Consumer group alleges that California refiners are manipulating gasoline prices
A consumer advocacy group contends that California refiners are holding down gasoline production to inflate prices at the pump.
California gasoline prices remain at least 50 cents a gallon higher than in other areas of the country even though a major Southern California refinery that was mostly shutdown throughout 2015 is back in operation, said Jamie Court, executive director of Santa Monica-based Consumer Watchdog.
Court on Tuesday argued to members of the California Energy Commission’s Petroleum Market Advisory Committee that the difference in the wholesale and retail prices in Los Angeles, for example, were substantially greater than in other big cities such as Chicago and New York.
On Nov. 23, for example, gasoline cost $1.35 a gallon at the wholesale level and averaged $2.75 at retail in Los Angeles, compared with Chicago, where the wholesale price was $1.39 a gallon and retail was $2.25. New York saw $1.41 wholesale and $2.46 retail, Court said.
AAA reported the average price for a gallon of regular gasoline Tuesday was $2.72 in the L.A. area, about 58 cents higher than the national average.
Court said he believes that part of the trouble is that four refiners control 78% of the market. He called for increased disclosure and monitoring of wholesale prices and limits on consolidation in the market to prevent any manipulation of prices.
Severin Borenstein, the committee’s chairman, questioned some of Court’s conclusions, though he agreed that there is a limited number of refiners, which is affecting how the industry operates in the state.
“There’s no question the industry is more consolidated and profiting,” Borenstein said. But he added that he would like to see a longer period of data rather than base conclusions on a limited period.
Ryan Hanretty, executive director of the California Independent Oil Marketers Assn., defended current disclosure requirements as sufficient for protecting the public interest.
“While there are a number of things that go into price, everything is publicly posted,” Hanretty said. “It’s very public for everybody.”
Questions about California gas prices — L.A. area costs in particular — have been the focus of increasing scrutiny following a dramatic price surge in 2015 that resulted from the almost complete shutdown of the Torrance refinery.
In June, state Atty. Gen. Kamala Harris opened an investigation into unusually high gasoline prices in California during 2015 and issued subpoenas to oil refiners.
A February 2015 explosion at the Torrance refinery, which provides 10% of the state’s refined capacity and 20% in Southern California, cut production levels at the plant to less than 20% of normal operations.
Gas prices in the L.A. area reached as much as $1.50 more than the rest of the nation in July 2015 while the state waited for the plant — then owned by Exxon Mobil — to return to service.
It took about a year and a half for repairs to be completed. Exxon Mobil then sold the plant to New Jersery-based PBF Energy, which then endured its own series of troubles, including power outages in Southern California Edison’s service network that shut down the refinery.
But contrary to Court’s contention, PBF said, the company has been “absolutely maximizing production” at the refinery with no intent of reducing output since it acquired the Torrance plant in July.
The Western States Petroleum Assn. maintains that California’s unique market is the cause of higher gasoline prices.
California gas prices typically run higher than the rest of the nation due to higher taxes and fees as well as requirements for a more environmentally friendly blend of gas that cannot be produced at most refineries in the country.
For more energy news, follow Ivan Penn on Twitter: @ivanlpenn
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