In early October 2023, a gallon of gasoline in at a station in Van Nuys, CA could be purchased for $8.88 - a price which would cause any driver in any US state to wonder why gasoline in California costs so much.
So let's explore this question in detail.
What happens when (questionable at best) government policies disrupt supply and demand?
The answer isn't particularly difficult: very few benefits if none at all.
TerraManta already discussed in the past the overarching problem which the State of California declined to address for many years.
- California is a gasoline island with no major pipelines
- California requires its own summer of gasoline produced by in-state refineries
California delegation to the US congress could sponsor a bill creating a national gasoline standard based on California requirements - but didn't. That's why a refinery in Texas cannot send gasoline to California when supply is lower than expected.
Revisiting important milestones.
10 years ago, the price of gasoline in California was about 30 cents per gallon higher than the national average.
Currently, the price of gasoline is more than $2 than the national average.
Adding 24 cents to the price of gasoline.
In 2013, California lawmakers created a cap-and-trade program mandating that businesses purchase special permits if their carbon dioxide emissions exceeded certain levels. These permits alone raise the cost of gasoline by approximately 24 cents per gallon.
Adding another 22 cents to the price of gasoline.
The California Air Resources Board (CARB) also imposed regulations that limit the “carbon intensity” of fuels, a fancy way of describing the total emissions produced throughout the entire gasoline production and consumption process. Doing so adds around 22 cents per gallon to the wholesale gasoline cost
Raise the excise tax on gasoline and tie to inflation
As a result, California drivers pay 73 cents per gallon in state taxes.
What will you do if told you cannot do business in 2035?
This supply and demand equation is further worsened by California’s impractical ban on the sale of new gasoline-powered cars by 2035. Oil refineries now face the challenge of planning for a future with fewer gas-powered cars while still providing affordable fuel to the millions who do not drive an electric vehicle, all while adhering to stringent regulations.
Forty years ago, the state’s population stood at 24 million, with 43 operating refineries producing more than 2.5 million barrels of crude oil daily.
Currently, with a population of nearly 40 million, only 15 refineries remain, refining less than 1.75 million barrels per day.
Governor Gavin Newsom: "we brought Big Oil to their knees"
California will soon be able to penalize oil companies that engage in “price gouging” behaviors, after Gov. Gavin Newsom (D) signed a first-of-its-kind bill into law on Tuesday evening.
“We proved that we could actually beat Big Oil,” the governor said at a press conference before signing the legislation. “There’s a new sheriff in town in California, where we brought Big Oil to their knees.”
As always, TerraManta invites the reader to decide if this statement is indeed correct.
Politics and reality are often very different
Governor Gavin Newsom also signed Senate Bill 1137, “to stop new oil drilling in our neighborhoods and protect California families.”
Since Newsom’s statement, however, the California Geologic Energy Management Division, or CalGEM, has approved hundreds of permits to rework existing oil and gas wells and continue dangerous operations within setback zones. CalGEM has approved a total of 897 permits since the beginning of the year, 62% of which are within the zones that would be protected by SB 1137.
Voting + critical thinking applied = a better outcome
TerraManta reminds all voters in California to exercise their right to vote while exercising critical thinking.
Commodities ran, run, and will run the world
TerraManta is the only company which applies machine learning to forecast commodity prices by continuously learning how geopolitical events influence fundamentals (supply, demand) and result in a price action as evidenced by markets behavior.
TerraManta welcomes serious inquiries from investors who want to see machine learning solve real problems in today's world.