Steve – I knew you knew more about this stuff that I did. But I have a very minor quibble. You write “…but by far the biggest reason is simply a shortage of refining capacity for California-specific gas.” I think that “but” distorts the picture. Is the lack of California-specific refineries really a different issue than the environmental regulations and additives? Isn’t it really a sympton of that issue?

The reason I bring it up is that I think the “but” clouds the free-market argument. Whenever the state imposes regulations there will be ripple effects and unintended consequences. If California had never passed those laws, the lack of those refineries wouldn’t be an issue. I’m sure there are liberals who think the problem isn’t the law but the lack of refineries and if “we” only built more refineries the law would work properly. But that would create new ripples and new costs down the road. In short, your point about the refineries is a great one but it’s not a different factor from those regulations it is a consequence of those regulations. I know you understand this better than me, but in this case the semantic point is a substantive one too, I think.