The price of gas at the Mobile Station at 4359 Laurel Canyon Blvd. in Studio City on Nov. 17, 2023. There is a rather basic but key economic principle which states that free markets are crucial to efficiently running economies. Free markets facilitate the allocation of capital and resources through unfettered interaction of supply and demand. Free markets are also crucial to investment, consumer choice, and innovation.
California is clearly seen as a leader in advancing policies and legislation designed to help achieve climate goals and net-zero carbon objectives. These are laudable objectives which have been implemented to help the state achieve its environmental and public health goals, and as a result Californians do pay higher prices for fuels relative to the rest of the country.
Returning to our economics primer, any price cap proposed by the CEC, while designed to stabilize markets and protect consumers by aiming to make fuels more affordable, can lead to unintended and very adverse consequences. One of the most significant dangers is the real possibility that the CEC action inadvertently creates fuel supply shortages by capping refinery margin and thus holding prices below the free market equilibrium levels where fuel demand outstrips supplies.
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