California’s clean energy laws could help blunt the impact of gas and oil price spikes, according to a new study released today by economists from three environmental groups.
After it's fully implemented in 2020, California's Global Warming Energy Act, or Assembly Bill 32, could save the average household between $332 during a year when the price doubles and $670 if it triples, said the study, produced by the Center for Resource Solutions, Energy Independence Now and Environmental Defense Fund, or EDF.
During the past three decades, price spikes have occurred an average of once every six years. During each of those times, the price for the year averaged jumped more than 100 percent over the previous year, with peak prices of 200 percent higher. On an annualized basis, the price rises averaged 179 percent, the study said.
“The worst part about our dependence on oil is how much it hurts consumers and small businesses when the price shoots up and you have little choice but to empty your wallet at the pump,” said Remy Garderet, economist for Energy Independence Now and a co-author of the report.
AB 32, which encourages the California businesses and residents to shift to alternate forms of energy, is currently under fire from oil companies and other corporations, who complain that some of its provisions are too restrictive.
Texas oil companies Tesoro and Valero have taken the lead in bankrolling a state referendum - Proposition 23 - aimed at blocking the bill from taking effect. They argue that jobs will be lost as the state switches from fossil fuels to solar, wind and other energy sources.
But the bill's proponents, including Gov. Arnold Schwarzenegger, say AB 32 will help create jobs by encouraging companies to develop new energy technologies.
“Over the long run, a strong economy and a clean environment go hand in hand because high-valued businesses are attracted to areas with better environmental quality,” UCSD economist Richard Carson said this summer.
EDF economist James Fine said that the current study is the first time anyone has tried to calculated the effects of AB 32 in the event of an energy price shock.
The study found that by increasing energy efficiency and providing more fuel choices, AB 32 will save California consumers and businesses $4.8 billion if a "moderate" doubling of oil prices occurs or $9.6 billion during a "large" tripling of prices.
A study of wholesale prices indicates the savings could be even larger. The study said that AB 32 would help build energy independence by cutting demand for oil imports by 18 percent, or a total of 5 million barrels in 2020, as well as cutting natural gas demand by 10 percent. That means decreased demand for imports of $18.8 billion if a moderate shock occurs or $29.6 billion if a large shock occurs.
Chris Busch, a report co-author and policy director at the Center for Resource Solutions, said the difference between the two figures is based on divergent data from the wholesale and retail markets. He said it's likely that the retail savings could be closer to the wholesale numbers, "but it really wasn't the purpose of this report to describe the differences between retail and wholesale."
Previous studies on AB 32 typically have assumed steady energy prices. For example, the California Air Resources Board estimated savings of $7.5 billion using a price of gasoline in 2020 that is not much higher than the current price and significantly less than prices in 2008, when prices spiked 45% to $4.59 per gallon.