Consumers got a nice gift this holiday season in the form of low per-gallon gas prices, at least in relation to where we were a year ago. This last year featured a wild ride in which gas prices nationally went up 50 cents per gallon between November 2013 and June 2014, and then tumbled more than a dollar in time for the new year. A question for 2015 is whether we can continue to count on lower prices. The answer is highly uncertain, since the primary drivers of price fluctuations, such as global demand and production decisions by oil interests, are out of our control.
The only reliable way to protect ourselves against gas price volatility is to use less. Fortunately, California is moving forward with policies that are helping us get more bang for our gasoline buck and providing consumers with greater fuel and transportation choices, while our state economy continues to grow faster than the national average.
These policies are saving California consumers money right now, and the savings will continue to grow. Last September, the Union of Concerned Scientists (UCS) published an analysis of both the costs and savings associated with California’s low-carbon transportation policies and found that a California driver who purchases a new car in 2015 can expect to save an average of $3,000 over the 15-year life of the vehicle compared to a driver who purchased a new vehicle in 2008, prior to the implementation of these policies. A new car in 2025 will save a driver an average of $7,000 over the life of a vehicle. A 10-year-old used car in 2025, will save its driver about $400 a year over the remaining lifetime of the vehicle compared with a 10-year-old used car purchased in 2015. (To see details of this analysis and the assumptions that went into it, go to www.ucsusa.org/ab32saves.)
Oil companies spent much of the last few years and many millions of dollars trying to convince Californians that these policies, including a low-carbon fuel standard and a cap-and-trade program to reduce oil consumption and spur investment in cleaner alternatives, constitute what they call a “hidden gas tax” that will raise prices and burden the economy. Policies to reduce the carbon intensity of our transportation fuels present a cost of doing business for oil companies that they will likely pass on to consumers, just like safety regulations and minimum-wage requirements. But singling out one cost of doing business that the oil companies don’t like obscures the more significant reasons why prices will ultimately rise again, as well as why we are better off by diversifying our fuel choices.
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Gasoline pricing is not very transparent, but the current collapse in gas prices is widely thought to be due to slack global demand in combination with high levels of global oil production. But it wouldn’t take much to push prices way up again. Demand may rebound and increase globally, extreme weather could disrupt oil shipments, instability in the Middle East or other major oil producing regions may worsen, a major refinery accident (or even simple maintenance) could disrupt production, or major oil producers could cut their output. These are among the historic reasons behind gas price spikes — sometimes dramatic and unpredictable — that have had nothing to do with state regulations designed to protect public interests. We may have no control over many of the forces that cause surges in gas prices, but California’s low-carbon policies reduce our vulnerability to these inevitable price spikes.
California voters ratified the state’s clean energy policies by rejecting an oil industry-backed initiative in 2010 and surveys have continued to show broad support for our efforts to reduce carbon pollution. Most of us would rather invest in solutions that protect our health by improving our air quality, spur adoption of new products and technologies, and reduce the risks from climate change for ourselves and future generations. The oil companies would like to roll back this progress to maintain their fuel monopoly with a dirty, damaging product that subjects us to highly volatile pricing. Like most Californians, we at UCS say stay the course.