California's Jerry Brown and a Solution to Gas Prices

Governors and state legislatures across the country may want to take a page from the Jerry Brown playbook to bring down gasoline prices. In his state of California, regular gas sells for more than $5 a gallon. He has mandated a change in the nature of gas supply that should bring down these prices, which is proof that the gas price issue may be one that can be solved — at least at the state level.

Governor Brown’s office announced:

The Governor directed the California Air Resources Board (CARB) to immediately allow oil refineries to make an early transition to winter-blend gasoline. Winter-blend gasoline typically isn’t sold until after October 31.

And it pointed out that:

Winter-blend gasoline is a mixture that evaporates more quickly than the gasoline sold in summer months, which takes longer to evaporate and is better for air quality during the smog season. Allowing an early transition to winter-blend gasoline could increase California’s fuel supply by up to an estimated 8-10 percent with only negligible air quality impacts.

The winter-blend gas solution cannot be taken by other states because the rule is unique to California. But for most other states there is another path.

The gas tax in most states runs between 20 to 50 cents a gallon. The great majority of these taxes are excise taxes. States would have to forgo some of this revenue if these taxes were suspended or eliminated. So, states have to decide whether they want to potentially contribute to a recession nationwide or within their own borders. Are they better off with the excise taxes or with cutting them, which probably would help many of the people in their states financially, along with businesses that have operations that use a lot of gasoline.

The trade-off is the classic one that governments have to deal with, particularly when economies tumble: stimulate the economy now with lower tax rates or risk a worse slowdown because of the tax burden.

Brown may have an easy way out with the early switch to winter-blend gasoline. He has shown, however, that states are not powerless to help reverse the unprecedented rise in gas prices

Douglas A. McIntyre