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Consumer Watchdog Says California Petroleum Reduction Targets Needed To Stop Oil Company Price Gouging

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Jamie Court & Liza Tucker

Santa Monica, CA -- The nonprofit group Consumer Watchdog said that California legislation being debated today to cut petroleum demand in half will radically reduce the price of fuel in California.

The group pointed out that reducing demand for gasoline is a critical factor in blunting the oil company price gouging that Californians witnessed in February when the price of gas jumped a dollar a gallon at the pump when two refineries shut down, Consumer Watchdog said today.  Meanwhile, gasoline prices nationally and crude prices remained stable during the same time.

“If we don’t want oil companies to keep California consumers over a barrel, we have to set tougher goals for reducing demand for gasoline and introduce alternatives to the barrel,” said Jamie Court, president of Consumer Watchdog. “The recent run-up at the pump, when prices shot up about one dollar over national prices, is a reminder that we need new tools to deal with oil company gouging. Today Californians still pay 76 cent more per gallon than the rest of America.”

Today, the California Senate Committee on Energy, Utilities and Communications hears SB 350, introduced by Senate Pro Tempore Kevin de Leon, to implement Jerry Brown’s ambitious climate change action plan by, among other things, reducing petroleum-based fuel use 50% by 2030.

At last month’s hearings on gas price spikes before the same committee, Consumer Watchdog testified that oil companies keep Californians running on 48% less gasoline on hand than the refiners in the rest of the country.  The result is that when refineries go down, prices spike up rapidly – costing California drivers on average $2,000 per person more than US drivers over the last decade.   

By reducing demand for gasoline, SB 350 will reduce fuel prices by taking away the oil companies’ ability to keep gasoline scarce and expensive, Consumer Watchdog said.

The report released by Consumer Watchdog at the March 24th hearing, "Price Spiked", found California’s gasoline market in particular is structured for shortages and volatility.  Consumer Watchdog said SB 350 will help break oil refiners hold over the auto fuel market by introducing competing sources of fuel. Read the report at: http://www.consumerwatchdog.org/resources/PriceSpiked.pdf

"Price Spiked" found the major factor in gasoline price spikes is that refineries in California keep an average of 10.7 days worth of gasoline on hand versus 18 days in the rest of the country. When companies shut down refineries, as Tesoro did in Martinez in February, or experience accidents, as Exxon’s Torrance facility did shortly thereafter, the conditions are ripe for price spikes.

The report also pointed to refiner consolidation as a key factor in price gouging. Two refiners – Chevron and Tesoro – now control 55% of the state gasoline market. Four refiners control 76% of the market.

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