Currently, the United States of America are experiencing extremely low oil prices. With that being said, there is a state that is not enjoying cheap fuel, that state is California. In some places in the country gas prices have fallen below $1, but in California, the current average price for fuel is $2.50 per gallon. This is a result of California having one of the highest gas tax rates at $0.40 per gallon. California is trying to be a very environmental friendly state and due to the state’s strict gas standards, their fuel is known as one of the cleanest burning in the world. California’s firm control on emissions sent into their atmosphere is not a cheap service.
California fuel costs much more to refine and is a special oxygenated blend compared to other state’s gasoline. This fuel burns so clean that most Refineries do not have the resources to produce it. When one of the few refineries that makes California fuel goes down, the state suffers. The Exxon Mobil refinery in Torrance California experienced an explosion and this crippled the supply of gas to the State of California. This major supplier to California is on schedule to be operating again toward the middle of the year. "Right now, California is a bit like Pluto revolving around the sun of crude oil, but it's going to move closer to the national average when that refinery reopens’ said Tom Kloza of the Oil Price Information Service.
While protecting the environment to ensure the longevity of the Earth is of high importance, it seems that having such high tax rates on gas could cause a negative effect on the economy. It would be interesting to look at the elasticity of demand for gas to see if the demand for gas changes significantly with changes in price. If the elasticity is significant, this means that people will not drive to as many places, preventing them from spending as much money. This would be negative for the economy because businesses would not have as high of sales as they could if the tax on gas in California declined.
ReplyDeleteVery interesting read! I never knew that California has a different blend of gasoline than the rest of the country. The "sin tax" on gasoline is certainly something that I think the rest of the country should consider. If the gasoline is more environmentally friendly while still having a price that is comparable to the national average (once the refinery is set up), then it seems like an idea that the entire country should be considering.
ReplyDeleteIt is interesting to find that California is environmental friendly and have such high gasoline tax which may have a negative effect on the economy. Although the gasoline prices have been constantly falling California still has high gas prices due to their strict checks and standards. The analysis of simple demand and supply can also be used to explain the relativly high gas prices in the state. As mentioned in the article the oil refinery in California was damaged, thus lessening the supply and causing price to rise.
ReplyDeleteI find it amazing that just a year ago all of us would have killed for $2.50 gas. California especially would have been happy, since the price of their gas was much higher than ours. However, I do understand their frustration. That's the nature of the double edged sword in terms of protecting the environment. I do think that California is making the right and ethical decision, and I hope that the rest of the country/world does the same thing.
ReplyDeleteIt raises the question whether California has just started a new trend and now other states will integrate this more environmental friendly gasoline. Yes, that would be a great idea but prices would go up. It raises the question whether we should continue to advance oil technology or really try to develop a new fuel source that is cleaner and less expensive.
ReplyDeleteIt's positive to see that California are focusing on cleaning the oil to make it more environmentally better, however the rise in prices might push consumers to perhaps think more about buying electric or hybrid cars which would hurt the sales of the dominantly run gasoline cars. It'll be interesting to see if other states follow suit.
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ReplyDeleteI believe that California is making the right and ethical decision and will experience little controversy. The prices are so low that a reasonable increase in the price of gas should not a big deal considering the prices were much higher only a few years ago.
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