Monday, October 8, 2012

California, Running Out of Gas

Schadenfreude is not the most noble of emotions, but anyone with a soul is rejoicing to see the greener-than-thou crowd in the greenest-of-green states waiting on gas lines for the last drops of overpriced fuel.

Gas prices are spiking to well over $5.00 a gallon. Gas stations are running out of gas. In a state where people have to get in a car to go to the grocery store, it feels like poetic, if not social justice. Call it the wages of auto-eroticism.

Add to that the highest electricity prices in the nation and you have a state in decline, a state that is driving business to Texas, a test case for what happens when environmentalists regulate us back to the Stone Age.

Even the most inveterate atheists have to admit that God does not approve of California.

Naturally, Californians have a right to the most stringent environmental regulations in the nation. They voted for them; they own them. It only seems just that they should pay for them. It’s God’s way of teaching people to take responsibility.

If you have been following the news coverage of the California gas crisis you, as I, have probably come away with the impression that  it’s all the fault of a refinery fire or some such accident. This spin makes it all sound like … an accident, an act of God.

This morning a Wall Street Journal editorial showed, on the contrary, that the California gas crisis is a man-caused, or as the green crowd likes to say, anthropogenic calamity.

In Journal’s words:

Because California's fuel regulations are the most stringent in the country, the state is isolated from other energy markets. Few refineries in the world can produce the unique reformulated gasoline blend that the state requires, and almost all are located in California.

Over the last two decades four refineries in the state have shut down rather than invest in expensive upgrades to comply with fuel regulations. The biggest killer was a 2002 ban on the additive MTBE, which refiners had to replace with ethanol. The California Air Resources Board has estimated that this reformulated blend adds five to 15 cents to the cost of every gallon of gas, but Californians pay a premium whenever a refinery shuts down.

The 14 refineries in California that blend its special fuel operate at nearly full capacity. So when a refinery experiences an unexpected outage or even routine maintenance, others can't pick up the slack. And since importing the fuel via tanker can take up to six weeks, Californians are usually stuck paying higher prices until the refinery comes back on line.

Why does California have to depend on chronically slow fuel tankers to bring gas? You guessed it: the state refuses to allow pipelines to befoul its pristine environment.

It’s going to get worse. Even after the refineries come back on line new green regulations are going to kick in in November, making gasoline even more expensive. And then there will be the “low carbon fuel standards” that will take effect in 2015.

The Journal continues:

The state's cap-and-trade program, which charges businesses for emitting carbon, will take effect this November. Oil companies warn they'll pass on the costs to consumers. Meanwhile, a low-carbon fuel standard kicks into high gear in 2015. That's when regulators expect the new generation of biofuels like cellulosic ethanol to be plentiful, though such fuels aren't now commercially viable.


Bilejones said...

It's hard not to smile at self-inflicted catastrophe, so I did.

Casey Klahn said...

This "Gasamageddon" is a cautionary tale for everyone, I think.

I never realized, and certainly don't fully understand, how it is that the $5 threshold makes it prohibitive for gas stations to earn any margin.

Another layer to think about.

Sam L. said...

California used a howitzer to shoot off a foot. Dang, that hurt!

Anonymous said...

I heard a spokesman for the trade group that represents gas station and convenience store owners. This may help explain why loss of some refinery output makes some stations close.

Branded gas stations (Exxon, Shell, etc.) are required to buy their fuel from the affiliated jobbers and refiners. They are also guaranteed some amount fuel from these sources if there is not enough to supply all stations with their normal amount.

Unbranded stations can buy their fuel from any source they can contract with, but their fuel is not guaranteed to be available by anyone. In times of shortage some fuel suppliers will increase their prices to discourage anyone but their branded stations from sapping the restricted stocks of fuel. Or if the fuel shortage is severe enough there may not be any fuel to be sold once the allocation to branded stations are made.

I suspect the closed stations are the ones last in line to get fuel when a shortage happens or they are branded stations that have sold all of their fraction of the allocation for their brand.

Kenny Isbell said...

I don’t really think that California is the only one suffering from this crisis. However, a factor of this can be due to the wider streets in California and because more people own cars and drive around themselves; unlike in other states and cities with congested highways like let’s say, New York. That might be an explanation right there. :)
Kenny Isbell