California bill targets alleged gasoline price manipulation

19 April 2013 23:30  [Source: ICIS news]

HOUSTON (ICIS)--Proposed legislation in the state of California aimed at curbing alleged gasoline price manipulation could eventually ease consumers' concerns in a state with historically high retail gasoline prices, an industry analyst said on Friday.

California State Senator Mark Leno has proposed a bill that, should it be passed into law, would create an Office of Fuel Price Investigation and Manipulation Prevention at the California Energy Commission.

The office will develop anti-fuel price manipulation standards, investigate potential incidents of illegal activity and develop recommendations to reduce California’s fuel price volatility that is associated with fuel producer market power.

“California’s economy has struggled to absorb the erratic spikes in gas prices in recent years, which have impacted consumers, families who are already scrambling to balance their budgets, and small businesses,” said Leno.

Last year, California drivers paid some of the most drastic gasoline price spikes in the state’s history, and some retail station owners temporarily closed shop because of the cost to supply gasoline to consumers.

“In many places, gas rose to over $5/gal,” analyst Patrick DeHaan said. “While fuel producers pointed to a perceived supply shortage, industry experts concluded that price manipulation might have been a factor in the volatility.”

During last year’s price spike, producers said unexpected refinery slowdowns, and shut downs such as the fire at Chevron’s Richmond refinery, caused a gap in fuel supply.

However, Leno’s office cited an energy consultant, McCullough Research, that found gasoline inventory levels had increased in California at that same time, indicating that other market forces, possibly the withholding of supply, were likely at play.

According to the Western States Petroleum Association (WSPA), the bill has gone through extensive amendments this week and contains provisions the association believes “are duplicative of other agency enforcement powers that are tasked with ensuring and open markets for fuels and other products – specifically the California Attorney General’s Office, the Federal Trade Commission and the U.S. Department of Justice".

“We also do not believe the legislation is warranted,” WSPA Director of Strategic Communications Tupper Hull said. “The petroleum industry on the west coast has been the subject of more than two dozen investigations over the past two decades. Each and every one of those investigations has concluded the dynamics of supply and demand have been responsible for changes in fuel prices, not anticompetitive conduct or market manipulation.”

The bill, SB 448, will be heard on 23 April in the Senate Committee on Energy, Utilities and Communications.

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By: Anna Matherne

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