via Mike Shedlock
Common sense returns to Virginia as California Governor Gavin Newsom Struggles to defend inane policy. Let’s start with Newsom and gasoline prices.
In a Wall Street Journal Op-Ed, Newsom says “What people pay at the pump isn’t simple supply and demand but the result of a highly concentrated and opaque market.“
Here are the facts. Price spikes—like the $6.42 a gallon in June 2022 that sparked our new price-gouging law—happened when California taxes and fees remained unchanged, and crude prices had actually decreased. What drove up prices were increases in industry profits.
California’s new law provides us with tools to investigate profit spiking by Big Oil, helping us to prevent supply disruptions and take legal action when necessary. Another potential tool to encourage the oil industry to do right by Californians is a price-gouging penalty that will be developed through a public process.
What people pay at the pump isn’t simple supply and demand but the result of a highly concentrated and opaque market that lets a handful of mega-profitable oil companies upcharge tens of millions of people. In California, four companies control 90% of the gasoline refining capacity.
Factors such as refinery maintenance and lack of planning have been shown to reduce supply and increase refinery margins by upward of 200% at a time. California has also found that traders on the open “spot market” drive up prices, benefiting oil companies.
A Concentrated and Opaque Market
OK, why is the market in California concentrated and opaque?
- California has the most regulations of any state
- Refiners tired of California nonsense have left the state
- California seasonal blend requirements have costs. But there’s not just one summer blend. Refineries make more than 14 kinds due to different state regulations.
Two California Refiners Shut Down
Please note that on October 11, 2023, 2 of 5 Bay Area Refineries to Stop Making Gasoline
“Coming into the year, there’s only gonna be three refineries in the Bay Area,” said Texas-based Andrew Lipow, an oil industry analyst and consultant. “When you have only three and one shuts down, it makes, to say the least, it would make things exciting and not necessarily in a good way.”
“Yes, we’ll be as vulnerable or more to disruptions just because there’s less alternative sources to diversity that production amongst. I think we’ll have too much diesel and not enough gasoline,” said UC Davis economics professor Jim Bushell.
Not enough gasoline in a state mostly using gasoline cars means higher priced gasoline.
California Issues Major New Emergency Rules
Totally oblivious to what’s going on, please ponder Newsom’s solution to high gas prices and refiners leaving the state.
Effective May 20, 2024, California Issues Major New Gasoline Regulations for Refiners, Traders, and Brokers Through Emergency Rulemaking
Effective May 20, 2024, refiners and all importers of transportation fuels into California must follow the newest regulations from the California Energy Commission (CEC) — the Gross Gasoline Refining Margin and Marine Import Reporting Regulations. These impose substantial reporting obligations on imports of transportations fuels destined for California. Importers subject to these obligations are all entities that import transportation fuels, including refiners, traders, and brokers, and that are importers of record under federal customs law or are otherwise owners of cargo before arrival. Refiners, firms that produce liquid hydrocarbons or fuel ethanol, and firms that sell these products to retailers and resellers are also required to submit new monthly reports on their gross gasoline refining margins and detailed information on expenses and wholesale gasoline sales.
Following a pre-rulemaking workshop in April, CEC submitted this latest regulation to the Office of Administrative Law (OAL) on May 9, kicking off a limited five-day public comment period. OAL ultimately approved the regulation on May 20, and it became effective immediately for a period of two years. Most significantly, the regulation requires that any importer of record or owner of “reportable cargo,” which includes finished gasolines, gasoline blending components, diesel fuels, and aviation fuels, file the new California Marine Import Report prior to arrival at a California port.
The latest regulation is a product of the March 2023 California Gas Price Gouging and Transparency Law (SBX1-2), which provides CEC with unprecedented authority to promulgate regulations that will increase state regulatory control over the transportation fuels market. These regulations will have a significant impact on a wide swath of market participants — including market participants beyond refiners and importers of gasoline.
What Newsom Deserves
What Newsom and his supporters deserve is for all California refiners to leave the state.
However, if the refiners all did leave, innocent bystanders who don’t support Newsom’s madness would also suffer in the debacle.
A Higher Gas Price Is Part of the Plan
A small opinion letter to the WSJ sums up the situation nicely: A Higher Gas Price Is Part of the Plan
Considering that it takes many years to build a new refinery and that Gov. Gavin Newsom championed California’s law to prohibit the sale of new gas-powered vehicles after 2035, why would anyone invest in new refining capacity to produce California’s unique blends? Mr. Newsom and his fellow travelers are on a mission to force Californians to stop driving gas-powered vehicles, so he should be thrilled at high gasoline prices.
Paul Dembry
Virginia Exits the California Way
Please consider Virginia Exits the California EV Way
Gov. Gavin Newsom wants to spread his anti-fossil fuel gospel far beyond California, but last week he lost a follower. Virginia canceled its plan to adopt West Coast vehicle standards, offering drivers freedom instead of climate dogma.
Gov. Glenn Youngkin said his state won’t phase out sales of gas-powered vehicles, despite a 2021 law that might have set Virginia on course to ban them by 2035, as California will. “The idea that government should tell people what kind of car they can or can’t purchase is fundamentally wrong,” he said.
He’s changing policy set by Democratic Gov. Ralph Northam, who signed a bill letting Virginia impose regulations set by the California Air Resources Board (CARB). The Biden Administration opened the door by letting the Golden State set stricter rules than those set by the Environmental Protection Agency, and Virginia was one of several states to follow California.
In 2022 Mr. Newsom pushed CARB to impose even stricter rules, mandating that zero-emissions cars make up 35% of new auto-maker sales by 2026 and 100% by 2035. Democrats in Virginia say they are bound to go along once the new rules take effect next year. So much for individual state sovereignty.
Mr. Youngkin has the public on his side. A December poll found that 57% of Virginians want to repeal the vehicle mandates, compared with 30% who prefer to keep them in place. Ditching the mandates will give consumers a choice of EVs or gas-powered cars, which will help low-income buyers in particular. As for Mr. Newsom, check back in a decade to see where his forced EV march has led the Golden State.
Virginia Has Had Enough
Expect a challenge from the climate fearmongers, but it won’t go anywhere. The bill signed by Democratic Gov. Ralph Northam lets (but does not require) Virginia to follow California nonsense.
No matter what idiots decide, 35 percent of new car sales in 2026 will not be EVs.
Assuming Trump is elected, he will seek to reverse ruling that lets California set stricter rules than those set by the Environmental Protection Agency.
And expect those increasingly ridiculous EPA rules themselves to be watered down.
AAA Gas Prices June 10, 2024
California Governor Escalates the War on Gasoline
On May 20, I noted California Governor Escalates the War on Gasoline Impacting Neighboring States
Prepare to pay another $1 per gallon in California with higher prices in Nevada and Arizona too.
Despite refiners losing money, Newsom seeks new taxes causing a complaint from Nevada.
If I was a refiner, I would leave that hell hole and let California fend for itself.
California already pays $1.48 more than the national average. Governor Newsom wants you to believe gouging is more likely in California than anyplace else in the nation.
As of April, 2024, the World Resources Institute reports “While around 50 oil refineries were in operation across California a few decades ago, 11 refineries operate in California today.”
Newsom’s proposal will impose more still costs on gasoline refiners, perhaps to the point more leave the state.
It’s on purpose.
Virginia now says no thanks to the path California is on.
Reflections on Progress
On March 22, I commented In the Name of Progress, Biden Will Take Away Your Truck
Trump will stop this nonsense cold.
EVs will happen, but at a pace set by markets, not by subsidies and demands with no reasonable plan to execute the plan.
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