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CA Gasoline Tradeoff: More Smog For Lower Pump Prices?

The news of the escalating gas prices was ubiquitous - local media news reports led with gas station prices that had risen 20-50 cents overnight, or stations that had closed early for lack of gas. Finally, Gov. Brown acted to alleviate the 'crisis'.
October 9, 2012, 10am PDT | Irvin Dawid
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The prices exceeded the record set in June, 2008 - "averaging $4.66 on Sunday (Oct. 7) according to the AAA's daily fuel gauge report", writes Ian Lovett from Los Angeles. No doubt that record no longer stands as prices have risen daily due to the perfect 'refinery storm': "two months ago, a fire knocked out a 245,000-barrel-a-day refinery in the Bay Area (Richmond) that has still not resumed full production. And last week, a power failure curtailed production at a refinery in Torrance. Full production resumed there on Friday."

California, the state with the worst air quality in the nation, empowers the California Air Resources Board to regulate gasoline in order to reduce smog emissions from motor vehicles by using reformulated gasoline. Currently the 'summer blend' is sold. In November it will be replaced with the winter-blend "which evaporates more quickly than gasoline sold during the summer smog season".

Gov. Jerry Brown "directed the California Air Resources Board to take emergency steps to increase the supply of fuel in the state and allow refineries to immediately switch to a winter blend of gasoline." CARB has complied and indicated that the impacts on air quality will be negligible.

"Mr. Brown said he hoped that the switch to the winter-blend gasoline would stop the climb in prices because it could increase fuel supplies in the state by up to 10 percent. Summer-blend gasoline is better for air quality."

The Mercury News Mr. Roadshow explains the predicament for California motorists. He points to a 1996 column that indicated that the reformulated gasoline increases by as much as 31 cents a gallon and made the market vulnerable to refinery issues.

"Because the new gas is sold only in California -- and made almost exclusively here -- the state has become a separate market for gasoline.... The special blend (of gasoline) is not going away. We are one of 17 states using reformulated gas, and about 30 percent of gas sold in the U.S. is reformulated. The problem is that there isn't a single blend required, or otherwise California could use other states' fuel when it's running low, and vice versa."

Relief is in sight, reports Stuart Pfeifer of the Los Angeles Times.

"Chris Faulkner, an energy expert and chief executive of Breitling Oil & Gas Corp. in Dallas said the (CARB) move could cause gasoline prices to drop as much as 15 cents to 20 cents in a week. Motorists probably wouldn't see a decrease for at least a few days because it will take time for the cheaper blend to move into the market."

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Published on Monday, October 8, 2012 in The New York Times - U.S.
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