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California Gasoline Market
Energy

California Gasoline Market

California has been plagued by chronic spikes in gasoline prices. In 2004, pump prices jumped 50 cents from January to March and stood some 30 percent higher than the national average in the first week of March.

Analysts say the 2004 price increases have been fueled by familiar market forces - forces identified in Attorney General Lockyer's Report on Gasoline Pricing in California in May 2000.

The market conditions include higher crude oil prices, tight gasoline supplies from the disruption in refinery production, more miles being driven by consumers, less robust competition from the shrinking number of oil companies in the marketplace, and replacement of MTBE with ethanol to meet federal Environmental Protection Agency requirements.

At an informational hearing in Los Angeles on March 11, Attorney General Lockyer provided an Updated Report on Gasoline Pricing in California.

The Attorney General has sought to the extent possible under existing laws to keep the marketplace from becoming even more concentrated and less competitive from oil company mergers and unfair business practices. Giving close scrutiny to oil company mergers, the Attorney General led a successful effort to make California the only state to secure divestment of a refinery in the $81 billion Exxon-Mobil global merger. The Attorney General also required other concessions aimed at preserving competition from the merger of Texaco-Shell and Arco-BP. The Attorney General has and will continue to investigate any unlawful conduct that arises in California's gasoline markets.

But the Attorney General's ability to affect the marketplace is limited. The conditions that drive California's high gasoline prices are deeply rooted. It is unrealistic to suggest there is a quick fix. As noted in the Attorney General's report, policymakers must begin taking the steps necessary to increase competitiveness, supplies and fuel conservation. They should continue to examine ways to cheaply and expeditiously import refined gasoline into the state, via pipeline or other means, and to reduce California's petroleum dependence through increased fuel economy and non-gasoline based technology.

Image of Annual Average Retail Regular Grade Gasoline Prices California vs Rest of U.S. chart


Image of Composition of a Gallon of Gasoline chart

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