California Gas Prices Hit Record High

by John M. Curtis
(310) 204-8700

Copyright Oct. 9, 2012
All Rights Reserved.                                         

        Jumping to the highest prices in state history, California’s pump prices are now the priciest in the United States, including Hawaii and Alaska.  Consumers have watched their wallets drained by record gas prices, driving the price of unleaded regular to over $4.66 a gallon.  Citing piracy by Big Oil, Sen. Dianne Feinstein (D-Calif.) asked the Federal Trade Commission to investigate what looks like undeniable market manipulation and egregious antitrust violations.  Calling the oil industry practices “malicious trading schemes,” Feinstein urged the FTC to take a hard look at what seems like illegal oil industry practices.  Dianne want to know whether the recent price hikes were do to illegal market manipulation or real supply-chain problems due to refinery shut-downs and seasonal maintenance.  All indications point toward illegal market manipulation and price gouging.

            Prices haven’t been this high since summer 2008 when pump prices broke all records, at least until now.  “Publicly available data appears to confirm that market fundamentals are not to blame for rising gas prices in California,” wrote Feinstein, questioning industry-wide abuses.  Californians are no stranger to energy manipulation when out-of-state power companies back in 2000 drove electricity prices through the roof, forcing the state to go billions in the red to cover costs.  Feinstein found that statewide production quantities were comparable to last year, despite the unprecedented run up in pump prices.  Gasoline was “almost as high as a year ago, and stockpiles of gasoline and blending components combined were equal to this time last year,” said Feinstein.  When oil companies and refineries conspire to raise prices, there’s little the government or consumers can do.

            Consumers can only sit back a watch Big Oil pick their pockets, while market forces eventually bring down prices.  Oil companies and refineries only respond to reduced consumption, eventually forcing a drop in prices.  As long as consumers are willing to pay the exorbitant prices, Big Oil will continue to gouge.  As consumption drops, it forces the industry to drop prices.  No one makes money when consumers stop buying gas.  Attempts in the past to implement an oil industry “windfall profits tax” haven’t worked to control industry practices.  Big Oil has every excuse under the sun to raise pump prices.  If it’s not increased demand in China or India, it’s refinery problems here at home.  Oil companies do what they can to suppress new global oil discoveries or storage excesses to continue gouging consumers domestically, blaming it on anything that sticks.

            California Gov. Jerry Brown Jr. asked the Air Resources Board to relax industry air pollution standards to end production of more costly summer-blend fuels a month early.  He asked the Board to permit the production of winter blends that are generally less costly.  Blaming the current price-gouging on Big Oil, Brown aims to focus consumers on the oil industry.  While many consumers now pay over $5 a gallon, a station in Long Beach charged consumers $6.65 a gallon.  If more instability breaks out in the Middle East, it drive up pump prices.  With only 10% of U.S. imports coming from the Middle East, there simply no excuse for gouging consumers.  To highlight the price disparities, a gas station in San Pablo, just north of Oakland, charges only $3.49 a gallon, attesting to industry wide price-gouging.  Price disparities reveal the sinister nature to market manipulation.

             Most station operators, whether major or off-brands, pay about the same wholesale prices for gasoline.  Since wholesale prices are about the same, high price stations make obscene amounts of profit.  No one likes getting gouged at the pumps.  Giving station operators a license to steal from consumers in the state hurts all businesses now reeling from high pump prices.  Brown’s move to allow winter-blend gas should at least bring into focus in markets like Los Angeles and San Francisco the industry-wide practice of manipulating prices.  State officials should check wholesale gas prices around the state to determine whether local consortiums of station operators have arbitrarily fixed prices.  Judging by disparities in pump prices, it’s more likely that monopolistic practices have emerged in local gas station markets around the state, maintaining artificially high prices.

            California Gov. Brown and Sen. Feinstein have taken the first steps to expose industry-wide monopolistic practices.  It’s shouldn’t take too much research to find whether or not wholesale gas suppliers have jacked up prices or whether local bands of station operators have fixed prices at whopping profit margins.  Now that the cat’s out of the bag, GasBuddy.com’s senior analyst Patrick DeHaan predicts that pump prices should stabilize soon.  Consumers don’t want prices to stabilize, they want them to come down to pre-inflated levels.  Big Oil and station operations need to show more responsibility to the U.S. economy.  Gouging consumers, whether personal or commercial, harms the economy by fueling inflation.  No one benefits, other than gas stations or Big Oil, gouging consumers.  Federal and state authorities need to give free enterprise a necessary safety check.

 John M. Curtis writes politically neutral commentary analyzing spin in national and global news.  He's editor of OnlineColumnist.com.and author of Dodging the Bullet and Operation Charisma.

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