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Consumer Watchdog Urges Tough State Oversight of Gas Supply as California Drivers Face a One Buck a Month Price Spike

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Liza Tucker & Jamie Court

Santa Monica, CA -- Consumer Watchdog said today that prices per regular gallon of gas in California were up an unprecedented 96 cents in the last month, nearly triple the 38-cent increase per gallon nationwide.

“This is all pure profit for the oil companies,” said Consumer Advocate Liza Tucker. “The Senate has called hearings into this, and it is high time that the CEOs of these companies be subpoenaed to answer for this type of price gouging.”

A regular gallon of California gasoline now stands at an average of $3.39 a gallon, according to GasBuddy.com. The average price for a gallon of gas in the rest of the country stands at $2.42 a gallon, nearly a dollar less.

“Since the start of February—when Tesoro announced the closure of its Martinez refinery—and today, the price of a regular gallon of gas in California has soared astronomically while the price of crude continues to fall,” said Tucker. “This isn’t due to regular supply and demand as oil analysts claim. It’s because refineries here are in a position to manipulate gas supply, and thus gas prices, in a way that refineries in other states have a harder time doing.”

California refiners have a chokehold on prices because they make the state’s special blend of gas themselves. They keep only a 10-day supply of gasoline on hand, versus a 24-day supply that refineries in other states keep, according to the California Energy Commission. Refineries that perform annual maintenance also do not stagger periods when refinery operations are running at less than full capacity.

In the face of a national steelworkers’ strike, refineries have used contract workers to fill in, and the increased sophistication of automation at such facilities means fewer workers can run these plants.

“We need a system to ‘trust but verify’ that shutdowns are legitimate whenever a refinery cuts back sharply or closes a facility for what might be bogus reasons,” said Tucker.  “Refineries are in a position to make piles of money off of restricting supply artificially.”

Gas price spikes were compounded by the shutdown of Exxon’s Torrance facility in mid-February due to an explosion and fire. The two refineries together represent 16.5 percent of the state’s refinery capacity offline—a significant chunk of capacity.

Tucker suggested the following questions for lawmakers to ask CEOs at upcoming legislative hearings in Torrance and Sacramento:

•Why did Tesoro shut its Martinez refinery down completely—instead of leaving it operating at half capacity—when its CEO told investors that refineries can keep operating with lower staff levels indefinitely?

•Why did managers at Exxon’s Torrance facility keep running faulty equipment instead of shutting down to avoid endangering workers and the public with a subsequent explosion and fire?

•What will it take to make refineries invest the proper capital into making their facilities safe in terms of not endangering the public with both fugitive emissions from throughout refineries and from accidents?

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