Consumer group alleges price gouging, calls on legislators to take action Seize the Bay: Classic makes run at helping
CITYWIDE — With the average price of a gallon of gasoline rising this week to just above $3 a gallon in Los Angeles County — the highest price on record — a local, consumer advocacy group is calling on lawmakers and the governor to investigate allegations of price gouging by oil companies.
The Santa Monica-based Foundation for Taxpayer and Consumer Rights (FTCR) con-tends oil refineries are manipulating production, which has dramatically increased prices at the pump. The foundation insists that legislative leaders and the governor immediately consider legislation regulating refineries in the state, and return “windfall” profits to consumers via a rebate.
State Assembly Speaker Fabian Nuñez, D-Los Angeles, made a similar plea on Friday to Gov. Arnold Schwarzenegger to direct the California Energy and Public Utilities commissions to investigate possible price gouging by oil companies.
This comes as refineries reported a 10.3-percent decrease in production of gasoline in the state, “tightening the market and causing spot prices in California-use gasoline to jump 22 cents between April 10 and April 17,” a report from the state Energy Commission said.
Although inventories are up slightly above last year’s level, the week-to-week production cut and the increase in gasoline exports to other states “inevitably pushed market prices higher, in tandem with rising crude oil prices,” the foundation said.
“The time to study this is over. It is now time for action,” said Judy Dugan, research director for FTCR. “Oil refineries can say what they want, ‘Oh, we had to take this refinery off-line for maintenance,’ or ‘We had to increase fuel production for other states,’ but we consider that manipulation of gas prices and consumers just can’t take it anymore.”
According to a daily tally from motorist club AAA and the Oil Price Information Service (OPIS), the average price for regular gasoline in California hit $3.015 on Thursday, up 3 cents from the day before, and up 34 cents from a month ago. In the Los Angeles-Long Beach area, gas hit $3.029 a gallon — the highest price on record. Prices in Orange County, Riverside-San Bernardino, Santa Barbara- Santa Maria-Lompoc and Ventura also broke records.
Industry experts said the rise in fuel prices is directly related to the rise in price for crude oil, which hit a record high of $73 this week for some of the most popular blends. Certain crude in California is selling for just over $57 per gallon, according to the California Energy Commission, which monitors fuel production in the state.
Oil refineries said prices have also climbed higher recently because many refineries are being forced to shut down to make repairs and to prepare the summer gasoline formula.
In a statement from the Western States Petroleum Association, a nonprofit trade association representing energy companies in California and five other western states, oil companies defended their record and said the foundation’s claims of price manipulation “show, at best, an ignorance of basic economics, and at worst, a deliberate attempt to mislead consumers.”
The association said prices are determined by several factors including: the record-high price of crude oil; government regulations including the mandated introduction of ethanol; taxes; and a growing gap between increasing worldwide demand for gasoline and other petroleum products and the capacity to meet the demand.
“This industry has been investigated more than 20 times in the last few years and there has never been a finding that there has been price gouging, collusion, price manipulation or anything of the sort,” said Tupper Hull, a spokesman for the association.
Rob Schlichting, a spokesman for the state Energy Commission, said he was aware of the call by Nuñez and the foundation for an investigation, but said the commission does not have that authority. The Attorney General’s Office is responsible and has conducted “several” investigations over the years.
“The Attorney General has not found an instance of market manipulation or collusion and that’s all he can look for under the law,” Schlichting said. “In 1982 under President Reagan, price controls were lifted on gasoline. There is no law against making profits, even very healthy ones.”
Schlichting said consumers better get used to high gas prices, because the supply is only going to decrease in the coming years.
“I guess you could say the days of easy oil have come to a close,” he said. “Oil is getting harder and harder to extract, which means prices are going to rise to reflect added costs.”
The foundation isn’t buying explanations from oil refineries for the rising prices.
“They’re dubious,” Dugan said. “Most of the increase in prices is pure profit for these guys. It’s not like they’re taking a hit when prices go up for crude oil. They’re passing that on to consumers and that’s not right.”
Originally published in the Santa Monica Daily Press print edition on April 22, 2006. Read the original PDF.