State plans deeper look at gas prices

SACRAMENTO — The California Energy Commission has concluded that “market manipulation” may be one factor in why the state’s gas prices are so high and has proposed a five-month study to pin down why motorists here pay more than those in the rest of the country.

California motorists were paying an average of $4.05 a gallon for gasoline on Friday, the highest price in the country and $1.20 more than the national average, according to the American Automobile Assn.

“The Energy Commission has identified a number of possible causes that could explain the residual price increase in California, ranging from refinery outages to potentially market manipulation,” the panel said in a six-page memo to Gov. Gavin Newsom.

The commission concluded that a study should be conducted “to thoroughly quantify the possible causes discussed in this memo. The Energy Commission proposes to spend the next five months examining those causes and reporting back to the Governor.”

Newsom requested a review of the high gas prices last month and on Friday supported the planned deeper dive into the issue.

“We appreciate the work of the Energy Commission and look forward to reviewing their findings,” said Brian Ferguson, a spokesman for the governor.

The oil industry responded Friday by saying that causes for the state’s gas prices include market forces, the state’s environmental rules, such as a requirement for special blends of gas, as well as the state’s decision in 2017 to raise the gas tax by 12 cents per gallon to pay for road repairs.

“This report provides further evidence of what market experts and government agencies have maintained for years: there are many factors that influence movement in the price of gasoline and diesel, but the primary driver is the dynamics of supply and demand of crude oil,” said Catherine ReheisBoyd, president of the Western States Petroleum Assn.

The initial review by the Energy Commission said California gasoline prices have “diverged noticeably from U.S. averages” beginning in 2015 when an explosion at the Torrance refinery interrupted supplies.

“While that outage lasted roughly one and a half years, the increase in California gasoline prices remained well after the restoration of normal operations at Torrance,” the report said.

The “residual” price impact ranging of between 17 cents and 34 cents per gallon has remained in the market, and might be explained in part by other refinery outages and crude prices, the report said.

Others have labeled the differential in price as a mystery surcharge, the cause of which is debatable.