Bustamante’s political consultant dismissed suggestions that regulating gas prices would lead to shortages
The Sacramento Bee
Independent economists Friday ripped Lt. Gov. Cruz Bustamante’s proposal to regulate gasoline prices in California, saying the Democratic gubernatorial candidate’s plan would bring back the long gas lines of a generation ago.
“I remember that nightmare in the ’70s and I don’t want to go through that again,” said Sacramento economic consultant Ted Gibson, the state’s former chief economist. “I’d rather pay $2.20 a gallon.”
Bustamante’s idea “would almost assure us of gasoline lines in California until perpetuity,” said Newport Beach energy consultant Philip Verleger Jr. He was an energy adviser in President Carter’s administration, when long gas lines appeared during a late-’70s oil shock.
Bustamante, a leading candidate to replace Gov. Gray Davis in the Oct. 7 recall, endorsed a proposed constitutional amendment Thursday to let the Public Utilities Commission regulate gasoline. The amendment is being pushed by state Sen. Joe Dunn, D-Santa Ana.
Seizing on a price spike that rivals last March’s record, Bustamante appeared with Dunn at a news conference at a Sacramento gas station and said, “Californians are being gouged, and under current law we are powerless to do anything about it.”
In separate interviews Friday, a leading consumer advocate and Bustamante’s political consultant dismissed suggestions that regulating gas prices would lead to long gas lines.
Gas prices shot up 18 cents in one week this month and were averaging $2.12 in Sacramento Friday for a gallon of self-serve regular, according to AAA of Northern California.
But the price was a fraction of a penny lower than the day before, amid signs that supplies are firming up and prices will soon fall back below $2. The statewide average Friday was $2.16, essentially unchanged from the day before.
Despite the increases, gas prices adjusted for inflation have risen only slightly since 1982, according to the California Energy Commission.
Still, gas prices and oil companies are a frequent target for California politicians even though most independent experts say price spikes are the result of legitimate hiccups in supply. For environmental reasons, California requires a unique fuel blend not used elsewhere, so when there’s a disruption in supply, it’s difficult to bring in replacement supplies quickly from out of state, they say.
According to analysts, the latest jump in prices was caused by refinery problems in the Bay Area and a pipeline rupture in Arizona.
The pipeline break cut Arizona off from Texas, which provides most of its gasoline, and forced the state to import more from Southern California refineries. That in turn strained supplies in the Golden State. With the Arizona pipeline being partially restored and the Bay Area refineries returning to full production, prices are easing.
Energy economist Severin Borenstein said rising prices curb consumption and are a legitimate means of efficiently allocating a scarce resource. The alternative, he said, is to put a ceiling on prices and make people line up for the product – as Presidents Nixon and Carter did during the oil embargoes of the 1970s.
Back then, the price of gas stayed relatively low, but motorists frequentlyhad to wait 30 minutes or longer to fill up.
“People don’t like high gas prices; they really hate waiting in line 45 minutes,” said Borenstein, director of the University of California Energy Institute in Berkeley.
Borenstein said price controls would be useful if there was compelling evidence of “market power” exercised by the oil companies. While there’s reason to be concerned that there are fewer refiners competing in California than a decade ago, he said the competitive market still seems to be working.
California gas prices are usually about 20 cents above the U.S. average, in part because of the unique fuel blend, many experts say. Lately the spread has risen to around 40 cents.
But Bustamante’s political consultant, Richie Ross, contends the clean-air standards contribute a mere 4 cents to the price at the pump; the rest of the spread is a profit grab by oil companies. Regulation “is going to result in lower prices,” he said. The threat of long gas lines is “just another bogeyman tactic” by oil companies, Ross said.
Consumer advocate Jamie Court of the Foundation for Taxpayer and Consumer Rights in Santa Monica backed Bustamante’s plan and said it was ridiculous to think supplies would dry up if prices were regulated.
Court said the situation is similar to the 2000-2001 California energy crisis, during which prices were driven up by a relative handful of generators and marketers.
Although incidents like pipeline ruptures trigger price spikes, the refineries exacerbate the situation by deliberately keeping inventories low, Court said.
“The problem is one of manipulation of inventories by refineries,” Court said. A possible remedy is state regulation that ensures there’s adequate supply, he said.
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The Bee’s Dale Kasler can be reached at (916) 321-1066 or [email protected]
