Why shouldn't I buy Google's explanation?

If an app that uses bluetooth can get my location via beacons or etc., then bluetooth should be wrapped in location privileges. An app that I do not want having my location should not be allowed to use bluetooth, and I have to accept that any app that does use bluetooth could get my location.

While it does mean that apps that use bluetooth now have a slightly easier way of getting location (i.e., via phone GPS, not just bluetooth), we shouldn't obfuscate that bluetooth is another way to get that information. In the end, you are trusting the app developer with the privilege of knowing your location. If you don't trust them with that, then they can't be allowed to use bluetooth, full stop.