California motorists will face rising gasoline prices and shortages in the years ahead, but under heavy pressure from the oil industry, Governor Gray Davis’ administration last week sent a report to the Legislature that offers few real solutions to the impending problem.
It’s the old story of supply and demand, according to the report by the California Energy Commission and Air Resources Board. Domestic oil wells are running dry, and Californians’ demand for gasoline already outstrips the ability of in-state refineries to make enough gasoline. By 2020, gasoline demand will grow by 48 percent as the state gains 12 million people and 7.5 million vehicles, urban areas continue to sprawl, and motorists keep driving big vehicles with poor mileage. Most of the additional oil and gasoline will have to be imported, which will pit Californians against an increasing number of motorists in China, India and other countries for a limited resource. The result will be gasoline shortages and rising prices that could harm the state’s economy unless demand for gasoline is cut 15 percent by 2020, which the report recommends as a state goal.
“We use more gasoline than anyone in the world except the rest of the United States,” said James Boyd, a member of the Energy Commission, who headed up the report. “The demand curve just goes up and up and outstrips California’s ability to provide supply.”
To head off a crisis, the agency’s original draft report recommended that the Legislature set new fees on petroleum and gasoline, which could have funded badly needed public-transportation projects and a switch to alternative fuels. However, senior energy and environmental officials dropped the idea last month after an oil industry–backed group discussed plans to target the Davis administration in the midst of the recall drive with an advertising campaign saying he was ready to back a massive gasoline-tax hike.
Practically all that remains in the report is a recommendation that California join with other states to beg Congress for a doubling of the federal fuel-efficiency standard for new passenger vehicles, an unlikely prospect in Republican-controlled Washington. If that effort fails, the report promises that the potentially short-lived Davis administration will revise its goal to reduce gasoline consumption.
Joe Sparano, president of the Western States Petroleum Association, acknowledged that the industry still is considering “paid media” depending upon the cost of a campaign. Instead of intervening in the gasoline market, Sparano urged opening new areas to oil drilling and said the state should streamline environmental-permit rules for expanding oil refineries, pipelines and port terminals. “We’re trying very hard to reach out through a coalition called Stop Hidden Gas Taxes and the Coalition for California Jobs,” Sparano said.
The Stop Hidden Gas Taxes coalition — which includes oil, agriculture, manufacturing, anti-tax and other groups — has enlisted media support from the political consulting powerhouse of Woodward & McDowell in Burlingame, which rose to fame by handling the gubernatorial election campaign for Ronald Reagan. Since then, the firm has handled campaigns for tobacco and oil.
“As long as the goals they set are on the table, the possibility of tax increases is on the table,” said Audrie Krause, who was retained by Woodward & McDowell to act as spokesperson for the campaign against the petroleum-dependence report. She said that the gas tax initially contemplated by the two agencies could have been as high as 50 cents a gallon.
However, the report says that reducing gasoline use by 15 percent would outweigh the cost of a prospective tax hike by saving each California motorist an average of about $100 a month in gasoline bills and health costs stemming from environmental pollution. “There is a role for government and policy,” said Daniel Emmett, energy-programs director for the Energy Independence Now Coalition in Santa Monica, which has been supportive of the state agencies’ goal of weaning Californians from petroleum dependence because of the environmental-health benefits and geopolitical stability it would bring.
While the environmental benefits of using less gasoline are well-known, the report coincides with an emerging debate in the energy field about whether oil production soon will peak worldwide while demand continues to grow. “I think the state agencies are taking the debate seriously about when there will be a peak or if we’ve reached a peak already,” said Kathryn Phillips, senior policy adviser for the Center for Energy Efficiency and Renewable Technology. “The war in Iraq has raised in people’s minds how dependent we are on a product imported from other countries.”
Yet, even though California is clearly ahead in identifying the problem of depending on an increasingly finite resource, for the moment, politics and the influence of big corporations appear to have trumped the public interest when it comes to doing much about it.