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Why Have Gas Prices Skyrocketed in California?
Posted on Oct 8, 2012
Here’s some not-so-good news for California motorists at the beginning of the workweek: Gas prices in the Golden State have soared to record levels, rising 50 cents in the span of seven days. On Monday, the average price of a gallon of regular gasoline was $4.67, a record high in the state and much, much higher than anywhere else in the country.
So what gives with the higher prices at the pump?
For starters, gasoline in California is usually more expensive than in other places thanks largely to gas taxes in the state that are significantly higher than the national average. Secondly, refineries have to produce higher-quality gasoline to meet California’s air quality standards, so gasoline can’t just be imported from any old pipeline. In fact, there’s little pipeline capacity to bring the product in from other states. As a result, motorists in California pay, on average, 30 to 50 cents more per gallon than do drivers in the rest of the country.
Coupled with some recent refinery and pipeline problems in the state, and you begin to see why some stations are charging more than 5 bucks a gallon.
As James Hamilton at Econbrowser wrote:
To ease the pain California motorists are enduring, Gov. Jerry Brown on Sunday ordered that refineries be allowed to produce winter-blend gasoline that is normally not available to the state until late October. “If this situation continues, it may cause unacceptable price impacts for consumers and small businesses, significant economic disruption, and serious harm to public safety and welfare,” Brown wrote in a letter to regulators at the California Air Resources Board. “Allowing refiners to make an early transition to winter-blend gasoline could quickly increase fuel supply.”
The move is expected to lower gasoline prices and thus please drivers, though it could have some adverse effects on the environment.
Hamiltion warned, however, that prices could remain high because of consumer demand and a willingness to pay at the pump even when prices have peaked.
—Posted by Tracy Bloom.
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