STATE CAPITOL
P.O. BOX 942849
SACRAMENTO, CA 94249-0115

q?egialafure

January 28, 2019

Members of the California Legislature have sent the attached letter to Attorney General Xavier
Becerra asking the California Department of Justice to investigate an unexplained ?surcharge?
that has been identi?ed in the state?s gasoline prices. The primary basis for this request is in the
?ndings of the 2017 ?Final Report? of the Petroleum Market Advisory Committee, which was
established by the California Energy Commission in 2014.

The following legislators are signatories:

Marc Levine of Marin County; Senator Jerry Hill of San Mateo;
Bill Quirk of Hayward; Senator Henry Stern of Canoga Park;
Jim Wood of Santa Rosa; David Chiu of San Francisco;
Richard Bloom of Santa Monica; Ash Kalra of San Jose;
Mark Stone of Scotts Valley; Buffy Wicks oankland;
Laura Friedman ofGlendale; Rebecca Bauer-Kahan of
Orinda; Shirley N. Weber of San Diego; Senator Ben Allen of Santa Monica;
Senator Jim Beall of San Jose; Robert Rivas of Hollister; Senator Mike
McGuire of Healdsburg; Senator Nancy Skinner of Berkeley; and Senator Scott Wiener of San
Francisco.

Media Inguiries:

 

 

Kurt Schuparra Leslie Guevarra

Of?ce of Marc Levine Of?ce of State Senator Jerry Hill
Kurt.Schuparra@asm.ca.gov Leslie.Guevarra@sen.ca.g?
916?319-2010 916-651?4013

 

Printed on Recycled Paper

STATE CAPITOL
PO. BOX 942849
SACRAMENTO, CA 94249-0115

E?egizlature

January 28, 2019

The Honorable Xavier Becerra
Attorney General, State of California
1300 I Street, Suite 1740
Sacramento, CA 95814

Dear Attorney General Becerra:

We, the undersigned legislators, are contacting you to ask the California Department of Justice to
launch an investigation into gasoline prices in the state. The primary basis for this request is the
?Final Report? of the Petroleum Market Advisory Committee (PMAC), which was formed by the
California Energy Commission (CEC) in December 2014 to review California?s petroleum fuel-
market operations.

Submitted to the CEC in September 2017, the Final Report noted that even after accounting for
California?s gasoline tax, fuel-blend and greenhouse gas reduction costs, ?gasoline prices since
February 2015 have exhibited a continuous and signi?cant unexplained differential compared to
the rest of the country.?

University of California, Berkeley, Professor Severin Borenstein, the former chair of the PMAC,
observed last October that since February 2015 this unexplained surcharge ?has cost Californians
more than $17 billion, or about $1,700 for a family of four.?

We note now, just as the PMAC members did in their Final Report, that the California cost
differential does not in itself imply that any market participants have acted illegally. However,
there are a number of indications that the state?s gasoline market lacks robust competition and
that Californians are consequentially paying a steeper price, beyond what can otherwise be
accounted for, compared to residents of other states.

As Professor Borenstein has noted, the unexplained ?surcharge shows up between the refineries
and our gas tanks, in the distribution and retailing network,? where competitive pressures may be
insuf?cient. ?Far more stations here,? he notes, ?are owned by re?ners or have long-term
contracts that give the re?ners signi?cant control over gas prices.?

It is possible, as stated in the Final Report, that logistical issues have contributed to the
surcharge. But no one has been able to explain why these potential logistical issues would have
persisted over the past four years but seemingly were not signi?cant cost factors prior to that

a v?m

Printed on Recycled Paper

time, as this gas-price graph monitoring the surcharge suggests. The surcharge averaged 2 cents
from 2000 to 2014 and was never more than 12 cents in any of those years. But it soared in 2015
after the Torrance re?nery ?re and in 2018 has averaged about 24 cents per gallon

California's Unexpiained Gasoiine Surcharge - 2000 to 2018
(unexplained price premium ve rsus US in real 2017 dollars per gallon}

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$0.50 Torrance
Refinery Ftre/
?eb.18,2015
scat)
$0.30
$0.20
$8.10 
$0.00 I

4.33.16
3%at338?8353?538


In their Final Report, the PMAC members strongly urged ?the State to establish an
organizational structure and to commit resources? that would permit an ?in-depth analysis and
conclusions? regarding the unexplained gasoline surcharge. We concur and are committed to
seeking the funding that may need to carry out and conclude an investigation.

Sincerely,

 

 

 

 

 Wm; Mm
ILA M27

MJWW M5400

 

 

 

 

 

 

 

QC:

544/ 

 

 

 

0/ WW
QMWW