California’s gasoline suppliers will be investigated because a long-awaited probe by the California Energy Commission couldn’t show they misbehaved.
Last April, Gov. Gavin Newsom asked the CEC to study the growing difference between California and national average gasoline prices.
California prices always are higher. The state imposes high taxes and stringent product specifications. It’s in a market isolated by the Rocky Mountains. Consumption and incomes are high.
But the differential has widened recently. In April it spurted to $1/gal.
The CEC found “an unexplained residual price increase over the last 5 years.”
It duly reported this discovery of the unexplained in May and sought an extension enabling it to assess “possible causes, including refiner margins, refiner outages, crude oil prices, retail margins, and other factors.”
In an Oct. 21 report it opined, “The primary cause of the residual price increase is simply that California’s retail gasoline outlets are charging higher prices than those in other states.”
And higher-priced brands have increased retail margins “far beyond their competitors.”
What’s more, the suspect brands didn’t lose market share when they raised prices.
“This is evidence of market power,” the CEC said.
The agency acknowledged that gasoline buyers might simply favor certain brands and be willing to pay for the preference. But it added: “There are also certain illegitimate business practices that could lead to higher prices for similar products, such as price fixing and false advertising.”
Did the CEC find any such mischief? No.
“The CEC does not have any evidence that gasoline retailers fixed prices or engaged in false advertising,” it said. “Moreover, the CEC lacks the expertise to determine whether such behavior occurred. The California Department of Justice is well-equipped to conduct an appropriate investigation.”
So, given no evidence of the need to do so, Newsom asked the attorney general to investigate, declaring, “There is no identifiable evidence to justify these premium prices.”
What form might such price-justifying evidence take?
Apparently, the AG will have to invent something.
(From the subscription area of www.ogj.com, posted Oct. 25, 2019. To comment, join the Commentary channel at www.ogj.com/oilandgascommunity.)