California Atty. Gen. Bill Lockyer has spent years examining the inner workings of the state's fuel business and thinks he's found a partial solution to expensive gasoline: Every time he starts up his hybrid Toyota Prius, he figures he's conserving.
"Doing something that expands supply and reduces demand is absolutely necessary," said Lockyer, who convened a gas-price task force in 1999 and once likened the state's refiners to the Organization of the Petroleum Exporting Countries oil cartel. Two years ago, Lockyer bought his black Prius, which runs on gasoline and electricity, to show his commitment to burning less fuel.
Taming California's energy prices will require using less gasoline and diesel, making or importing more fuel or tinkering with the way refiners and retailers operate, according to interviews with two dozen economists, consumer advocates, oil executives and government officials.
Expensive gasoline is a national problem, reflecting the steep cost of crude oil. But the situation is particularly serious in California, which has some of the highest gas prices in the United States because of a series of actions by regulators, oil companies, community groups and others. Step by step over the last decade -- starting with mandates for a special cleaner-burning fuel and adding in oil company mergers, community resistance to refinery expansions and unrestrained demand -- the Golden State's fuel business has been transformed into a kind of dream market for oil refiners.
The strains on California's fuel sector won't be easily fixed, the experts stressed. Some ideas are likely to be painful and politically unpopular.
Take taxes, which currently add about 55 cents to California's per-gallon gasoline cost, with 18.4 cents going to the federal government and the rest to state and local governments.
"If we were smart about this, we would increase the gas tax substantially -- that would reduce demand and get us back to a point at least for a while where we were able to supply our own needs for California," said Severin Borenstein, director of the University of California Energy Institute in Berkeley.
California Democrats took a different approach in April, proposing cutting the gas tax 11 cents a gallon and increasing the sales tax on everything else. Legislation has yet to be introduced.
"That's a really bad idea," Borenstein said. "Lowering the tax on gas is not a good response to the fact that we don't have enough gasoline."
