The daily AAA fuel gauge report on Feb. 26 shows that California’s average pump price for regular has spiked to nearly $2.81 per gallon, almost 46 cents above the national average of $2.34. Utah and Wyoming, averaging under $2.19 per gallon, are 62 cents a gallon cheaper than California. There is no credible reason for the large and widening disparity. Congress and state lawmakers need to act, and act now.
California’s price spike in February, nearly the lowest consumption period of the year, is setting up the state to smash last year’s $3.38 a gallon record. Lawmakers will be guilty of political malpractice if they ignore this blatant profiteering at the expense of the nation’s most populous state and largest gasoline market.
The oil industry’s manipulation of gasoline supplies on hand—not an outage at a Texas refinery, as industry spokesmen argue–is what keeps prices higher in California than in the rest of the country. The price gap is far more than can be accounted for by the state’s slightly higher gasoline taxes. This May 2006 report outlines the price effects of restricted supplies.
When a burp at a Texas refinery can be blamed for a price leap in California—but not in Texas or elsewhere in the nation—that is proof of a supply chain seriously out of whack. If oil companies won’t increase their refinery capacity and gasoline storage in the state, government must make them do it. Otherwise California drivers will remain the oil industry’s pick-pocketing victims.
Congress also needs to update antitrust law to reflect the reality of how few major oil companies control markets today. Oil companies and their refinering subsidiaries don’t need to conspire in a smoke-filled back room to keep prices high. The companies’ restriction of refining capacity and storage does the job for them, while their paid spokesmen have the gall to describe the situation as merely the laws of supply and demand.