SB 448 proposes office to investigate fuel price volatility, gas price fixing (vetoed)

Update: On October 13, Governor Brown vetoed SB 448.

Do oil companies illegally set gas prices at the pump? A bill moving through the Legislature would force the state of California to take a closer look.

The Consumer Federation of California supports SB 448, which is aimed at protecting California consumers who have, for too long, been at the mercy of a few major oil companies that control nearly all of the transportation fuel market.

After a spike in gas prices last year that led to some Californians paying more than $5 per gallon, Senator Mark Leno introduced SB 448, which would set up a new office at the California Energy Commission to develop standards against motor vehicle fuel price manipulation, to investigate potential incidents of illegal activity, and to recommend ways to reduce the volatility of gas prices in California.

Fuel consumers are faced with two major problems: the price of fuel in the market is highly variable and the average price for gasoline and diesel in the state is much higher than in the rest of the country.

Time and time again, regulators who examine oil company operations have been unable to hold those companies accountable for consolidating market power and dictating prices at the pump. Since there are virtually no standards by which to judge oil company operations with regard to gas prices and no consistent evaluation of those practices by state regulators, Californians continue to be held hostage at the pump.

A vast majority of the supply for motor vehicle fuel in California is controlled by only a handful of producers and importers. Unfortunately, many of these companies are also fighting common sense environmental regulations that could lead to long-term fuel diversification and fuel price decreases. These producers use high fuel prices as the main reason for California to think twice about moving forward with comprehensive fuel policy implementation. It is time to put an end to the practice of allowing oil companies to control California’s fuel and environmental policy.

According to Senator Leno’s press release, SB 448 “will help protect California consumers against erratic pain at the gas pump.” During last year’s gasoline price spikes in California, fuel producers indicated that unexpected refinery slowdowns created a gap in fuel supply. However, McCullough Research, an independent energy consultant, found that gasoline inventory levels had in fact increased in California at that same time, indicating other market forces, possibly the withholding of supply, were likely at play.

SB 448 is a necessary tool for understanding and regulating the fuel market in California.

‘For too long, Golden State drivers have been at the mercy of a few major oil companies that control the state’s transportation fuel market,’ Leno said. ‘We clearly need a process by which we can protect consumers against fuel price volatility and investigate potential cases of price manipulation.’

Federal lawmakers also have voiced concerns over the concentration of the refinery sector. Six U.S. senators from the West Coast, including Senators Dianne Feinstein and Barbara Boxer told U.S. Attorney General Eric Holder in a letter last year that inaccurate information about the shutdown or slowdown of one production facility could affect gas prices for tens of millions of consumers.

Organizations supporting SB 448 (partial list):

Consumer Federation of California
Consumers Union
Sierra Club California
Consumer Action
Environmental Defense Fund
Greenlining Institute
Green California
Communities for a Better Environment
Asian Pacific Environmental Network
California Interfaith Power and Light
United Steelworkers District 12