New California Oil Price Czar Reports Market Fluctuations Impacting Gas Price Hikes

Gasoline prices for full serve and self serve are displayed at the Union 76 gas station in Beverly Hills, Calif., on Aug. 28, 2023. Mario Tama/Getty Images

California’s administrator tasked with taking on big oil by overseeing the state’s newly created Petroleum Market Oversight division has found market fluctuations and refinery issues are behind a recent spike in gas prices.

In the division’s first update to Gov. Gavin Newsom, Director Tai Milder reported gas prices have steadily increased in California over the past several weeks after a period of stability that ended Aug. 1.

Mr. Milder said the recent price spike is attributable to an increase in global crude oil prices, refinery maintenance, not enough inventory and imports, and a single “unusual” purchase on the state’s oil market that raised prices across the board.

“First, part of the price increase is due to the rising cost of crude oil that has driven up prices, not just in California but across the world,” Mr. Milder wrote in the letter (pdf) Sept. 22. “Russia’s invasion of Ukraine has caused crude oil prices to climb and remain volatile.”

Planned and unplanned maintenance at refineries in the state also contributed to the price spikes.

“Such events decrease production capacity and lower supply availability,” Mr. Milder said.

Based on the agency’s review of recent data, refiners also did not appear to maintain adequate levels of inventory of refined gasoline or the state’s special “summer blend” gas, which is more eco-friendly but costs more.

An oil pump in Long Beach, Calif., on Oct. 27, 2021. John Fredricks/The Epoch Times

“When demand is high in the summer, undersupply can quickly lead to soaring prices at the pump,” he added.

The Santa Maria Refinery in San Luis Obispo County also ceased operations in January, ending nearly 68 years of operations in California. The shutdown was related to the planned conversion of Phillips 66’s San Francisco refinery into one of the world’s largest renewable fuels facilities, according to the company.

The refining industry has been running at above 90 percent capacity for more than a year to meet strong gasoline and diesel demands, according to Reuters.

The state also adds the highest taxes and fees in the nation—$1.31 a gallon—to each gallon. That includes state and federal excises taxes, cap-and-trade and other environmental fees, and state and local sales taxes, according to the latest weekly update on Sept. 7 by the Western States Petroleum Association (WSPA), the oldest petroleum trade association in the United States.

The one unusual transaction on the state’s oil market on Sept. 15 elevated the price of oil for several days, Mr. Milder said.

“It is not an exaggeration to say that one trade likely cost California drivers many millions of dollars at the pump,” Mr. Milder added.

Oil industry experts reacted to the update Monday.

Tim Stewart, president of U.S. Oil and Gas Association, said the report reached the same conclusions that the industry reported during price hikes last year.

People wait in lines for gasoline at Costco Wholesale in Tustin, Calif., on Jan. 12, 2022. John Fredricks/The Epoch Times

“Unfortunately, we see this all too often in our industry with politicians who are unwilling to admit their regulations are increasing costs to consumers,” Mr. Stewart told The Epoch Times. “Instead of tackling the tough issues they helped create, they tell the bureaucracy to ‘get to the bottom of things.’”

“The bureaucrats then do their work, and sure enough, they usually reach the same conclusions that industry has been telling the politicians all along,” he added.

Kara Green, spokeswoman for WSPA, said the industry was “taking more of a wait-and-see approach to see what the actual effects will be of the recent legislation.”

“It looks like the administration, or at least the [California Energy Commission], acknowledges there’s a lot of factors that influence cost at the pump for California consumers,” Ms. Green told The Epoch Times. “Another takeaway that I read from [the update] is the [Energy Commission] acknowledging that policies in California can make things more expensive.”

Gas prices in the Golden State increased to an average of $5.89 Wednesday for a gallon of regular-blend gasoline—nearly $2.06 more than the national average, according to the Automobile Club of Southern California (AAA). The national average was about $3.83 per gallon.

In Los Angeles, the average price reached over $6.16, which was more than two cents higher than the day before and more than $.20 higher than last year.

Orange County drivers were paying about $6.13 a gallon for regular gasoline, which was nearly $.20 higher than a year ago.

Pizza restaurant owner Dara Maleki speaks about gas prices and inflation challenges at Yorba Park in Orange, Calif., on March 2, 2022. John Fredricks/The Epoch Times

California’s supply of gasoline dropped dramatically last year as some refineries were closed for maintenance, adding to the price spike. The state’s gas production in 2022 was reduced by 88,000 barrels per day—equal to the output of a midsized refinery—compared to the previous year, according to fuels expert David Hackett of Stillwater Associates in Irvine.

The start of the Ukraine conflict and COVID-19 shutdowns also contributed to higher prices, experts told The Epoch Times in February.

In September 2022, Mr. Newsom posted a video message on social media blaming oil companies for “ripping off” residents after the state’s gas prices spiked.

In response to Mr. Milder’s update, the governor applauded the new agency’s insight into the oil market.

“With California’s new gas price transparency law, we now have the tools to see where this market is broken,” Mr. Newsom said in a statement. “We will no longer be left in the dark as private traders and corporate interests take record profits while Californians foot the bill.”

California Energy Commission Vice Chair Siva Gunda also said the new tools will add critical information to the state’s understanding of the petroleum market.

“The California Energy Commission is rapidly collecting and analyzing market data to implement the new law and support the Division of Petroleum Market Oversight’s efforts,” Mr. Gunda said in a statement. “Our new tools and additional access to critical information enhances the state’s ability to understand and respond to price spikes.”

California Governor Gavin Newsom speaks in the rotunda of the California State Capitol in Sacramento on March 28, 2023. Courtesy of the Office of Governor Gavin Newsom

Mr. Newsom spearheaded the creation of the new state department this year, under the umbrella of the California Energy Commission, to “beat big oil.” Mr. Newsom signed legislation March 28 in an effort to create new regulations and extensive state oversight for oil companies after last year’s price spikes.

The bill, which sailed through the state Legislature in less than a week, created the Petroleum Market Oversight division and requires oil companies to report daily operations, shipping information, contracts, agreements, forecasts, and other sometimes-confidential market data, including how much they pay for each gallon of crude.

Southern California gas prices rose at the third-fastest rate ever recorded last week, according to AAA.

“Refinery production and imports have improved the Southern California fuel supply situation, causing wholesale prices to drop for the last few days,” said Auto Club spokesperson Doug Shupe on Sept. 21. “According to Oil Price Information Service (OPIS), the PBF Energy refinery in Torrance and the Wilmington portion of the Phillips 66 refinery have both started multi-week planned maintenance projects this week.”

OPIS analysts reported large shipments of imported gasoline were expected to arrive soon on the West Coast, which would likely offset the upward pressure on pump prices caused by refinery maintenance, Mr. Shupe added.