Economics over the environment in California

Details

Published on Wednesday, 10 October 2012 06:48

By John Plesnicar

The state of California is currently in a “crisis” with record high gasoline prices. The average price for a gallon of gas in California as of the 9th of October, 2012 was $4.67 USD per gallon. If you are reading this in Europe or Asia you probably would like to pay only $4.67 USD a gallon. In California this is considered a crisis. Elected leaders are calling for a federal investigation on the current gasoline price. This past spring I wrote an article called: No Austerity means Future U.S. Energy Policy Has Been Determined. The point of the article was that economics will drive future environmental regulations and policies. The current California situation is a perfect example where the most environmentally friendly state in the U.S. picked economics over the environment in just a few days.

California law requires refiners to produce a blend of gasoline to meet California state air quality standards based on the time of year. This means refiners and wholesalers can’t make up shortages with gasoline that can be sold in other U.S. states.  Recently California had several refinery disruptions. These disruptions caused gasoline prices in California to go up quickly as the state could not import gasoline.

This past Sunday Governor Jerry Brown asked the California’s Air Resources Board to grant an immediate waiver that would allow refineries to make and sell the winter-blend gasoline. This would ease supply issues and reduce prices. California refineries are normally not allowed to begin selling the cheaper winter blend until the end of October. What the governor did was simply bypass state environmental regulations. Economics easily trumped the environmental laws of the state. The environmental policy of California was shown to be just a piece of paper and the people will override the environmental law the instant their pocketbooks are affected.

If it is a good idea to have these winter and summer blend gasoline laws for the environment then why would the people not sacrifice a few dollars for a few more days? When the average person is directly affected economically then the environmental laws do not matter. Californians were begging their government to come up with a way for cheaper gas as soon as possible. If it meant overriding a law instead of cleaner air then that was fine with the people. This is an example where environmental laws and policy can and will change quickly if the economic conditions are putting pain on the population. The right economic conditions will always trump environmental laws.

This is just a small example but a very good one for why future U.S. energy policy has been determined. Economics will determine everything regarding future U.S. energy policy. Future laws and regulations for fracking, drilling on federal lands, total drilling permits and LNG exports in the U.S. will be based on economic survival not environmental policy. The current California experience tells us the most ardent environmentalists in the U.S. could only last a few days with economic hardship. Keep this in mind when thinking about future U.S. FERC LNG export regulations and DOE approvals.  Processes we currently think of taking years can be changed in days if the economic conditions are right.   

John Plesnicar is the Managing Director of LNG Global
Comments: info@lngglobal.com