New Report Says California Faces Uncertain Gasoline Future

NRDC Offers Plan to Reduce Oil Dependence and Eliminate Gasoline Imports by 2011

SAN FRANCISCO (September 26, 2002) -- California refineries can't keep up with demand for gasoline, a problem that will worsen over the next two decades, according to a new report. The report by NRDC (Natural Resources Defense Council) says that motorists will face higher prices and volatility at the gas pump unless the state reduces petroleum demand through a combination of fuel efficiency, advanced vehicle technologies, public education and smart growth.

California imports about 30,000 barrels of gasoline per day to make up for the refining capacity shortfall. Experts predict that number will jump to 80,000 barrels per day when the state phases out the gasoline additive MTBE (methyl tertiary butyl ether) by the end of 2003. (MTBE is being phased out because it is contaminating the state's water supplies.) But the gap will grow even greater as the state's population increases by an estimated 14 million people by 2020. During this time, NRDC projects that gasoline demand will grow by 30 percent, resulting in a refining capacity shortfall of 280,000 barrels per day.

"California is in for gas pains, if it doesn't reduce its oil dependence," said Roland Hwang, NRDC senior policy analyst and principal author of the report, "Fueling the Future: A Plan to Reduce California's Oil Dependence." "Our addiction to oil threatens consumers with higher prices at the gas pump and more pollution from oil drilling and refining, tanker traffic and vehicle tailpipes."

The Energy Commission and Air Resources Board are required by a 2000 law (AB 2076) to develop a strategy to reduce the state's petroleum dependence. The state also is studying other ways to make up the shortfall, like building a gasoline pipeline from Texas and creating a gasoline reserve. The agencies are expected to submit their recommendations to the governor and Legislature by the end of this year.

"The best solution is to use less gasoline," said Hwang. "If we expand or build more refineries, we'll pay with more pollution and run afoul of state and federal clean air requirements. And we can't just import more gasoline because supplies are scarce, unreliable and costly to consumers."

California already faces the highest gas prices in the nation. According to a March report commissioned by the Energy Commission, the MTBE phaseout could cause gasoline prices to climb above $2.00 per gallon, with even higher price spikes. The state's annual gas bill could jump from roughly $25 billion to $30 billion.

Rising global oil prices and supply disruptions in the Middle East could push the state's gasoline price tag higher. In 2000, California refineries imported about 30 percent of their crude oil from foreign countries, including about 13 percent from the Middle East. NRDC projects that oil imports will grow to 40 percent by 2010 and over 50 percent by 2020. Crude oil prices have risen to nearly $31 per barrel in recent weeks due to anticipation of a possible war in Iraq. Prices topped $41 per barrel in October 1990 during the Persian Gulf crisis when Iraq invaded Kuwait.

The NRDC report outlines a 4-step plan for California to reduce its gasoline demand and completely eliminate its dependence on imported gasoline by 2011. The plan would save drivers approximately $28 billion by 2020, while protecting the economy, environment and public health.

Step 1: Raise the fuel efficiency of the state's auto fleet

Automakers already have technology to increase the fuel economy of passenger vehicles to 42 miles per gallon (mpg) by 2015 -- up from today's average of 24 mpg. California cannot regulate fuel economy under federal law, but automakers can make voluntary commitments to increase fuel economy, similar to what they have done in Europe. The state also can expand existing incentive programs to spur consumer purchases of fuel-efficient hybrid and electric vehicles, and it needs to maintain a strong commitment to its Zero Emissions Vehicle (ZEV) program. A fuel-efficient fleet could save the state about 340,000 barrels of gasoline per day or 5.2 billion gallons by 2020.

Step 2: Invest in a hydrogen fuel infrastructure

Automakers will soon begin pilot production of fuel-cell powered vehicles. A network of hydrogen fueling stations will be needed to run this new generation of zero emission vehicles. The NRDC report recommends state tax incentives or grants to expedite the construction of a hydrogen fueling network. With the proper infrastructure in place, fuel-cell powered vehicles can hit the market in significant volumes by 2010. Fuel cell vehicles and battery-electric vehicles could save the state about 60,000 barrels of gasoline per day or almost 1 billion gallons by 2020.

Step 3: Launch a public education campaign to promote smart driving

California averted rolling blackouts during the recent electricity crisis by launching the most successful electricity demand reduction program in U.S. history. Public education was a critical component of the state's conservation campaign. California can organize a similar effort to educate the public about the benefits and savings of maintaining their vehicles at peak efficiency performance, buying fuel efficient tires and driving the speed limit on highways. Public education efforts can save about 45,000 barrels of gasoline per day or 700 million gallons by 2020.

Step 4: Encourage smart growth and diverse transportation options

Sprawl development forces more people to drive more miles to get to their jobs, schools and stores, resulting in increased traffic congestion, fuel consumption and air pollution. State and local policymakers should direct investments to encourage new development in urban areas and around transit stations, increase the supply of public transit and improve regional jobs-to-housing ratios so more people can live close to where they work. Smart growth and better transportation options can save about 45,000 barrels of gasoline per day or 700 million gallons by 2020.

"It's totally unnecessary for Californians to suffer from petroleum dependence," said Hwang. "We have an opportunity to make investments in a clean, reliable fuel supply that will power continued economic growth, while protecting the environment and public health."

The Natural Resources Defense Council is a national, non-profit organization of scientists, lawyers and environmental specialists dedicated to protecting public health and the environment. Founded in 1970, NRDC has more than 500,000 members nationwide, served from offices in New York, Washington, Los Angeles and San Francisco.

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New Report Says California Faces Uncertain Gasoline Future