New state panel to probe spike in gasoline prices

Source: Anne C. Mulkern, E&E reporter • Posted: Monday, September 8, 2014

A new panel will help the California Energy Commission hunt for the causes of gasoline price spikes, known in the Golden State to prompt motorist outrage and sometimes claims of market manipulation.

The six-member Petroleum Market Advisory Committee also will offer expertise on factors that can lead to fuel supply chain disruptions. Those often are pointed to as a trigger of higher pump prices.

“This stems from concerns about not having a lot of information about pricing of fuels,” said Tim Olson, manager of the Energy Commission’s Transportation Energy Office. “We wanted to add some additional expertise.”

The launch of the Petroleum Market Advisory Committee comes nearly a year after Gov. Jerry Brown (D) vetoed a bill that would have made the state the first in the nation to search regularly for potential pump price manipulation.

Brown in October 2013 rejected S.B. 448 from Sen. Mark Leno (D), which would have directed the Energy Commission to analyze industry data and advise on suspicious behavior. The agency also would have told the state Legislature how to limit motor fuel price volatility.

“This bill is unnecessary,” Brown said at the time. “The Energy Commission already has the authority to analyze and interpret changes in petroleum supply and market price.”

Brown then directed the commission “to work with the [state] attorney general to evaluate market trends and ways to respond to market volatility. We need to have a plan and rapid response team in place with the capability to respond when sudden and untoward price fluctuations occur.”

The Energy Commission told Brown it lacked the funding to make his request happen. In the budget approved this summer, the governor included $342,000 and one new staff position.

California typically has some of the highest pump prices in the continental United States. The average cost of gasoline in California yesterday was $3.84 per gallon, according to the AAA Daily Fuel Gauge Report. Drivers in Washington state and Oregon paid slightly more, $3.87 per gallon. The national average was $3.43.

The Golden State is vulnerable to gasoline price jumps because of environmental rules that require cleaner fuels. Those make it difficult to import backup supplies if a refinery goes out of service.

The Petroleum Market Advisory Committee likely will be asked to give its expertise on “the vulnerabilities in the fuel system, where pricing may be jeopardized,” Olson said. “We want to really have some better insight about what aspect of the petroleum supply chain is vulnerable to those pricing issues, whether it’s retailing, or wholesaling or refineries, so we’re identifying these things in advance.”

The advisory panel also will provide recommendations on how “to minimize adverse impacts of fuel price changes,” said Lori Sinsley, deputy executive director of strategic planning and media at the commission.

The Energy Commission doesn’t investigate potential market manipulation, however, and isn’t going to start, Olson said. That’s handled by the state attorney general and the Federal Trade Commission, he said.

If the new advisory panel, while looking at a price spike, provided information about potential manipulation, it would be turned over to those places, Olson said.

Tim O’Connor, an attorney with the Environmental Defense Fund, who worked with Leno on S.B. 448, said the new panel and its work “will serve as a deterrent against would-be price manipulators.”

Oil industry trade group Western States Petroleum Association did not respond to requests for comment on the new Energy Commission advisory panel. WSPA President Catherine Reheis-Boyd said at the time Brown vetoed S.B. 448 that “over the past 20 years, multiple investigations have failed to find any evidence linking the petroleum industry to anti-competitive behavior.”

James Sweeney, director of Stanford University’s Precourt Energy Efficiency Center, will serve as the Petroleum Market Advisory Committee’s chairman. Five other members haven’t yet been appointed. The panel of experts will work as volunteers.