Santa Monica Consumer Group Blames Refineries for Pump Price Spikes

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While crude oil prices stayed low, prices at the pump for California drivers shot up $1 in February, and motorists in the Golden State continue to be squeezed by price spikes while refineries reap big profits, a Santa Monica consumer advocacy group said last week.

Refineries going off line — like two that shut down in February, including Exxon’s refinery in Torrance following an explosion — provide ready excuses for companies to raise prices the pump, with little or no government oversight or review, said Santa Monica-based Consumer Watchdog’s report, “Price Spiked: How Oil Refiners Gouge California and What It Costs.”

Researchers analyzed gasoline prices over the past decade found that the same forces responsible for gas price spikes since 1999 have only intensified in recent years — namely, too much control over supplies consolidated in the hands of a few big oil refineries.

“During a gasoline price spike, the persistent gap between what Californians and Americans pay for their gasoline typically grows larger,” the report said. “This analysis shows that California’s oil refiners profit greatly from these price spikes and California drivers pay a huge price.”

California’s wildly oscillating gas prices also were the subject at a state Senate hearing Tuesday by state Sen. Ben Hueso, D-San Diego, chairman of the Senate Energy, Utility and Communications Committee, and Sen. Jim Beall, D-San Jose, who heads the Transportation and Housing Committee.

“California’s gas prices have risen faster and farther than in any other state in the U.S.,” said Hueso. “These gas price spikes have a significant impact in our economy and cost our consumers.  We need to get to the bottom of this and provide Californian’s with some relief at the pump.”

Consumer Watchdog’s report claimed the state’s gasoline market “is structured for volatility that benefits the downstream profits of oil refineries.”

“California refineries consistently keep one week less of gasoline inventory than the rest of the country,” the report said, citing a “lack of transparency” about refining operations “in real time,” which makes it harder for state lawmakers “to understand the reasons for volatility and react by take steps to reduce its swings.”

The report also found that over the last decade California gas prices averaged 32 cents more than the national average.

In addition, while the rest of the country averaged 18 days of gasoline supply in refineries and bulk terminals, California refiners kept 10.7 days of gas supply on hand, or 48 percent less than the national average.

Such short supplies make the system “vulnerable to price spikes when refineries experience problems,” the report said.
Jay McKeeman, vice president of the California Independent Oil Marketers Association, told officials at the Senate hearing that refineries lack the space to keep large amounts of gas supplies on hand.

Also, strong demand for refined gas makes it harder to keep large stores of the fuel available in the event a refinery goes off line, he said.

But Jaime Court, president of Consumer Watchdog, who also spoke at Tuesday’s hearing, said lawmakers should mandate “some level of inventory that is safe” to protect consumers when refinery problems occur. He also called on legislators to regulate the refineries.

Consumer Watchdog’s report calls for more transparency and accountability for oil refiners.

“California should publish refinery outages and accidents in real time, and ask refiners to publicly disclose maintenance schedules in advance and weekly supply figures in real time,” the report recommends.

Refiners should also be required to “keep an additional week’s worth of supply on hand so that it matches national days of supply.”

The state also should do more to accelerate the technology for electric vehicles, the report said.

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