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Politics Oct 07, 2022
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Rep. Mike Levin, D-Dana Point, and 30 other lawmakers called on the Federal Trade Commission Friday to investigate what they believe is market manipulation by California oil refineries contributing to rising gas prices in part to maintenance.
At least half a dozen of the state’s 17 oil refineries have recently shut down for maintenance, with some experts pointing to those shut-downs as the main factor causing California’s gas prices to outpace national averages.
“There’s a $2.50 a gallon disconnect between the federal and California price, which is unprecedented,” Levin told City News Service, adding that gas prices rose in the state by nearly 60% over the past week despite crude prices remaining about the same.
The oil companies “are providing no clear explanation at all why prices are rising so rapidly and how these refineries are making decisions about maintenance,” Levin said.
“We’ve got to make sure we crack down on these oil companies that have taken advantage of us for years,” Levin said. “We’re sick and tired of paying these painfully high prices while these companies take in record-breaking profits.”
The lawmakers called on the FTC to team up with the Department of Justice, the Department of Energy and the California Department of Justice “to use its existing authorities to launch an investigation into any potential anti-consumer behavior and market manipulation within California’s transportation fuel markets. While refiners and other actors may want to continue operating without transparency and accountability, our constituents deserve to know whether these companies are manipulating markets at the expense of everyday Americans, including through any coordination to affect refining capacity or inventory levels.”
In a letter to the state Energy Commission this week responding to requests for more information, an executive with PBF Energy Western Region LLC blamed part of the problem on the state’s requirements for fuel as well as the closure of an East Bay refinery.
“The laws and policies being implemented to decrease domestic crude oil production within the state are adversely affecting refining operations within the state and it is important that there be a full understanding of what the implications will be in the short-, medium- and long-term on the availability of gasoline supplies for consumers and businesses,” the company’s senior vice president Paul Davis wrote.
“Importantly, it must be recognized that, since 1980, approximately one million barrels per day of crude oil refining capacity has been permanently shut down in California,” Davis wrote. “Specifically, the August 2020 shutdown of a 166,000 barrels per day East Bay refinery, compounded by reduced imports in 2022, should be considered as a potential contributing factor to current supply disruptions and lower gasoline inventories that have been blamed for price increases. The effects of the 2020 refinery closure were not evidence until post-COVID demand for fuels began rebounding.”
Davis added that “there are only a few refineries outside of California that manufacture the specific fuel blends mandated by the state’s regulations.”
California Energy Commission Chairman David Hochschild said blaming state permitting issues for rising prices is “misleading.”
“The reality is 40% of the oil industry’s approved permits in California are still valid but have not yet been used and the price increase is occurring at the refining stage of gas production, not the oil extraction stage,” he said. “And it does not explain the sudden gap between national and California prices.”
State Republicans have lashed out at Democrats for failing to act on rising gas prices, most notably by failing to support a suspension of the state’s gas tax. Some also criticized Gov. Gavin Newsom’s call this week for a “windfall tax” on oil companies
“The problem in California is policy,” Republican Assembly Leader James Gallagher of Yuba City said. “We need major action on these prices, starting with suspending the gas tax and additional fees that make our gas so much more expensive here. All of these fees should be paused to account for rising inflation. Anything less is totally unacceptable.”
In a separate statement, he added, “Paying more than $5 or $6 for a gallon of gas is absurd. The governor and the Democrat super-majority cannot really expect Californians to accept this as the new normal. Republicans stand ready and united to suspend the 54-cent gas tax to provide real immediate relief.”
Republicans have been critical of Newsom for delays in sending long- promised relief checks to Californians — rebates that are being distributed beginning Friday.
“More than any other state, Californians have suffered from soaring gas prices, and Democrats have ignored their cries for help,” California Republican Party Chair Jessica Millan Patterson said. “Californians should not have to choose between buying gas and groceries.”
Levin said Republicans “like the politics of talking about high prices more than going after the profits and extraordinarily unprecedented profits of the industry.”
Levin said “fossil fuel donations, dark money, and direct money to all sorts of electeds” is behind opposition to cracking down on the oil companies.
The other Democratic representatives who signed on to the letter to the FTC include Pete Aguilar, Nanette Barragán, Karen Bass, Julia Brownley, Salud Carbajal, John Garamendi, Jimmy Gomez, Jared Huffman, Ro Khanna, Barbara Lee, Ted Lieu, Jimmy Panetta, Katie Porter, Brad Sherman, Mark Takano, Mike Thompson, Norma Torres, Juan Vargas, Doris Matsui, Grace Napolitano, Jackie Speier, Jerry McNerney, Tony Cárdenas, Sara Jacobs, Alan Lowenthal, Mark DeSaulnier, Eric Swalwell, Adam Schiff, Raul Ruiz, and Judy Chu.
Levin previously introduced legislation aimed at cracking down on “price gouging” by increasing fines for oil companies found to be distorting or manipulating fuel markets.
The FTC “can fine companies,” Levin told City News Service. “They can certainly make an impact. … A $1 million per day for violation for those using false information to distort fuel markets, and our bill would increase it to $2 million. Our legislation would heighten or strengthen that effort. But, as of right now, (the FTC) are the regulatory body with authority to go after fuel market distortion and they’re also capable of issuing penalties to perpetrators, so I think it’s very important to use all the tools in the tool box.”
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