State Officials: High Gas Prices Could Be Due to Refinery Problems — and Market Manipulation

A gas pump fills a car with fuel at a gas station on May 10, 2017, in San Rafael. (Justin Sullivan/Getty Images)

Refinery outages and potential market manipulation could be to blame for California's high gas prices, according to the California Energy Commission.

The commission's analysis comes after Gov. Gavin Newsom asked the state agency in April to investigate what he called an "unaccounted-for price differential" in the state. In a memo to Newsom on Wednesday, Energy Commission Chair David Hochschild said California gas prices have been higher than the national average since 2015, and "most recently, that difference has soared to more than a dollar."

According to the agency's analysis, the phenomenon can roughly be traced to early 2015, when an explosion at Exxon Mobil's Torrance refinery prompted state officials to order the company to shut down the refinery until it could demonstrate safe operation. While the ensuing outage at that refinery only lasted about a year and a half, the commission said spiking prices at the pump in California "remained well after the restoration of normal operations at Torrance."

Since 2015, the analysis found — after accounting for the state's additional taxes and other program costs — that price increases have ranged between 17 cents and 24 cents per gallon.

The commission said those price increases may be due, in part, to some oil companies charging more than others for the same product.

"While this practice is not necessarily illegal," the report says, "it may be an effort of a segment of the market to artificially inflate prices to the detriment of California consumers."

The analysis found a number of other reasons for the continued differences between California prices and the U.S. average, including crude oil prices and other recent refinery outages.

Read the full analysis:

In March, KQED reported that a recent shutdown of Valero's Benicia refinery may have contributed to increasing prices at the pump in California this year. Valero began restarting operations at the facility earlier this month.

Consumer advocates are applauding the Energy Commission's analysis and Newsom's call for the investigation. In a statement, the advocacy group Consumer Watchdog said they have issued a series of reports since 2015 finding that oil companies may be manipulating the market in California.

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"Governor Newsom's Energy Commission has finally acknowledged that the extra dollar we pay at the pump is likely highway robbery because it's not justified by production costs," said Consumer Watchdog President Jamie Court in the statement. "At last we have a real investigation into the Golden State Gouge."

In his letter to Newsom, Energy Commission Chair Hochschild proposed spending another five months further examining the causes of skyrocketing gas prices. Consumer Watchdog is asking Newsom and the state Legislature to take action against oil companies before that full investigation is complete.

"Californians need relief now," Court said. "Oil companies should not be able to use this state like an ATM anymore. It's time to reverse the cash flow."

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