The San Francisco Bay Area has some of the most expensive gasoline in the US, but last Saturday we bought gas for just below $3.00 a gallon. I savored the moment because these low prices won’t last long. (The price is at the bottom left of the photo, just above the “unleaded”.)
California “adds more than 40 cents a gallon in excise and sales taxes“, and these taxes will increase next year. From the San Francisco Chronicle, “starting in January, fuels sold in California will fall under the state’s cap-and-trade system to fight global warming.” So California’s gas tax will increase next year. “The Air Resources Board said anywhere from 16 to 76 cents. The Boston Consulting Group looked at it and came up with 14 to 69 cents.”
A second reason for high prices is that California requires a unique blend of gasoline to reduce smog. This blend is more expensive to produce, and no other state requires this blend. “Because of California’s unique fuel blend requirements, motorists can rely only on California’s refineries to correct their supply problem. They can’t solve the shortage by borrowing from their next door neighbors in Arizona or Nevada the way other states might.”
That said, US consumers enjoy lower energy prices than most other countries, so we shouldn’t complain.
Oil prices are falling because supply exceeds demand. First, the US is producing more oil because of fracking.
Second, according to this NPR article, “And blame — or credit — for the plummeting prices is falling squarely on Saudi Arabia.” “Normally when oil prices begin to slide, she says, Saudi Arabia will step in and slow production, which will help bring up the price. But not this time: The Gulf state hasn’t made any move to reduce oil production.”
During last Friday’s Stanford Roundtable on Climate Change, former Secretary of State George Shultz said that Saudi Arabia is reducing the price of oil to marginalize conservation and alternate energy sources, so the world would continue to be more dependent on oil. If Schultz is right, we should continue working on conservation and alternate energy despite the cheap oil prices we’re seeing.