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New Californian Senate Panel To Examine Gasoline, Diesel Pricing

The Wall Street Journal: New Californian Senate Panel To Examine Gasoline, Diesel Pricing

DOW JONES NEWSWIRES

May 19, 2004 7:31 a.m.

NEW YORK — A newly-formed California Senate committee will investigate oil companies’ market behavior in the face of record-high gasoline prices in the state, an aide to committee chairman Sen. Joseph Dunn, D-Santa Ana, said Tuesday.

Dunn’s Senate Select Committee on Gasoline and Diesel Pricing will be similar in design to a panel he chaired in 2001-2003 to examine electricity price manipulation during California’s energy crisis, the aide said.

Among other things, that committee looked into allegations of generation being withheld from power plants, false power price reporting to trade publications and deliberate congestion of transmission lines as tactics that may have been used to drive up wholesale power prices. The committee issued citations against two energy firms, but later dropped them.

With his latest committee, Dunn joins a growing number of politicians around the state and nation who are seeking to determine why gasoline prices are so high and what can be done to bring them down.

The average cost of a gallon of regular unleaded gasoline was $2.31 in California on Tuesday, compared to a $2.00 national average, according to the American Automobile Association.

Experts attribute the rise in U.S. gasoline prices to record high crude oil prices caused by an increase in world demand and anxiety about shaky political conditions in the Middle East. In California, those conditions are exacerbated by a chronically tight supply-demand balance for gasoline.

U.S. Sen. Dianne Feinstein and U.S. Sen. Barbara Boxer, both California Democrats, joined six other senators Tuesday in calling on the the Bush Administration to release stored government oil reserves in order to lower gas prices. One of the senators, Charles E. Schumer, D-NY, has drafted a resolution to release oil from the Strategic Petroleum Reserve for two months.

Feinstein also urged California Gov. Arnold Schwarzenegger Friday to help streamline the state’s refinery permit process. The same day, Boxer said she will meet with Bush’s nominee to the Federal Trade Commission, Deborah Majoras, this week to discuss the state’s gasoline prices.

Diesel prices in California are also soaring. The average price of diesel in the state was $2.46 a gallon Tuesday, down slightly from a record high of $2.48 a gallon Friday, AAA said. Nationwide, diesel is priced at an average $1.82 a gallon, according to AAA.

The planned October closure of Shell Oil Co’s (RD SC) Bakersfield, Calif. refinery has caused concern among state officials about further tigthening in an already narrow supply-demand gap.

The facility makes 6% of the state’s diesel and 2% of its gasoline. Shell says it hasn’t been able to find a buyer for the refinery, and that it needs to close the facility because of declining crude production.

California Attorney General Bill Lockyer is looking into the refinery closure, and Boxer has asked the FTC to do so as well, saying she suspects its an effort to tighten supply and raise prices.

By Jessica Berthold, Dow Jones Newswires; 201-938-4424; [email protected]

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