California Governor Takes Steps To Lower High Gas Prices

Californians have felt the proverbial pinch at the gas pump the past week as gas prices in the state increased by over $.50 a gallon in one week, rising to an average of almost $4.70. The prices spiked after a refinery in Torrance, located near Los Angeles, experienced a power failure, and then a fire occurred at a Chevron plant in Richmond, near San Francisco.

Governor Jerry Brown directed the California Air Resources Board (CARB) to allow oil refineries to produce winter-blend gasoline a few weeks earlier than usual. Winter-blend gasoline isn't normally sold before October 31. It evaporates more quickly than gasoline sold during the summer, which can exacerbate air quality issues - especially a challenge during the smoggy summer months. A press release from the Governor's office states that releasing the winter blend earlier would increase California's fuel supply by eight to ten percent "with only negligible air quality impacts."

"Gas prices in California have risen to their highest levels ever, with unacceptable cost impacts on consumers and small businesses," said Governor Brown. "I am directing the Air Resources Board to immediately take whatever steps are necessary to allow an early transition to winter-blend gasoline."

Senators Feinstein and Boxer request investigations into price spikes

Senator Dianne Feinstein (D-CA) sent a letter to Jon Leibowitz, chairman of the Federal Trade Commission, asking for an investigation into the recent spike in gas prices in California and the shortages at some gas stations. "I am writing to express my deep concern that the Federal Trade Commission (FTC) is failing to take action to protect California consumers from malicious trading schemes in the California gasoline market," Feinstein said in the letter.

Feinstein asked the FTC to "immediately seek data sharing agreements that will allow it to monitor gasoline and oil markets actively and effectively." In addition, the California senator asked the FTC to create a "permanent gasoline and oil market oversight unit modeled on the Federal Energy Regulatory Commission’s (FERC) Division of Energy Market Analytics and Surveillance."

In August, Feinstein sent a letter asking the FTC to investigate "whether the use of market power is inflating gasoline prices" in California.

Feinstein's colleague, Senator Barbara Boxer (D-CA) also wrote a letter calling for an investigation. Boxer addressed her letter to the Department of Justice's Oil and Gas Price Fraud Working Group to investigate the price spikes. "Californians have too often been victimized as unscrupulous traders have created or taken advantage of supply disruptions to drive up energy prices," Boxer stated in her letter. "We cannot allow market manipulation by those who would seek to profit off the pain of our families at the pump."

Boxer also asked the Working Group to "closely examine the maintenance issues that continue to plague West Coast refineries.

Reuters investigation of the California gas price spikes

Feinstein and Boxer both cited an October 5 investigation by Reuters in their letters on the cause of the price spikes. Industry sources told Reuters that "fundamental factors alone cannot explain the 97-cent surge" for gasoline last week. While Reuters reported that sources said "no single party appeared to be withholding supply intentionally…many participants may have seen an opportunity to profit from one company's apparent shortfall." The refinery company Tesoro is suffering from a reported shortage.

Gasoline production in California last week was almost the same as a year ago, Reuters noted in its investigation.

Photo: Flickr user, Damian Gadal