With gas prices soaring and news that the Chevron Richmond refinery’s crude oil unit won’t reopen until 2013, a state Senate committee will hold a hearing next month on the safety and reliability of California’s gasoline production system and its impacts on gas prices and the economy.
State Sen. Mark Leno, D-San Francisco, announced today he’ll convene the Senate Select Committee on Bay Area Transportation to explore the issue.
“The volatile spikes in gas prices and gas shortages in our state in recent weeks indicate serious problems with California refineries,” Leno said in a news release. “I am concerned that refineries have no incentive for keeping their operations safe and fully functional because their profits increase greatly following any type of disruption, whether it is the consequence of a potentially deadly explosion or failed piping. Meanwhile, consumers are paying the price for these refinery errors, not only at the pumps, but also in the risks posed to public health and safety.”
Leno said the hearing will focus on two main topics: system reliability for California’s refineries and its effect on the economy; and the state’s oversight process and role related to refinery worker safety. Topics may include monitoring health and safety at the state’s 15 oil refineries, state compliance and enforcement at refineries, West Coast gasoline prices and how they may be manipulated, refinery capacity and its relationship to gas prices and the economy, and the Chevron Richmond fire investigation.
“Chevron’s announcement late yesterday that its Richmond (crude oil) facility will be closed for the remainder of the year could further complicate matters for California,” he said. “Economists have estimated that a lengthy shutdown of that facility could slow the growth rate of the state’s economy by half a percentage point.”
This past weekend, Gov. Jerry Brown urged the California Air Resources Board to make an early switch to the state’s winter blend of gasoline to improve supply, and U.S. Sen. Dianne Feinstein, D-Calif., renewed her call for the Federal Trade Commission to investigate the soaring prices.
U.S. Sen. Barbara Boxer, D-Calif., got into the act Monday, sending a letter urging the Department of Justice’s Oil and Gas Price Fraud Working Group to investigate the recent spike.
“Californians have too often been victimized as unscrupulous traders have created or taken advantage of supply disruptions to drive up energy prices,” Boxer wrote. “We cannot allow market manipulation by those who would seek to profit off the pain of our families at the pump.”
In the letter, Boxer pointed to published reports that cited energy traders saying the sudden rise in gas prices had “many of the hallmarks of a classic short squeeze.”
She acknowledged the maintenance issues facing California refineries beginning with the shutdown of Chevron’s Richmond crude oil unit in August due to a fire, the power outage at Exxon Mobil’s Torrance refinery, and the September shutdown of a Chevron pipeline that supplies crude from the Central Valley to the Bay Area. But noting a pattern of similar maintenance issues at West Coast refineries that led to price spikes earlier this year, Boxer wrote, “it is critical that we ensure that these shutdowns are not part of any broader effort to deliberately keep gasoline supplies tight—and prices high—at the expense of consumers.”