Californians have been paying a roughly 20 cent "mystery surcharge" on gasoline for the last 4 years and a coalition of lawmakers is asking the attorney general to find out why. https://t.co/duGbg2Cz6b— KFI AM 640 (@KFIAM640) January 30, 2019
The Mercury News
written by Erin Baldassari
Wednesday January 30, 2019
SACRAMENTO — Since at least 2015, Californians have been paying a “hidden surcharge” on gasoline that adds an average of 20 cents to each gallon — costing drivers more than $17 billion — and now a coalition of lawmakers is asking the attorney general to find out why.
A group of 19 legislators, including a dozen from the Bay Area, sent a letter Monday requesting that the state’s Department of Justice investigate the mystery cost identified in a 2017 report on the state’s high gasoline prices. The senate had held a hearing on the issue in the past, said Sen. Jim Beall, D-San Jose, one of those signing the letter. But at the time, the report’s authors said they needed more resources to find out where the charge was coming from.
With the election of a new governor, Beall said it is time to take another look.
“We ought to get to the bottom of it,” he said. “We should find out whether (oil companies) are legitimately charging us the right amount and being fair.”
Golden State drivers regularly pay some of the highest gasoline prices in the nation. This week, California has the the highest price, at $3.25 per gallon, or a dollar more than the national average, according to AAA.
High taxes and more stringent regulations are not entirely to blame, says UC Berkeley economist Severin Borenstein, a lead author of the report that identified the added the cost.
Even with California’s increased gas tax, which voters upheld this past November, the state still ranks second in total taxes, paying approximately 73 cents per gallon, compared to Pennsylvania’s 77 cents, according to the American Petroleum Institute. The state’s more stringent environmental regulations increase the cost, too, Borenstein said, including cleaner-burning and low-carbon fuel requirements that together contribute another 14 cents. The state’s cap-and-trade program adds another 12 cents.
But motorists are still paying 20 cents more for each gallon of gasoline than they should, Borenstein said. And the mysterious part is that the surcharge showed up just a few months after the researchers started their work.
The California Energy Commission in late 2014 named Borenstein and four other experts to the Petroleum Market Advisory Committee to study the state’s high gas prices. Not too long after the team started working, an explosion in February 2015 at Exxon Mobil’s refinery in Torrance disrupted the state’s oil market, causing prices to spike while the refinery was shut down.
The committee expected prices to rise, which is typically what happens when there’s a sudden shortage. But instead of prices coming down when the refinery got back online, they stayed high, he said. And they still haven’t dropped to what the committee would have expected.
That could be because refineries are pocketing the extra profit, or it could be that other issues are limiting production and driving up prices, he said. What is clear, Borenstein said, is that the surcharge shows up “between the refineries and the streets.”
“I’m not saying we know the answer, because we don’t,” he said. “What we are saying is something is happening to the refinery price relative to the street price, and we’re finding out its not that the commodity itself has gone up. That much is clear. It’s something in between.”
The committee asked oil companies to share data that would help them understand whether logistics constraints — such as issues getting the gas to distribution centers or retailers, limitations on which ports allow shipments, or other issues — were driving up prices. The companies instead sent the Western States Petroleum Association, a trade organization, which at the time declined to share information on prices, Borenstein said.
That’s because the association isn’t involved in fuel pricing, which is set by supply and demand, said Kevin Slagle, a spokesman for the association. Over the years, the West Coast’s petroleum industry has been subject to “dozens of independent investigations by government agencies,” he said, all of which agreed market factors, not collusion, shape prices.
The committee couldn’t compel the companies to participate, but the attorney general’s office can, Borenstein said. In their letter, the legislators said they were committed to seeking the funding the Department of Justice would need to carry out its investigation.
In a statement, a spokesperson for the department said the attorney general’s office couldn’t confirm or deny an investigation. But the spokesperson cited a 2017 action in which Attorney General Xavier Becerra filed a lawsuit to block a merger that would have reduced competition and raised gas prices.
“(He) is a strong defender of California’s access to affordable and transparent fuel prices,” the statement reads, “and he will continue to fight to ensure this for California’s residents.”
The legislators on the letter, all of which are from the Democratic party, are assembly members Marc Levine of Marin County; Bill Quirk of Hayward; Jim Wood of Santa Rosa; David Chiu of San Francisco; Richard Bloom of Santa Monica; Ash Kalra of San Jose; Mark Stone of Scotts Valley; Buffy Wicks of Oakland; Laura Friedman of Glendale; Rebecca Bauer-Kahan of Orinda; Shirley Weber of San Diego; Robert Rivas of Hollister; and senators Jerry Hill of San Mateo; Henry Stern of Canoga Park; Ben Allen of Santa Monica; Jim Beall of San Jose; Mike McGuire of Healdsburg; Nancy Skinner of Berkeley; and Scott Wiener of San Francisco.
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