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State Lawmakers To Probe Reason For High Californian Gas Prices

The Wall Street Journal: State Lawmakers To Probe Reason For High Californian Gas Prices

DOW JONES NEWSWIRES

May 18, 2004 7:48 a.m.

LOS ANGELES (AP)–State lawmakers will probe what’s behind California’s high gas prices following an increase in the average price of self-serve regular to a new high of $2.269 per gallon.

The new Senate Select Committee on Gasoline and Diesel Pricing announced Monday it will launch an investigation patterned after the inquiry into manipulation of California’s energy market in 2000 and 2001, said Senate President Pro Tem John Burton, D-San Francisco.

The statewide average price of self-serve regular has jumped 4.6 cents in the last week to a new high of $2.269 a gallon, according to the weekly survey by the Energy Information Administration, an arm of the U.S. Energy Department.

Nationwide, the average cost of gasoline rose 7.6 cents to $2.017 a gallon, the first time pump prices have averaged more than $2 a gallon nationwide, the survey showed.

In California, demand for gasoline is 4% higher than last year and supplies can’t keep up.

State Sen. Joe Dunn, D-Santa Ana, intends to show that oil companies have deliberately contributed to California’s precarious supply-and-demand situation.

“Is there a supply problem? Yes. But there’s a supply problem as a result of a deliberate strategy of the gasoline industry,” Dunn said. “They have purposely eliminated their excess inventories, they claim in an effort to save costs, but conveniently, it also gives rise to market power and their ability to dictate the prices at will.”

Shell Oil Co. (RD) plans to close its Bakersfield refinery this year. The facility makes 2% of California’s gasoline and 6% of its diesel. The company has said the closure is necessary because of declining crude supplies. But Dunn, U.S. Sen. Barbara Boxer and others have said they suspect Shell of intentionally crimping supplies.

At Boxer’s request, the Federal Trade Commission is reviewing Shell’s decision. The state attorney general also has questioned Shell’s move, and legislative committees have held hearings to discuss rising fuel prices in California.

Joe Sparano, president of the trade group Western States Petroleum Assn., said Monday that gasoline prices are set by market forces and by the price of oil.

“Our resources are probably better spent working on possible solutions and then cooperating to get there instead of continuing to investigate in areas where there has been no wrongdoing,” he said.

Dunn said the committee would subpoena documents from the oil companies in about a week. Eventually, it will compel executives to testify before the panel under oath, he said.

Other members of the committee include vice chairman Sen. Bill Morrow, R-Oceanside; Sen. Debra Bowen, D-Marina del Rey; and Sen. Martha Escutia, D-Whittier.

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