Lockyer Blames State’s High Cost of Gasoline on Lack of Competition

Blaming lack of statewide competition in the oil industry, Atty. Gen. Bill Lockyer estimated Thursday that Californians last year spent $2 billion more than the national average for gasoline.

Lockyer announced the sum as he opened the first meeting of a diverse task force that he appointed to recommend ways to prevent a repeat of record price spikes that California motorists experienced at the pumps.

In November, an economic study prepared for the attorney general estimated that in the first eight months of 1999, California motorists spent $1.3 billion more for gasoline than the national average.

In an update, Lockyer told his advisors Thursday that the payout, spread over the entire year, totals $2 billion. Drivers could have saved that money if there had been a more “robust, competitive environment,” he said.

“I believe the market system works, [but] it only works if there is healthy competition in the marketplace,” he told the task force of oil industry executives, consumer representatives, service station dealers, economists and others.

The November report blamed a lack of competition in the state’s oil industry, more costly “clean-burning” gasoline and higher state taxes for the difference between gasoline prices in California and those elsewhere.

Industry officials have disputed the study, contending that prices, which reached more than $2 a gallon at some Northern California stations, generally reflected shortages caused by unexpected refinery disruptions and accidents.

Lockyer noted that six California refiners--Chevron, Tosco, Equilon, Arco, Mobil and Exxon--control 93% of all gasoline supplies in California. As a result, the “consumer is paying substantially for gasoline products,” he said.

Lockyer named the task force to help him identify the causes of the price jumps and to propose legislation, if necessary, to prevent a recurrence. As one of the most powerful economic interests in California, the oil industry is highly resistant to changes it does not like.

But the attorney general’s assertion that lack of competition is a chief culprit for the price increases drew challenges from the California Chamber of Commerce and the Western States Petroleum Assn., Chamber President Allan Zaremberg, a task force member, suggested that there may be other causes that should be examined before a legislative solution is proposed.

Zaremberg said the task force should investigate whether refineries have enough capacity to produce more gasoline and whether “government-created barriers,” such as environmental regulations and tax rules, stand in the way of expanding production of gasoline.

“We have to start from square No. 1 and identify the problem,” Zaremberg said.

In a statement, the petroleum association, also represented on the task force by Executive Director Doug Henderson, charged that the November economic report “paints an incomplete and inaccurate picture” of oil industry competition.

The association said California refiners were victims of a series of “one-time disruptions” in 1999, which caused a “‘unique price spike” and was not “indicative of a permanent problem.”

“It is simply not sound economics to base conclusions about the marketplace on events which are the exception, rather than the rule,” the association said.