California Energy Price Data for March 2022

Below are the monthly updates from the March 2022 fuel price data (GasBuddy.com) and January 2022 electricity and natural gas price data (US Energy Information Administration).

This latest data continues to reflect the run-up in oil and natural gas costs, with the highest gasoline and diesel prices on record. With a greater lag of two months, the electricity and natural gas prices only begin to reflect the economic effects on households and employers throughout the state. Diesel in particular at 26.2% premium above prices in other states but gasoline as well at 40.6% premium also feed into the state’s rising overall inflation, as the cost to produce and deliver goods and services rises as well.

The most recent data from CSAA show only minor easing in prices, with the US average at $4.15 a gallon on Thursday compared to the $4.24 average in March. California’s prices remain stickier at $5.81 on Thursday compared to $5.79 in March as the result of circumstances arising out of the state’s policies essentially walling off the California fuel market from the rest of the nation and the world. Issues at refineries particularly in Southern California have affected production during this critical changeover to the summer formulations under state regulations. While these events have not been as severe as in the past, the supply effects on prices are a continuing consequence of the state’s regulations, as evidenced in the current higher prices being experienced by drivers in the southern part of the state. A strike at Chevron’s refinery in the Bay Area has raised similar concerns, although the company has indicated there have been no production restrictions to date.

The current spike in energy prices is being driven by price and supply instability arising from Russia’s invasion of Ukraine. The substantially higher economic costs to California households and employers, however, continue to be the outcome of the state’s energy policy and regulations and only magnify the growing costs and their effects on the costs of living and the costs of doing business.

These rapid cost spikes have led to an increasing number of proposals to offset the direct effect on households—but not in all cases the indirect effects as higher costs on employers become embedded in inflationary effects for goods and services—including proposals within California. While likely to help the current situation, these proposals follow the unfortunately too typical historic response to policy failures. In particular, they reflect the continuing problem of the state’s approach to energy and rising costs in general–attempting to ameliorate the worst effects when they become apparent, but doing so in a way that is incapable of reaching all who are being harmed, and doing so in a way that deals only with the immediate effects rather than policy reforms to prevent them from growing in the future. The most this approach can do is partial relief and even then at high transaction costs that must be filtered through bureaucracies that in recent years especially have proven their incapacity to do so quickly, efficiently, and without waste due to fraud and bureaucratic haste. The state continues to avoid revising the policies that led to this harm in the first place and in California’s case, magnifying that harm.

This reaction is not being followed universally. In a move to diversify their energy supply, the EU recently moved away from a sole reliance on politically determined technologies to incorporate nuclear and natural gas as a means to achieve their emission reductions at lower overall costs. China, instead, has moved away from emission reductions altogether and is shifting back to greater reliance on coal in a recognition that energy supply and costs are fundamental to the direction of economic progress. Others acknowledging fossil fuels will continue to be a major factor in overall energy costs even under their climate programs are now reassessing ways to increase domestic production or shift away from their prior reliance on Russian imports.