California has a solution for the problem of its highest-in-the-nation gasoline prices (see chart below), and you’ll never guess what it is: Price controls! From Barron’s:
The California Energy Commission says it will decide on whether to establish a margin cap [for refineries] and any penalties for exceeding it by the end of this year. The state passed a law last year giving it that authority, but the commission first needs to make sure that such a cap wouldn’t just exacerbate the problem. The law says it shouldn’t set any margin or penalty “unless it finds that the likely benefits to consumers outweigh the potential costs to consumers.”
Gov. Brylcreem is all for it, but I think we all know how this story plays out in the real world.
Taxes and regulation account for 28 percent of the pump price of gasoline in California—a far larger margin than refiners make. In fact the government makes more on every gallon of gas than the oil companies do. Maybe the state government might look at those factors first.
Then there’s this:
Refiners have also been closing in California for years, reducing overall supply options. There are now just nine, down from 40 in 1983.
