California Governor Calls for Probe of ‘Gouge Gap’ in Gas Prices

SACRAMENTO (CN) – With regulators unable to pinpoint the reason for California’s exorbitant gas prices, Governor Gavin Newsom on Monday called for the state to investigate whether Big Oil companies such as Shell and Chevron are cheating Californians at the pump.

The Kern River Oilfield in Bakersfield, California. (AP file photo/Jae C. Hong)

Newsom urged Attorney General Xavier Becerra to pry into why Californians pay on average 30 cents per gallon more than other states and find out if a handful of major retailers are “engaging in false advertising or price fixing.”

“There is no identifiable evidence to justify these premier prices,” Newsom said in a letter to Becerra. “The mystery surcharge adds up, especially for cost-conscious, working families.”

Newsom’s request was prompted by a report released Monday by the California Energy Commission that raised the possibility of wrongdoing by the oil industry.

In the 10-page report, the commission rules out short-term refinery outages and higher crude oil prices as legitimate reasons for the state’s skyrocketing gas prices. The report, authorized by Newsom in April, examined gas prices over the past five years and found that Californians paid $4.50 more to fill up a 15-gallon tank than the average American.

The commission scoffed at the notion that name-brand retailers such as Shell or Chevron are selling higher-quality gasoline than lower-priced brands like Arco or grocery store stations, and prodded Newsom by noting that Becerra’s office is “well-equipped to investigate” the matter.

“Although name-brand retail gasoline outlets represent that they sell higher-quality gasoline than lower-priced outlets, given the high standards of all gasoline in California there is no apparent difference in the quality of gasoline at retail outlets in the state,” the report states. “The name-brand stations, therefore, are charging higher prices for what appears to be the same product.”

According to the latest data from the U.S. Energy Information Administration, the average nationwide retail price for a gallon of regular-grade gas was $2.63, and $3.34 for premium-grade. As of Monday, Californians were paying on average $4.03 for regular and $4.33 for premium.

While major gasoline brands increased their prices over the past five years, the commission claims they didn’t lose market share in the Golden State. It suggests that consumer tastes could simply be changing and that Californians are favoring name-brand stations, but added that the companies were less than cooperative with the commission’s request for information on pricing.

“The commission has concluded that the primary cause of the residual price increase is simply that California’s retail gasoline outlets are charging higher prices than those in other states,” the report states.

The oil industry has long contended that California’s array of environmental fees and taxes are the driving factor behind the higher prices, and it repeated that line on Monday.

“It’s important to note that the commission’s own numbers show our state’s regulatory environment plays a big role in the ever-increasing affordability challenges Californians face,” said Catherine Reheis-Boyd, Western States Petroleum Association president. “In fact, the first $1.07 per gallon at the pump is a result of taxes and California’s regulatory programs, such as the low carbon fuel standard.”

California lawmakers raised gasoline taxes by 12 cents per gallon in 2017 as part of a $52 billion transportation package intended to fix the state’s crumbling roads. The tax increase was the first in 23 years and voters upheld it by rejecting a Republican-led ballot measure.

The commission concluded that while it does not have evidence that oil companies are fixing prices, that should not preclude a deeper investigation.

“The price of gasoline in California is unregulated and companies can charge prices based on what consumers are willing to pay. However, if competitors fix prices or employ false advertising practices, this may be unlawful. Additional investigation is necessary to determine whether either has occurred.”

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