Thursday, August 28, 2008

Friday, Jul. 11, 2008

Another View: Facing the reality of gas prices

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As is now apparent, no commercial enterprise will survive with a business plan that depends on gas returning to $3 a gallon.

To endure and thrive, businesses will have to reduce their fuel consumption, change the products they sell and create new sets of customers.

Landscaping businesses will need to focus on local clients instead of ones that are 100 miles away. Automakers will need to make cars and trucks that consume less fuel. Families will increasingly seek out homes that are closer to their jobs, and builders will have to build them.

State and local governments must also come up with a business plan that adjusts to $4.50 gasoline. But California, to no one's surprise, is moving like a dinosaur.

California runs a fleet of 50,000 state-owned vehicles, but as the Sun-Star reported Tuesday, the state has no system for tracking fuel purchases, and is doing little to maximize its vast purchasing power.

As it was reported, state vehicles and their fuel purchases are spread among 100 agencies, and there's no central database to track their purchases of fuels.

Less than 40 percent of that fuel comes from bulk supplies the state purchases at a discount. Sixty percent comes from commercial pumps, where state workers purchase gasoline and diesel with credit cards known as Voyager cards.

In 2007, these types of purchases cost taxpayers nearly $100 million. How well are state workers shopping around for gas? How much could be saved if more state vehicles were fueled at state fueling stations? It's hard to know. The Department of General Services doesn't have a system for tracking such data.

State officials say some improvements are on the way. By 2010, a new state law will require better fuel efficiency for some state-owned vehicles, along with a tracking system for mileage. So far, however, there is no plan to increase the state's purchases of bulk fuels, including alternative fuels, such as biodiesel.

This has to change. The fuel purchasing policies of the DGS and other state agencies are in direct conflict with other state policies, including a 2006 law that requires the state to reduce greenhouse gases by 30 percent by 2020.

As the California Air Resources Board said in a recent implementation plan for that law, "Myriad opportunities exist for California state government to operate more efficiently. These opportunities will not only reduce greenhouse gas emissions but also will produce savings for California taxpayers." While some far-right commentators say California could reduce fuel costs by allowing more oil drilling off its coast, the realities of world oil markets demonstrate otherwise. Since the United States imports so much of its oil -- and demand for the black gold is booming in India and China -- any incremental increase in offshore drilling would do little to affect prices, and that blip wouldn't be felt for years to come.

A better approach is for businesses, government agencies and consumers to significantly decrease their consumption of fuel, and for regulators and market managers to curtail reckless speculation in the futures markets. State government is only a small part of this larger problem. But, to date, it hasn't been much of a model.