No stopping higher gas prices

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As records fall again, state lawmakers prepare for a new investigation

Oakland Tribune

The average price of gasoline in the Bay Area hit yet another all-time record of $2.30 a gallon Tuesday, while outraged state lawmakers prepared to launch a new investigation into the California oil industry. The average price of regular unleaded soared 10 cents in the Bay Area over the past month, according to AAA of Northern California. And for the first time ever, the national average has hit $2 a gallon.

In Fremont, the average price was $2.27 a gallon, up 10 cents from last month, according to AAA. In Oakland, it was $2.35, up 10 cents. In Pleasanton, it was $2.29, up 13 cents. In Tracy, it was $2.21. up 8 cents.

In San Mateo, the price was $2.36 a gallon, up 6 cents from last month, according to AAA. In San Jose, it was $2.24 a gallon, up 7 cents. In San Francisco, it was $2.39 a gallon, up 9 cents.

Experts blame record-high crude oil prices, high demand for gasoline and low inventories of stored gasoline for the soaring gas prices. In trading Tuesday, oil prices slipped from record-highs reached on Monday as support seemed to be gathering among OPEC members to raise their cap on crude production.

The futures contract for light sweet crude oil for June delivery closed at $40.54 on the New York Mercantile Exchange, down from Monday’s record closing price of $41.55 per barrel.

Experts say high gas prices could cause inflation, as businesses pass high energy costs on to consumers.

“Gas prices affect us whether we know it or not,” said AAA spokesman Sean Comey. “There’s costs associated with this that get passed on to the consumer on a whole lot of levels.”

Oil industry officials consistently have said that California’s gasoline prices are high because demand for gasoline is rising faster than refiners’ ability to meet it.

But there have long been allegations of price gouging and market manipulation. State Attorney General Bill Lockyer has been investigating the state’s oil industry since 1999, but has not prosecuted anyone for illegal behavior.

The latest investigation of the oil industry, announced Monday, will come from a State Senate committee led by State Sen. Joseph Dunn, D-Garden Grove, and Bill Morrow, R-Oceanside.

Dunn, who led an investigation of the power industry in California, said he believes oil companies are engaged in a “deliberate strategy” to produce less gasoline and boost up prices.

“The behavior of the gasoline industry at first blush appears to be identical” to power companies accused of manipulating California’s market, Dunn said. He said his investigation differs from Lockyer’s because it is not trying to prove criminal misbehavior, but instead will try to devise practical solutions.

“The only way we’re going to get to the truth is when oil execs are hauled up and put under oath,” said Jamie Court, president of the Santa Monica-based Foundation for Taxpayer and Consumer Rights.

Anita Mangels, spokeswoman for the Western States Petroleum Association said: “Another investigation may be politically expedient, but the politicians, the petroleum industry, the government and economists all know what’s behind the recent gasoline market volatility … That’s basic supply and demand.”

One new proposal to reform California’s gasoline market comes from Richard Gilbert, chairman of the economics department at the University of California, Berkeley. Gilbert has proposed that refiners should be required to market generic gasoline and additives such as Chevron‘s Techron separately. Doing so, he said, would allow independent owners of branded gas stations to get the best possible wholesale price for their product.

The proposal “would create a marketplace in which refiners would have an incentive to lower prices because they could sell more gasoline,” Gilbert said. Before additives are put in, California gasoline is a generic commodity, he said.

The oil industry does not support the plan. Mangels said it would cause “chaos” in the gasoline distribution system and would not increase the supply of gasoline to California.
The Associated Press contributed to this report.

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