Gov. Jerry Brown and U.S. Sen. Dianne Feinstein today pushed for action and answers on California’s skyrocketing gas prices.
Brown directed the California Air Resources Board to take emergency steps to increase the state’s gasoline supply and bring down fuel prices by immediately taking “whatever steps are necessary” to let oil refineries to make an early transition to winter-blend gasoline, which typically isn’t sold until after October 31.
“Gas prices in the state have set new record highs, and gas is completely unavailable at some stations in southern California,” Brown wrote to CARB chairwoman Mary Nichols. “If this situation continues, it may cause unacceptable price impacts for consumers and small businesses, significant economic disruption, and serious harm to public safety and welfare.”
Winter-blend gasoline evaporates more quickly than the gas sold in summer months, which is better for air quality during the smog season. Allowing an early transition could increase California’s fuel supply by up to an estimated 8 to 10 percent with only negligible air quality impacts, Brown said.
Gas prices in California have skyrocketed over the past week due to a tightening of fuel supplies caused in part by shutdowns at Tesoro and Exxon refineries. The Exxon refinery came back online Friday and Tesoro is scheduled to resume production early next week.
Feinstein, meanwhile, sent a second letter to Federal Trade Commission chairman Jon Leibowitz – she sent the first in late August – asking for an immediate investigation of the price spike:
First, I request that the FTC immediately initiate an investigation to determine if the price spike in Southern California this week results from an illegal short squeeze. A Reuters investigation cites industry sources who believe that the 97-cent price spike in CARBOB gasoline this past week “has many of the hallmarks of a classic short squeeze.” Multiple trade sources say Tesoro Corporation was caught short on supply. In the severely concentrated Los Angeles gasoline market, the few sellers were reportedly able to squeeze Tesoro either through collusion or use of market power. An FTC investigation is likely the only way to determine whether this reported squeeze took place.
Publically available data appears to confirm that market fundamentals are not to blame for rising gas prices in California. Despite a pipeline and refinery shut down, gasoline production in the state last week was almost as high as a year ago, and stockpiles of gasoline and blending components combined were equal to this time last year, state data show.
Second, I ask that the FTC immediately seek data sharing agreements that will allow it to monitor gasoline and oil markets actively and effectively. Data on prices, trading activity, refinery output, demand, stocks, and other information are vital to determine if trading activities reflect fraud, manipulation, or other malicious trading practices. While much of this data is currently collected, but not released, by the CFTC, the Energy Information Administration, the California Energy Commission, and private sources, the FTC does not collect, compile, or analyze this information in any organized or ongoing way. I believe that obtaining relevant data is a basic prerequisite of effective consumer protection.
Third, I request that the FTC establish a permanent gasoline and oil market oversight unit modeled on the Federal Energy Regulatory Commission’s (FERC) Division of Energy Market Analytics and Surveillance. As you know, FERC’s anti-manipulation authority in natural gas and electricity markets mirrors the FTC oil market authority nearly word for word. With its authority, FERC has built an entire division of market monitoring professionals who oversee trading in real time to protect consumers from malicious trading practices. I fail to understand why the FTC has not yet set up its own unit to oversee oil markets.