Grandstanding over gas prices

Assembly Speaker Fabian Núñez and Attorney General Bill Lockyer have proposed legislation that would allow the state to impose temporary price caps on gasoline if costs at the pump rise more than 10 percent during not-yet-

defined periods of “abnormal market

disruption.”

As critics quickly pointed out, this is both bad law and bad

economics.

Núñez told the press his AB 457 would protect California from Enron-style artificial manipulation of prices. This sounds good during a year when the state’s average gasoline prices leaped from $2.21 in January to $3.27 last week.

But as the director of the University of California Energy Institute, Severin Borenstein, warned last week, price limits could do more harm than good, creating shortages and long lines at gas stations. In free markets, customers cut back on purchasing high-priced goods while producers try to sell more, which eventually results in prices coming down because of lower demand and a glut of unsold supply.

Interfering with this cause-and-effect process is risky. It stands to reason that if an oil company with limited refinery capacity could legally charge more for gas in Nevada and Arizona than in California, as much gas as could possibly be sold elsewhere would be shipped away from California.

The end result would likely be not enough gas available here, frightening motorists into lining up to refill their half-empty tanks before the gas stations run out.

A close look at AB 457 reveals that it wouldn’t accomplish very much, even if it somehow got passed by both legislative houses and was not vetoed by Gov. Schwarzenegger. The bill would expand on existing law barring retailers from raising prices on essential goods more than 10 percent for 30 days after an official state emergency is declared.

AB 457 would freeze prices for oil refiners and wholesalers as well as at gas stations for 60 days, with another 60-day extension possible. But companies would be allowed to hike prices if they proved they were simply passing along higher costs.

The biggest change in AB 457 would be that it would allow these price caps to be imposed during periods of abnormal market disruption as well as under states of emergency. The problem is that defining an abnormal market disruption is still very much a work in progress and would be difficult to do in a way that stood up to the court challenges that are sure to come.

While it may make for juicy election-season headlines, AB 457 should be allowed to fade away into bad-legislation purgatory. It is time to stop cynically pushing the buttons on Californians who are legitimately angry over record-breaking gasoline prices.

General OpinionOpinion

If you find our journalism valuable and relevant, please consider joining our Examiner membership program.
Find out more at www.sfexaminer.com/join/

Just Posted

Chelsea Hung, who owns Washington Bakery and Restaurant in Chinatown with her mother, said the restaurant is only making about 30 percent of pre-pandemic revenues. (Kevin N. Hume/S.F. Examiner)
Chinatown’s slow recovery has business owners fearing for the future

Lack of outside visitors threatens to push neighborhood into ‘downward spiral’

San Francisco Symphony Music Director Esa-Pekka Salonen and members of the orchestra were thrilled to be back inside Davies Symphony Hall on May 6 in a program for first responders featuring string works by Jean Sibelius, George Walker, Carl Nielsen, Caroline Shaw and Edward Grieg. (Courtesy Stefan Cohen/San Francisco Symphony)
SF Symphony makes joyful return to Davies Hall

Esa-Pekka Salonen conducts program for first responders and community leaders

Students in an after-school community hub move quickly through a social circle as they play a game at the Mission YMCA on Friday, May 7, 2021. (Kevin N. Hume/S.F. Examiner)
Parents scramble for ‘Summer Together’ spaces

City program offering free camps sees high demand, confusion over enrollment

Jazz pianist and composer Jon Jang is an instructor at Community Music Center in the Mission District. (Kevin N. Hume/S.F. Examiner)
Jon Jang composes bittersweet symphonies

Musician-activist’s works are steeped in civil rights history

Calfire (Shutterstock)
Wildfires burn around Northern California during first red flag weekend of the year

Firefighters around the region battled wildfires all day Saturday, starting less than… Continue reading

Most Read