California Officials Ready to Spank Oil Companies

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I have been watching oil companies get away with price gouging for so many years that it was refreshing to see California's top political leaders let the oil companies know that they're going to be on the hot seat if they try to undermine California's landmark environmental laws taking effect in January.

The admonitions to Big Oil came at NextGen Climate America's Leadership Summit in Oakland on Monday from Governor Jerry Brown, Assembly Speaker Tony Atkins and Senate leader Kevin De Leon.

The oil lobby made a major misstep when an internal November presentation became public. Bloomberg Businessweek liberated the Big Oil plan, which details an aggressive campaign to mislead the public through phony reports, front groups pretending to be consumer advocacy groups, and threatening increased gas prices under California's landmark climate change law, AB 32.

California's officials fired back Monday: if oil companies try to jack up gasoline prices to undermine political support for California's new cap and trade program, there will be new sunlight on the companies and big consequences.

Oil companies are hardly used to such treatment. A report released by Consumer Watchdog at the summit showed that the companies had spent more than $100 million on lobbying and campaign contributions during the last five years in California to combat environmental protections.


The report also detailed how the pump-jacking is likely occur despite the current glut in crude oil. Regardless of how much crude oil there is or how cheap it is, the crude still has to be processed by a small number of California refiners into a special blend of fuel only Californians make or use. The refiners, 2 of which control 54% of the market, have consumers over a barrel, which is why Californians pay dimes more per gallon for their gasoline.

"Significant market consolidation in the hands of a few refiners and historically low inventories of gasoline have given oil companies the power to artificially increase or decrease gas prices at critical moments," our consumer group reported. We pointed out unwarranted refinery outages and other production "slow downs" to artificially produce gasoline price spikes on what is an unregulated commodity should be met with swift investigation and prosecution.

The report finds:

"California's under-regulated gasoline market resembles our briefly deregulated electricity grid during 2000-01, when energy pirates such as Enron manipulated prices…. The California gasoline market is structured to create shortages and scarcity. When an inevitable problem occurs to shock the system, such as a refinery outage or pipeline problem, gasoline prices and company profits go through the roof in tandem.

"Over the last decade, Californians have consistently paid prices that are 10 to 20 cents a gallon higher than the rest of the nation, and we have lower inventories. The rest of the continental U.S. has about 24 days of gasoline on hand; California's average is 10 to 13 days. Not surprisingly, over the last 10 years, refineries on the West Coast have consistently been among the most profitable in the continental U.S."


Would oil companies shut down refineries in order to jack up gasoline prices and argue that California's climate protection laws are to blame? The good news is this batch of California leaders seems to have learned from the Enron experience and is ready if Big Oil tries such tricks. And our report shows, they've engaged in such productions slowdowns before for both economic and political reasons.

Expect hearings, subpoenas and investigations at the first sign of gasoline price spikes. California consumers and our climate appear to be in for a new day in 2015.

Jamie Court
Jamie Court
Consumer Watchdog's President and Chairman of the Board is an award-winning and nationally recognized consumer advocate. The author of three books, he has led dozens of campaigns to reform insurance companies, financial institutions, energy companies, political accountability and health care companies.

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