In 1990, Congress amended the Clean Air Act in an attempt to reduce toxic and smog-forming pollutants in certain areas of the U.S.
Cities with high levels of smog were required to use what is called reformulated gasoline (RFG). RFG burns cleaner than conventional gasoline and has contributed to a downward trend in U.S. smog levels.
But the impact of RFG today is not as significant as it was years ago – conventional gasoline is burning cleaner than ever before.
Additionally, RFG is costing consumers at the pump.
The graphic below represents which U.S. areas are required to use RFG:
You’ll notice that two prominent locations consuming RFG are California and various states along the the Northeast coast.
Now let’s take a look at gasoline prices by region:
The West Coast, Central Atlantic, and New England regions sport the highest prices of gasoline.
Of course, this isn’t a coincidence. Just compare the two maps – RFG is an economic burden on those areas required to use it.
RFG is one of the main reasons why California citizens pay the highest prices for fuel out of any other state in the nation.
The average price for a gallon of regular grade gasoline on the West Coast is $3.875. When you remove California from that equation, that figure drops to $3.685.
That’s because the average price of gasoline in California is a staggering $3.985 per gallon. For perspective, that’s about 45 cents more per gallon than the next state down.
For better or worse, environmentalism is hurting California’s economy.
Weighing the Costs
I’m not going to sit here and tell you that smog isn’t harmful because that just isn’t true.
Smog can cause respiratory problems, especially with at-risk groups such as children and the elderly. Furthermore, it can aggravate chronic lung diseases, increase asthma rates, and inflame the respiratory system.
There is no doubt that protecting the environment is important for our society, but I would argue that reducing and preventing poverty takes precedence.
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Take, for instance, the fact that research shows 4.5 percent of U.S. deaths are attributable to poverty. That’s approximately 112.5 thousand people a year who die from issues such as malnutrition and a lack of sufficient medical care.
Furthermore, poor nutrition causes 45 percent (nearly half) of deaths in children under five and obstructs development of the brain’s pre-frontal cortex, which is responsible for self-regulation and decision making. In short, poverty is hurting our nation’s future.
Despite the images of Hollywood riches often associated with the Golden State, California’s poverty rate is currently the highest in the nation.
According to the Census Bureau, nearly one in four (23.2 percent) California citizens are living below the poverty line when taking into account factors such as cost of living and medical costs.
Denying massive economic benefit to the poorest state in the U.S. because of environmental concerns is a huge mistake.
And I’m no longer talking about RFG here. There is now a much bigger factor at play – one that could completely revitalize California’s economy.
If you haven’t already guessed, I’m talking about the Monterey Shale formation – the largest oil reserve in the United States.
With an estimated 15.4 billion barrels of oil, the Monterey Shale provides California with about 60 percent of current U.S. reserves.
Environmentalists in California have recently failed to push a state ban on fracking, mainly over water contamination concerns. And even if we assume these concerns are legitimate, the benefit of ramping up oil production in California absolutely trumps the potential of environmental consequences.
I won’t even go into the recent Department of Energy study finding absolutely no evidence of contaminated drinking water aquifers at a western Pennsylvania drilling site…
And if you have any doubts about the ability of a shale formation to revive a struggling economy, look no further than North Dakota.
Looking back to 2008, oil production in North Dakota has jumped from about 200,000 barrels per day to more than 793,000 barrels per day in 2013. In turn, the state’s GDP has grown by an annual rate of 6.7 percent – the fastest in the nation.
Furthermore, North Dakota’s unemployment rate has fallen to 3.2 percent, the lowest in the nation. The state now has the 7th lowest poverty rate in the nation and has experienced the 4th largest decrease in poverty, according to the Census Bureau.
Here are the predicted benefits of the Monterey Shale Formation, as reported by the USC Global Energy Network:
- More Jobs: 512,000 to 2.8 million new jobs, depending on year.
- Economic Growth: A GDP increase of 2.6 percent to 14.3 percent.
- Higher Income: Annual personal income growth of 10 percent compared to 2.1 percent.
- Increased Government Revenue: Local and state revenue growth of $4.5 billion.
But Californians wont be the only beneficiaries to this shale formation. My colleague Keith Kohl is closely following these developments, and he is sharing with investors the most promising Monterey shale plays on the market. If you missed getting in on the Bakken, you aren’t going to want to sit out on this one.
Turning progress to profits,
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