Out of Gas in the Golden State

The late Daniel Patrick Moynihan once remarked that “everyone is entitled to his own opinion, but not his own set of facts.” Nowhere does that adage ring truer than in the arena of economics. Yet there is probably no other arena where facts are more susceptible to ideology. Unfortunately for Californians, facts are triumphing.

California is a state where the car is king. Beginning last week, it is now taking the proverbial king’s ransom to fill up one’s gas tank in the Golden State, where a combination of economic facts has sent gas prices soaring. The most salient facts are these: Chevron’s Richmond plant, the largest refinery in Northern California, had a fire on August 6th, and has been running at reduced capacity ever since; last Monday, the Exxon Mobil plant in Torrance that produces 150 million barrels of gas per day had a power outage; and California’s strict pollution controls that require a switch between “summer blend” gas and “winter blend” gas beginning November 1st, has refineries reducing production in anticipation of the mandated change.

Thus, there is a shortage of available gas. That shortage has triggered the most fundamental economic fact of all: when there is less of something, it costs more to get it. In Los Angeles county, gas prices rose 13 cents overnight Saturday. In Orange County, the average price is up 20 cents to $4.65 per gallon. In the Inland Empire, the price is $4.62. In California overall, the average price has hit $4.61, tying the record for the highest price ever in that state.

The shortages have also affected those who sell gasoline at the retail level. Since the refineries have begun rationing their limited supplies, pushing prices up, many gas station owners are faced with a choice–if they have a choice at all. Those with no choice, as in the smaller mom-and-pop stations, who either can’t get gas or can’t afford to pay the higher wholesale price, are simply shutting down. Other stations are buying the expensive gas at the wholesale level, and in turn, trying to pass that price increase on to irate customers, or also shutting down altogether, in order to avoid dealing with the blowback.

Independent station owner Jim Li is a typical example. He told Bloomberg News that he may stop selling gasoline at his independent station, Best Auto Care, in San Francisco, even though he’s charging $4.59 a gallon, because “I’m still losing money,” he said. Li further noted that wholesale prices are “going up so quick that there’s not even any margin to make any money at all.” Sam Krikorian, owner of Quality Auto Repair in North Hollywood, echoed that reality. “We’re going to start shutting pumps Friday,” he said. “Gas is costing me almost $4.75 a gallon with taxes. There’s no sense in staying open. The profit margins are so low it’s not worth it.”  John Ravi, who owns a Low-P gasoline station in Calabasas, California, 30 miles west of Los Angeles, stopped selling unleaded gasoline October 2nd, and ran out of high-octane and medium-octane fuel earlier last week. “I can get gas, but it’s going to cost me $4.90 a gallon, and I can’t sell it here for $5,” Ravi said. “If you come here right now, I’ve got some diesel left. That’s all. My market is open, but no gas.”

The California Independent Oil Marketers Association, which represents independent station operators, is attempting to change one of those economic facts. They have asked the state to grant a waiver and allow the sale of cheaper, winter blend gas to begin now, instead of waiting until November. “Allowing winter gasoline to be used sooner in California will certainly provide additional supply very quickly and that would help with prices,” said Gordon Schremp with the California Energy Commission (CEC). Not everyone agrees with that solution. “Cleaner-burning gasoline, or California gasoline, is a key control measure,” said Bonnie Holmes-Gen with the American Lung Association. “It cuts the emissions that cause smog and send people to hospitals and emergency rooms.”

Thus, once again, we have a difficult choice, not only with respect to the present, but the future as well. In order to provide Californians with reasonably priced gas over the long haul, the facts are once again inarguable: the state needs to build more refineries, pipelines and storage. Yet such facts are in conflict with ideological forces. “The difficulty is that Californians generally love their environment and they don’t want to have facilities that they perceive to be degrading that environment. On the other hand, they want to have cheap gas. So this is a conflict,” said Dr. Dudley Burton, who teaches environmental studies at Sacramento State.

It is a conflict whose current outcome at the very least, was decided long ago. In short, California is the most progressive, tree-huggingest state in the nation, one where gasoline prices have long been higher than the rest of the country. And as much as progressives have attempted to deflect the blame for those prices on “evil” oil companies and their “obscene” profits, or retail gas station owners and their price “gouging,” the economic facts of supply and demand, coupled with the stringent environmental regulations that progressives champion, are unassailable.

For the average Californian, the choice here is clear: if they want cheaper gas, both economic and environmental realities must be addressed, resulting in some sort of reasonable trade-off between the two. For progressives, it’s much more complicated. For years they have championed higher energy prices as a way of forcing American to embrace alternative energy solutions. Thus, if logic prevails, skyrocketing gas prices in California should be embraced by the left. They should have the political courage to tell their fellow Californians to grin and bear it for the “greater good.”

So should President Obama. The man who promised in 2008 to bankrupt the coal industry, and who earlier this year rejected the Keystone pipeline project, should be equally forthright about progressive “solutions” to the nation’s energy problems. He should explain to the American people how pushing for “green” energy solutions that don’t currently exist–even as such pushes by his administration have led to a string of Solyndra-like bankruptcies–is better than pursuing a Manhattan Project-style, no-holds-barred effort to secure domestic energy independence. He should explain why it is better to be beholden to unstable regimes in the Middle East and their environmentally suspect methods for energy acquisition, than well-regulated American energy companies, and job-producing domestic energy projects. At the very least, he should go to California and remind the residents of that state that higher gas prices are an integral part of his progressive agenda.

Make no mistake: what is currently happening to gas prices in California is the eventual end game of progressive policies. And while progressives may be reticent to express their ideological take on such economic realities, those economic realities themselves cannot be denied.

Freedom Center pamphlets now available on Kindle: Click here.

  • ezra mordecai

    It is easy to blame the progressives, for the higher prices. Their policies are meant to raise prices, but we the people should bare the greater blame! It is time for the people to stand up and do what is right, a national strike, for a day. If the government and big business doesn't get it, then a national strike for a week. Time for the america people to take our country back from the politcans, both left and right.

    • objectivefactsmatter

      " It is time for the people to stand up and do what is right, a national strike, for a day. If the government and big business doesn't get it, then a national strike for a week. Time for the america people to take our country back from the politcans, both left and right. "

      What will they get? The further knowledge that the public wants to have its cake while eating it too?

      • ezra mordecai

        Is that any reason not to try?

        • Ar'nun

          What are you striking for???? The people have received the Government they deserve. The real strike comes in a few weeks when we can make a change at the ballot box.

          • objectivefactsmatter

            "What are you striking for???? "

            Exactly. It it not self-evident what your point would be, especially in Ca. Every faction would declare the strike as supporting their position.

            Picket for more domestic oil and coal development. A strike? What is the point other than being unhappy? Nobody is happy about the situation. Period. What is the solution, and does the strike articulate it?

          • http://www.youtube.com/watch?v=nLNn2YflwNs Roger

            Lower demand, and then the lower supply won't drive up prices.

            Don't strike for one day, have real impact, buy a bicycle and never use your car for the rest of the year.

          • objectivefactsmatter

            "Lower demand, and then the lower supply won't drive up prices. "

            Striking burns fuel beyond utility. The "message" of simply using less is far more effective in every way. So what is the strategy of the strike? If the object is to reduce load specifically, fine. I didn't hear that. One can do that any day of the week. I gave up my car in 2003 because of fuel prices in Ca. Actions speak louder than words, and strikes are not always effective actions, especially if there is no clear objectives.

            "Don't strike for one day, have real impact, buy a bicycle and never use your car for the rest of the year."

            Exactly. I'm going on my 10th year, but I did buy a 125cc motorcycle to use occasionally. I burn about 2 gallons a month at most. Everything else (strikes, crying and bitching) is seen as bluff, until you have long term alternatives, they know they have you. A strike will make them laugh and allow them opportunities to manipulate prices even more. You'll all lose until they know you (or "we" collectively) have the upper hand with alternatives.

        • objectivefactsmatter

          "Is that any reason not to try? "

          Try what? A strike is a tactic. What is your strategy and message specifically? We know it's self-evident that people buying gas want lower prices.

    • http://www.youtube.com/watch?v=nLNn2YflwNs Roger

      Ezra, business gets it.
      And they are leaving the state.

      When government makes things so difficult they shut down most of the refineries and make the blend requirements so hard that output is reduced… what other outcome would you expect?

      • Kufar Dawg

        Roger is right, California is dying. Southern California is a cesspool of high crime, high taxes (property, sales and income), gridlock, gangs and a huge, nation-sized debt. It's only a matter of time before the bubble bursts.

        • http://www.youtube.com/watch?v=nLNn2YflwNs Roger

          The bubble burst already, and Jerry Brown was lousy his first time around so he's not going to have clue what to do this time either. The lousy republican leadership in the state deserves the blame, they had a great possible governor to replace the ferret faced Gray Davis in McClintock and they said he wasn't electable since he didn't appeal to the middle, so they went with the Kennedy hubby and we all know how that turned out.

          The republicans are irrelevant in solving anything they've allowed to happen. We need a new second party. The marxists won't give us much time to act, so it had better be soon.

          • Kufar Dawg

            I respected Jerry Brown when he farmed out CalTrans to Soddy Barbaria and the Soddys tried to insist on their right to vet all the Caltrans workers to insure none of them were Jewish. Governor Brown said take all of them or none of them, but he might not be that person anymore, just like Geraldo Rivera is now a sell-out of the most disgusting kind.

  • PaulRevereNow

    The Progressive doctrine, particularly as administered by Barry, is simple: Turn Americans into paupers, by 1-reducing us to poverty. This is being done by sparing no effort to increase the national debt. 2-By keeping us dependent on ME oil. 3-By killing jobs, by eliminating them, or outsourcing them to other countries. 4-Psychologically, by propaganda dissemination, i.e. "You didn't build that." 5-By increasing taxes, which will happen if he wins in November. If Barry loses, no Presidential pension-he needs to get a dose of his own medicine.

  • Schlomotion

    It is funny that the author chooses to blame environmentalists and not the oil cartel and some state Congressmen for fixing the price of gasoline in the election season. It's almost as if Mr. Ahlert thinks the American public has forgotten about the sudden unavailability of electricity in the California Electricity Crisis of 2000-2001 when Enron illegally cut electrical supply to California in an election season. Once again according to Mr. Ahlert, the alleged culprit is a wind farm. Or, looking at all the facts, Mr. Ahlert is a wind farm.

    • UCSPanther

      Fat lot of good it did Enron. They were destroyed by their own corruption, their CEO and founder is dead, their president is serving 25 years and their CFO just did 8 years and he will have a hard time finding a job in his field with that kind of criminal record.

      Enron is irrelevant and long gone.

      And you are a leftist. You are not fooling anyone.

      • Schlomotion

        I look forward to the next round of suicides and long prison terms. Hopefully they won't propel Mitt Romney into office though. The man has no foreign policy experience.

        • Larry

          I gotta roll around laughing at that one.

          The empty suit currently incumbent in the Oval Office has NO experience, of anything, not even of being PoTUS, which he has been masquerading as for most of the last 4 years.

          Happy eternal nakba, schlocky.

          • Kufar Dawg

            Ditto, and I hope there are many more nakbas in Schlo's future.

        • UCSPanther

          It definitely irks you American Leftists when a Canadian knows more about American affairs than you will ever know.

          The proof is in your gibberish.

        • http://www.youtube.com/watch?v=nLNn2YflwNs Roger

          Go ahead, it will probably be alongside the road in your car out of gas and without a clue where to get any.

    • Kufar Dawg

      No blame for islamofascist controlled OPEC eh Abdullah? I wish the Jackal had killed them all when he had the chance. ENRON is old news fool.

      • objectivefactsmatter

        Actually you can blame the Soviets and now the Russians, Chinese and OPEC…or you can blame the stupid American voting public for allowing these minor players to deceive us collectively (deceiving enough liberals to destroy the economy via idiotic, suicidal energy policies).

        There's enough blame to go around, but generally it's not the fault of the oil corporations per se. It's American government and constituents who have failed here.

        Of course OPEC wants our money, and to destroy democracy. How stupid are we to ignore this for decades?

  • Nomadic100

    Very sloppy writing! The Exxon Mobil refinery in Torrance does not produce “150 million barrels of gas a day” and Calabasas is not 30 miles west of Los Angeles (which would put it in the ocean) but 30 miles east. If you are going to approvingly quote Moynihan about “facts,” you should at least get your own facts right.

    • Fred

      Dear Nonadic try google maps to get some facts. Calabasas is indeed WEST of LA not EAST by 30 miles. Actually slightly north but mostly west. Maybe a modern nomad should invest in a handheld gps unit.

      • Kufar Dawg

        What a strange thought, if I leave the city of L.A. and go due West It would be Santa Monica I'd be hitting, not Calabasas. The city of L.A. and the COUNTY of L.A. are NOT the same thing. Calabasas is much further north than West.

  • xkn

    Whenever price of gas drops in CA, some of refineries catches fire. Essentially acts of sabotage to boost the prices. Before the recent fire, the prices were dangerously testing $3.50 price level, not seen for a long time. So something needed to be done. I would not blame progressives for that, although they did create a captive market in CA, where gasoline cannot be imported into state, thus enabling this game to go on.

    • http://www.youtube.com/watch?v=nLNn2YflwNs Roger

      Are you sure it wasn't the producers of marshmellows trying to get people to make smoors?

  • UCSPanther

    I think California has a terminal case of EIS (Environmental idiocy syndrome), and much worse politics overall than British Columbia in Canada could ever think of having in the 1990s. When we got rid of the NDP party (Think democrats on steroids), many of our ridiculous environmental laws, which were choking out our industries (The forest industry was one of its biggest victims) were relaxed and things improved. For now.

    Unlike BC, where we had some temporary reprieve, it seems that no matter who is in power, California just can't seem to get away.

  • rubiconcrest

    The high prices in Ca. are the direct result of CARB, Californa Air Resources Board and their mismanagement. This agency established by the legislature has a long history of using faulty science and foisting additives like MTBE that do damage. The MTBE fuel additive cost Californians and estimated $30 million in added fuel costs and the groundwater pollution cleanup another 20 billion. Go to killcarb.org and get an education!
    Here is a true story. I spoke with an owner of a mobile home sales business 3 years ago. One day he came out of his sales office along Antelope Blvd., Red Bluff, and say a man putting a measuring stick in his pick up truck bed gas tank. It was a member of the CARB staff checking to see if he was using Ag diesel in the tank instead of regular diesel. This inspector came on the property and was doing his 'inspection' without even asking the permission of the owner before he climbed into his truck! This is the kind of government over regulation that exists in California.

  • Tanstaafl jw

    Maybe California can switch to skateboards.

  • Fred

    It's clear that the problem is government elected by progressive liberal DummycRats not private businesses. When the morons in California elect the likes of Brown, Pelosi, Boxer and Fienstein what other result could be expected? Liberal Democrats control California, state offices and the legislature. The fiscal problems the state faces have all been created by them. Government isn't the solution. Government IS the problem. The dimwits in California are too stupid to see the problem or too arrogant to admit it is all their fault.

  • jacob

    It is a known fact that if anything real bizarre is ever going to happen anywhere in this rotten world,
    it will most assuredly happen nowhere else but CALIFORNIA….
    If for sample suffices a button, there is the viper den of Berkeley and, since California is considered
    a fully blue state, let the whole state enjoy the achievements of their idol OBAMA….
    Will California be voting for his reelection …???
    Bet your bottom dollar it will