Tom Steyer and Consumer Watchdog Call On Legislators To Make Oil Company Executives Answer For February’s $550 Million Gas Price Spike

Business leader, philanthropist and climate activist Tom Steyer and Consumer Watchdog President Jamie Court asked California lawmakers to subpoena oil industry executives to explain why California’s gasoline market is structured for shortages and volatility.
The executives declined to testify at a March 24 hearing before a joint Senate Committee hearing into February’s dollar-a-gallon price spike at the pump.
“It’s outrageous that the oil industry would refuse to answer for the $550 million extra California consumers were forced to pay in February for their gasoline above the U.S. average, particularly as the hearings proved the oil companies were the ones profiting from the California price spike,” wrote Steyer and Court in a letter to Senate President Pro Tem Kevin de Leon, and Senators Jim Beall and Ben Hueso.
“Instead the oil companies sent an economist, Phil Verleger, whose first words were that he doesn’t speak for the industry, though Western States Petroleum Association paid him to attend.”
“The oil industry must answer for this half-billion dollar cost to Californians,” the letter continued. “The hearing confirmed that the market is rigged to the benefit of an oligopoly and the rules need to be changed to benefit consumers rather than the oil industry.”
Two refiners control 55 percent of the state’s refining capacity.
“According to California Department of Justice Anti-Trust Chief Kathleen Foote,” the letter continued, “California has 'what is generally called an oligopoly' due to consolidation in the refinery industry in the state. She also noted that by not having adequate reserves, short-term impacts on supply can drive prices upward.”
“Keeping inventories low exacerbates the perception of shortages, regardless of how much capacity refineries are actually using and how much margin they have to refine more gasoline,” the letter continued. “Schremp [of the California Energy Commission] stated it succinctly: ‘Inventory levels themselves do not cause price spikes, but lower than normal inventory levels can exacerbate conditions for a price spike.’”
Steyer and Consumer Watchdog called on the Senators to compel oil industry executives to answer four questions
1.     Why did Tesoro tell investors that the company can continue operating refineries indefinitely even with the steel worker strike, yet shut down its refinery, precipitating the price spike?
2.     Why didn’t the refineries act more quickly to increase supply when it became clear that prices were going to spike?
3.     Why do refiners keep so little inventory on hand compared to the rest of the country? Why should they not be required to keep the same amount as the national average?
4.     Why won’t refineries publicly disclose real-time information about their operations and outages?
“If oil company executives refuse an invitation to answer these and other questions, we urge you to use your subpoena power to compel them to testify,” concluded Steyer and Court.
At the March 24 joint hearing of the Senate Transportation & Housing and Energy, Utilities & Communications committees Consumer Watchdog President Jamie Court released the report, “Price Spiked: How Oil Refiners Gouge Californians On Their Gasoline and What It Costs.”

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