Lockyer Urges Steps to Cut Gas Prices

Atty. Gen. Bill Lockyer called on lawmakers Monday to take steps to ease gasoline prices in California, as he issued a report documenting that motorists here pay far more for gas than people in almost any other state.

As motorists prepare for the busiest travel weekend of the year, Lockyer said California’s average $1.31 per gallon pump price for regular-grade gasoline during the first eight months of 1999 was higher than in all other states except Hawaii and Nevada, and 23 cents above the national average.

During that period, Californians shelled out $1.3 billion more than they would have if they were paying the national average.

“We need to find the political vision, will and courage to make fundamental changes . . . in the gasoline market in California that would result in increased supplies and increased competition,” Lockyer said.

Lockyer noted that six major companies in California, led by Chevron and Tosco, control 90% of the state’s refining, and the same six companies, led by Arco and Chevron, control more than 90% of retail gasoline sales. In Texas, where there are more refiners and independent retailers, gas prices averaged 90 cents a gallon in the first eight months of the year.

“Higher prices in California result mainly from inadequate competition, and this is essentially not happening anywhere else in the country,” Lockyer said.

State gasoline taxes add a nickel to the pump price, and state requirements that oil companies produce cleaner-burning fuel add about 4 cents.

Echoing other oil industry officials, Thomas Markin, manager of Arco’s lobbying operation in Sacramento, said the issues raised by Lockyer are ones “we’ve debated in the past.” While no one likes gasoline spikes, he said, “price largely is affected by availability.”

“If there is more of it around, it is going to sell for a cheaper price,” Markin said.

The report, based on publicly available documents, comes as Lockyer pursues an antitrust investigation of several oil companies that he launched shortly after taking office earlier this year. He used the report to call on lawmakers and Gov. Gray Davis to allocate an additional $1 million to his antitrust unit to pursue the investigation.

Among his other suggestions is an energy summit early in 2000 to further analyze reasons for the high California prices. He also suggested legislation making it easier for independent refiners and marketers to operate in California, and for gas station owners to buy from refiners that offer low prices.

California’s environmental restrictions make construction of new refineries difficult, and no pipelines carry gasoline into California from other parts of the country. Thus, when a problem occurs at one or more California refineries, as happened last spring, the relatively small backlog of the state’s cleaner-burning gasoline is quickly used up and prices skyrocket.

Lockyer suggested that a pipeline running from the gulf states to Phoenix could be extended to California.

Lockyer’s antitrust unit is analyzing pending mergers between Exxon and Mobil and BP Amoco and Arco. He declined to comment in detail on those investigations.

“We have concerns that there will be further over-concentration of this market [and] overpaying by consumers that will can only be remedied, if this [BP Amoco-Arco] merger were to proceed, by substantial divestiture,” Lockyer said.

Lockyer pointed out that gasoline prices in the San Francisco area consistently are higher than in the rest of California, even though major refineries there produce more gasoline than is consumed by Bay Area motorists, and ship some of it to Southern California.

“Traditional laws of supply and demand aren’t at work,” Lockyer said.

The preliminary report, written by Keith Leffler, an economist at the University of Washington, and Barry Pulliam, senior economist with Econ One Research Inc., said California gasoline supplies could become even tighter because of growing demand and the planned phase-out of MTBE. MTBE is an oxygenate that is blended into California gasoline to help reduce pollution, but has been identified as a potential cause of cancer. MTBE accounts for about 11% of California’s gasoline supply.

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Times staff writer Nancy Rivera Brooks in Los Angeles contributed to this story.

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Gasoline Prices

Californians pay more for gasoline than almost anywhere else in the country. Atty. Gen. Bill Lockyer is calling for legislation that would provide some relief. Prices for regular grade, averaged from Jan.-Aug. 1999:

Selected cities

San Francisco: $1.55

San Diego: $1.39

Los Angeles: $1.34

Seattle: $1.32

Chicago: $1.31

Atlanta*: $0.98

By region

Hawaii: $1.54

Nevada: $1.39

California: $1.32

Oregon: $1.26

Alaska: $1.23

Washington: $1.22

U.S. average: $1.08

Georgia*: $0.89

*Lowest

Source: Oil & Gas Journal