Energy Commission hearing examines why California's gas prices are so high

Thursday, December 1, 2022

Why is gasoline so expensive in California, and why are there price spikes?

SACRAMENTO, Calif. (KGO) -- Why is gasoline so expensive in California, and why are there price spikes? That's what Tuesday's California Energy Commission hearing mainly focused on. It is teeing up next week's special legislative session where lawmakers will consider a windfall profit cap on gasoline prices. So there is a lot at stake.

There were charts, graphs and plenty of explanations in the hearing -- such as, California has special gas, environmental rules and is a closed market, therefore shortages more easily occur.

And this is where the conversation gets interesting. When shortages happen, oil has to be shipped in from overseas.

"It's on the other side of the Pacific Ocean, so there's time," says Gordon Schremp of the California Energy Commission. "Usually three weeks, sometimes four weeks, before the imports start to arrive, and it's that time to get the imports here where wholesale prices can change or rise and then start to fall when the imports start to arrive."

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Price movement while waiting. Spikes are also caused by refinery maintenance. When one refinery goes offline, oftentimes, other refineries make more money.

Vice President of the Western States Petroleum Association, Kevin Slagle says, "These studies on the Commission's website, if you look at their major takeaways and findings, it's what we've been saying."

"The studies that you'll see today presented by CEC staff show the facts about the fuel market, and that it's driven by supply and demand. The costs are driven by the high cost of doing business in the state and public policy in California. That's it," Slagle continued.

Advocacy group Consumer Watchdog says supply and demand and government regulation do not account for all the spikes and higher costs in California.

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"Oil refiners report making greater profits in California than anywhere else in the world or the nation," says Consumer Watchdog's Jamie Court. "So they're making windfall profits. It's in their own profit reports, and the question is, what is the state going to do about it?"

At Tuesday's hearing, those not in attendance were as important as those who were. The five major oil refiners in California did not show up, citing legal and other concerns. 7 On Your Side reached out to all of them, none returned the request for an interview.

"I think they're frustrated by the demonization that continues to go on with this administration," says Slagle. "But I bet they're optimistic about being able to work together towards something better. So you know we're there to represent them today to send that message. Let's look at the facts. Let's put the politics aside."

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Court says there is work to be done. "If we don't put a cap on these windfall profits, it will happen again when the oil companies have the opportunity," Court said.

How would a cap work? Well it isn't seen as a tax where the money goes to the state, but a cap where extra profits flow back to the consumer.

Take a look at more stories and videos by Michael Finney and 7 On Your Side.

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