Democratic lawmakers in the State Assembly announced a probe into California’s oil and gas market on Monday, saying profiteering in the industry is partially behind the state’s record high gas prices that are hovering around $6.40 a gallon.
The oil industry has a “foot on our necks and a hand in our pockets,” Assembly Speaker Anthony Rendon said during a news conference announcing a committee to investigate the industry’s pricing practices.
“These are companies that are obviously ripping off California consumers, and we need to ask tough questions about them and their business practices,” he said.
Legislators are scrambling to provide drivers with some relief from fuel costs that are set to tick even higher on July 1 due to an inflation-related tax increase of a few cents per gallon. California gas prices have shot up 37% since the start of the year and are $1.40 higher than the national average, according to AAA. Meanwhile, oil industry giants are reporting record profits as Russia’s war in Ukraine spiked the cost of crude oil to over $100 a barrel.
“As legislators, we owe it to our constituents to answer the question on everybody’s mind: Why do gas prices continue to rise?” said Assemblymember Jacqui Irwin of Thousand Oaks, the committee chair.
But details on when the committee will first meet or if it plans to compel witnesses and documents remain sparse. Joel Price, Irwin’s spokesperson, said members have yet to establish a focus for their work.
The Legislature is beginning a one-month summer recess in July, and it is unclear if the committee will hold hearings before August.
Lawmakers are under intense pressure from constituents to respond to the state’s gas prices, which are crushing drivers with $100 fill-ups. Democrats are hammering out a plan to send billions of dollars in payments back to Californians in ongoing budget negotiations, but their progress has been slow. Meanwhile, state Republicans, who are a minority in the Legislature, have been calling on Democrats to immediately suspend the state’s 51-cent gas tax to bring drivers quicker relief at the pump.
“Enough with the political antics, suspend the gas tax now,” Republican Vince Fong, who sits on the Assembly’s budget committee, said in a statement on Monday.
President Joe Biden said Monday that he will decide by the end of the week whether to order a holiday on the federal gasoline tax, possibly saving U.S. consumers as much as 18.4 cents a gallon.
Politicians have a long history of pushing for gas price investigations that yield little results. In 2012 Sen. Dianne Feinstein called on the Federal Trade Commission to probe the state’s surging fuel costs, reiterating that demand in April of this year. Gov. Gavin Newsom also asked the attorney general to look into price fixing in the industry in 2019.
“Time after time, at both the state and federal level, they always find the industry is acting responsibly,” said Kevin Slagle with the Western States Petroleum Association, an oil industry trade association. He criticized the announcement as a “political stunt press conference.”
But Severin Borenstein, an energy economist at UC Berkeley, applauded the formation of a select committee. He said lawmakers should focus on how California’s oil refineries are largely controlled by a handful of companies, including Chevron, Marathon Petroleum and PBF Energy.
“Our refinery market is pretty separate from the rest of the country because we use a cleaner-burning blend of gasoline that most refineries can’t make,” said Borenstein. “There are refiners producing a quarter of the entire market — and when you’re that big, you can move the market.”
California’s high gas costs are mostly explained by the state’s high taxes that fund roadway projects, environmental programs aimed at combatting climate change, and the special fuel blend that reduces air pollution. In total, taxes and fees drive costs higher by $1.19 per gallon, according to one estimate. But for years there has also been a “mystery surcharge” that drives prices about 30 to 40 cents higher after accounting for the state fees.
The mystery surcharge took off in 2015 when gas prices spiked in the aftermath of a Torrance oil refinery explosion, according to Borenstein. Before the blast, the unaccounted-for difference in California prices versus the national average was about 2 cents. Afterward it ballooned to over 40 cents, and it has remained high ever since.
Gas stations are also free to set prices as they wish, unless there is a state of emergency covering fuel costs, according to the state attorney general office. The highest gas prices in the country are located at a Mendocino Chevron charging $9.63 a gallon that was profiled in a story published Saturday by the Bay Area News Group. Its prices are over $3 higher than California’s statewide average.
The Associated Press contributed to this report.
