Monday, June 20, 2005

Finding a fix to High Gas Prices

With oil inching above $60 a barrel, California is struggling to find ways to keep gas prices under control:

"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.