No it won't be because oil companies are acting in a nefarious manner but it will be a result of Ca's state government mandating the use of more ethanol thus raising the cost of production of the closed fuel market in California.
Gas prices will jump again, critics say
David R. Baker
Published 5:07 p.m., Friday, October 12, 2012
For years, California has suffered sudden jumps in the price of gasoline. The latest price spike, which peaked this week, briefly
saw some stations charging $5 for regular.
Now critics warn that one of the state's policies to fight global warming could make the situation worse.
Business groups are taking aim at California's "low carbon fuel standard," which is designed to cut the greenhouse gas
emissions that come from making and burning fuel. Created in 2007, the standard forces fuel producers to lower the "carbon
intensity" of their products 10 percent by 2020.
Oil companies can meet the standard by blending advanced biofuels into their gasoline and diesel. But those biofuels - such as
cellulosic ethanol, made from grass, crop stubble or woody plants - are in short supply. If the oil companies can't get enough,
prices at the pump could soar, critics say.
"The fuel price increases are going to make last week look like nothing," said Robert Sturtz, chairman of Fueling California, a
coalition of companies that buy large amounts of fuel. Sturtz, for example, is also the managing director of fuel supplies for
"You'll be writing articles not about 50-cent increases in a week, but $1.50 increases in a week," he said. "That's what we're
trying to avoid."
State officials and supporters of the low carbon standard consider those fears overblown.
Low-carbon biofuels already exist in commercial quantities, they say, and supplies will grow with time. They see the standard
as a way to protect Californians from gas-price spikes by cutting the state's dependence on oil.
"A policy like this, that's aimed at diversifying the fuel mix, can help shield against those price swings," said Timothy
O'Connor, director of the California Climate Initiative at the Environmental Defense Fund nonprofit group.
The standard faces a crucial court test next week.
Last year, a federal judge blocked state regulators from enforcing the standard, ruling that the policy interfered with
interstate commerce and favored California biofuel producers over their Midwestern competitors. The California Air
Resources Board challenged the ruling, and on Tuesday, the U.S. Ninth Circuit Court of Appeals will hear arguments on
The court case focuses on one of the standard's most controversial aspects - its system for rating and ranking fuels.
The standard uses an approach called "well to wheels," which counts the greenhouse gas emissions released by making,
transporting and burning fuel. For standard gasoline, that means counting the emissions from pumping crude oil from the
ground, shipping it to refineries, turning it into gasoline and using it in a car.
By that measure, gasoline sold in California gets a carbon intensity score of 95.86. The most common form of American
ethanol, made from corn in the Midwest, rates worse - scoring 99.40. Some California ethanol, in contrast, scores as low as
Brazilian ethanol, made from sugarcane and shipped to California, scores 73.40. Compressed natural gas scores 67.70.
The standard does not require a quick shift to lower-carbon fuels. In 2013, for example, refiners must lower the carbon
intensity of their products by 1 percent, increasing to 1.5 percent in 2014 and 2.5 percent in 2015.
Critics concede that the state's fuel producers can meet the standard for now. It's 2015 that they worry about. At that point,
they say, refineries will have a hard time finding enough low-scoring biofuels to blend into their gasoline and diesel. Standard
corn ethanol from the Midwest won't do. And Brazilian exports of sugarcane ethanol may not be sufficient.
Lagging on technology
The real problem, they say, is that state officials counted on next generation biofuels, particularly cellulosic ethanol, to be
more abundant by now. But such fuels have yet to be made en masse, and their ability to turn a profit remains in question.
"The technology, while it's out of the lab, is not commercially scalable yet," Sturtz said. "And if you're not building the plant
now, it's not going to be available in the time frame we need it."
If advanced biofuel supplies can't meet demand, gasoline prices will rise. The problem will only get worse if other states adopt
"It's the consensus of the (fuel) industry that this is going to be a train wreck," said Jay McKeeman, vice president of
government relations at the California Independent Oil Marketers Association.
State officials say that biofuels exist in commercial quantities, and not just in Brazil. Contrary to the judge's ruling last year,
Midwestern ethanol made by new, energy efficient plants can meet the state's standard, said Dave Clegern, spokesman for the
Air Resources Board.
"We already have ethanols that can comply," he said. He noted that the standard was specifically written to give fuel suppliers
leeway in how they meet the requirements, not mandating the use of any specific biofuel.
"We're just telling them to make it cleaner," Clegern said. "We're not telling them how to do it."
Most academic studies of the standard have predicted that gasoline and diesel costs will rise as a result of the new
requirements, although they differ by how much. And most of the studies have been commissioned by parties skeptical of the
standard, such as the Western States Petroleum Association.
One such study, released earlier this year, estimated that the low carbon fuel standard could add $1.06 to the price of a gallon
of gas. In contrast, the Air Resources Board's own study found that prices could rise by as much as 9 cents per gallon or fall as
much as 13 cents per gallon by 2020.
David R. Baker is a San Francisco Chronicle staff writer. E-mail: email@example.com