SAN FRANCISCO (KPIX 5) — Even though gas prices in California are cheaper than they were this time last year, Consumer Watchdog says drivers are getting ripped off.

The non-profit organization points to the huge disparity between wholesale gas prices and the prices Californians pay at the pump as proof.

For example, in Los Angeles oil companies are selling each other gas at $1.26 a gallon, one of the lowest prices in the country. Yet the average price at the pump is $2.69 a gallon, one of the highest prices in the nation.

Oil companies blame market factors for the slow trickle-down of price reflection.

Consumer Watchdog president Jamie Court believes it is a case of market manipulation.

“If we have the lowest wholesale price for gasoline, we should also have the lowest retail price for gasoline.

Court says companies limit the amount of gasoline they refine to keep retail prices high.

To further his point, Court cites a remark from oil company exec on an earnings call.

“The bottom line is there’s too much clean product and the only way you can solve that problem is reducing the amount of clean product that you make,” said Thomas Nimbley, CEO of PBF Energy.

“They can make enough,” says Court. “They choose not to. I think that’s absolutely clear from this quote.”

Senior Oil Analyst Patrick Dehan of Gas Buddy.com isn’t so sure.

“The nature of the market in California may breed what you could call a less competitive marketplace,” says Dehan. “There are less refiners, there may be less competition and that probably does contribute to slightly higher prices… based on the way the market has moved, and watching numbers everyday, I would not call it market manipulation.”

Market analysts say it could take month for wholesale prices to trickle down at the pump. In the meantime, California’s Attorney General Kamala Harris is investigating.