California seeks culprit at gas pump
www.chron.com March 13, 2003, 11:40PM Bloomberg Business News
SACRAMENTO, Calif. -- Oil companies may be gouging California drivers by manipulating gasoline supplies to cause record high prices, Gov. Gray Davis charged.
Recent "unexplained" surges in pump prices may be the result of a "deliberate withholding of supply" by the oil industry, Davis said in letters to the state's top energy and public utilities regulators.
"As we well know from past experience, many energy companies would rather use Enron-style tricks to fuel their bottom lines than to fuel California homes and businesses," Davis wrote.
Retail gasoline prices in California are the highest in the United States, reaching a statewide average of $2.127 a gallon for regular-grade fuel this week, AAA said.
Gasoline prices have risen during the past three months as a strike in Venezuela cut U.S. crude supplies and tensions escalated with Iraq. Crude oil futures reached $37.83 a barrel earlier this week, the highest since October 1990.
Davis requested that the California Energy Commission and Public Utilities Commission report back to him in 15 days and asked for a recommendation on whether any matter should be referred to the attorney general for investigation. The agencies didn't return calls seeking comment.
The nationwide average pump price is currently $1.708 a gallon, up 39 percent from a year ago and 1 cent below the record set in May 2001, the AAA said. The surge in gasoline prices may still be "unjustified" because there is no shortage of gasoline, the association said last month.
Energy companies "have no qualms about using world events, such as the Venezuelan oil strike and an unusually cold winter on the East Coast, to their advantage," Davis said. "In light of a possible war with Iraq, I hope that none of these companies are engaging in war profiteering or any other types of illegal activity."
The government and many analysts dispute allegations of market manipulation. The rise in gasoline prices largely reflects shrinking crude supplies, analysts said. Crude stocks have fallen near 28-year lows after a nationwide strike in Venezuela slashed shipments from the world's fifth-largest oil exporter.
The prospect that a U.S. war against Iraq may disrupt oil shipments from the Persian Gulf has also fueled a surge in the cost of oil.
Prices for gasoline and other petroleum products are near all-time highs in the United States because of the rise in global crude oil prices, not because of "price gouging," the U.S. Energy Department said in a report earlier this week.
"There is no evidence of price gouging at any level," the department's Energy Information Administration said in its This Week in Petroleum newsletter. Profit margins for refiners and distributors "are not unusually high."