.

Because of a combination of high taxes and unstable supply, the price floor for California gasoline has long hovered well above per-gallon costs elsewhere. “Retail prices in California are traditionally among the highest in the lower 48 states because of relatively high state and local taxes combined with strict environmental rules governing gasoline blends and pollution,” U-T San Diego observed. But some critics have cautioned that the Golden State’s broadening regulatory effort to further reduce fossil fuel usage could contribute to surprising spikes. Kloza warned CBC that California “can’t tell refiners you are going to put them out of business and expect that everything is going to run smooth.”

A consolidated market

At the same time, some consumer advocates put forth a competing argument, pinning the blame for this most recent spike on refiners themselves. Jamie Court, president of Santa Monica-based Consumer Watchdog, told the Los Angeles Times that circumstantial evidence suggested prices were being manipulated. “Part of the problem, Court said, is that the state has a small group of companies able to set prices as they please — the definition of an oligopoly.” Court cited “a recent streak of high premiums charged to brand-name stations by refineries” and the export of “record amounts of fuel to other countries, which can keep state inventories low.

Charges of price manipulation have been explored in the past. As the Los Angeles Times noted, investigations conducted more than a decade ago revealed “major oil companies worked diligently in the 1990s to reduce refinery capacity so that profits would improve.” But investigators “found no evidence of collusion or price fixing.” Nevertheless, the Times added, California’s production capacity has been dramatically limited and consolidated. “In 1982, the state was home to 30 gasoline-producing refineries; now there are 11. Chevron Corp. and Tesoro Corp. control more than 50% of the state’s refining capacity.”

Calls for relief

Californians routinely consider how policymakers can make prices and supply more reliable and predictable. In an unusual move, GasBuddy itself launched a petition for relief directly from Sacramento. “We’re anticipating increases that could surpass 50-cents a gallon in Southern California and up to 20-cents a gallon in Northern California by next week,” said Patrick DeHaan, the site’s senior petroleum analyst for GasBuddy.” That’s why we’re asking Governor Brown to intercede and issue a waiver in the public interest.”

Editor’s note: Soon after this was posted Sunday morning, Jerry Brown took our advice — and even used the term “negligible” to describe the effects on the environment. Coincidence? Probably. But still!

Oct. 7, 2012

By Chris Reed

The shocking run-up in gasoline prices endured by California drivers in recent days has led to calls from the California Independent Oil Marketers Association and state Sen. Juan Vargas, D-Chula Vista, that Gov. Jerry Brown allow earlier introduction of winter-blend gasoline to increase supply and bring down the cost of gas.

Because this would require both action by the state, which has had uniquely stringent rules on gasoline composition since 1996, and the federal government, don’t expect relief at the pump anytime soon. The high gasoline prices could last until winter-blend gasoline is allowed after Oct. 31.

But the painful price spike at least has one benefit: illustrating the costliness and vapidity of excessive regulation.

There are sensible reasons for adjusting the composition of gasoline depending on the season. During the summer, especially in hotter areas, the formula used minimizes smog and the creation of ozone, which can damage the lungs.

But we are in the third week of fall, and the summer heat has receded. Why couldn’t Gov. Brown and the federal EPA relax the rules to save us all from $5 gas? At the least, why couldn’t winter-blend gasoline be allowed in colder parts of California, which would still have the effect of introducing new supply and reducing the cost of gasoline for everyone in the state?

I put these questions to some experts with this email: