According to a recent study, it seems high gasoline prices in California are the government’s fault and not the oil industry’s.
Extracting Fact published a piece about the study and provided a synopsis of the study’s findings:
"The policy choices of politicians, regulators, and environmental lobbyists drive gasoline prices higher in California, not monopolistic behavior of producers. Higher gasoline taxes, stricter environmental standards, and unique fuel island effects are the culprits, and they hurt low-income families disproportionately … Only policy fixes, not political grandstanding, will bring relief to consumers.”
Speaking to the administration’s allegations of oil company price gouging, the authors – economists Lawrence J. McQuillan, a Senior Fellow at the Independent Institute, and Robert J. Michaels of Cal State Fullerton – were dismissive:
“Market fundamentals and institutions explain California gasoline prices without resorting to conspiracy theories inconsistent with economic logic and the available data.”
The study shows California’s market for refined fuels is “overly constrained, rigid, and isolated, resulting in slow adjustments and sharp price spikes.”
Economists say the fix is for California policymakers to make its fuel markets “more flexible, interconnected, and responsive, from the crude oil producer to the corner gas station.”
“California’s state and local governments have enacted restrictions on oil drilling, refineries, pipelines, new gas stations, new fuel pumps, and the gasoline itself, and also implemented a long list of taxes and fees. The cost of those policy choices acts as a surcharge on gasoline (at least 30 percent and growing) and is borne entirely by Californians.”
Extracting Fact noted that the study points out that California being an energy island, with no pipeline connections to other states, exacerbates the susceptibility to spikes at the pump. Along with the California’s complex fuel blend regulations, this self-imposed isolation “limits California’s ability to adjust to unforeseen events, and dependence on maritime shipping makes adjustments even slower and more expensive.”
The economists recommend “lifting restrictions on oil exploration and drilling … reducing restrictions on refinery and pipeline capacity … [and] reviewing California’s stringent and unique environmental regulations that increase gasoline prices …”
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