SACRAMENTO, Calif. -- California Assembly Speaker Fabian N a aez and Attorney General Bill Lockyer have unveiled legislation that they say is designed to crack down on price gouging by oil companies.
If we suspect there's price gouging by the oil companies going on, we need the tools to investigate and determine if we're being ripped off, said Speaker Fabian N a aez, author of Assembly Bill 457. California needs to make sure that no energy company ever pulls Enron-like tricks to drive up the cost of gasoline.
The state's anti-gouging [image-nocss] law currently does not allow law enforcement to hold accountable oil companies that profiteer when consumers are most vulnerable, said Lockyer. This bill fixes that defect. It also makes other needed reforms that will strengthen the statute and, ultimately, deter gouging and protect California's long-suffering drivers.
California's current price gouging law prohibits retailers from raising gasoline prices more than 10% during the 30-day period after the president or governor declares a state of emergency caused by a natural or manmade disaster.
The speaker's bill would expand the law in four main ways. It would allow the governor to declare a state of emergency when there is an abnormal market disruption and thus allowing the law to apply; allow the governor to declare a state of emergency when a natural disaster occurs outside of California, but has a substantial impact on the state; expand current law to provide that oil companies that supply retailers would also be covered under the law; and extend the 30-day period to 60 days, with an additional 60 days permitted.
Violations of the anti-gouging statute are misdemeanors that carry a maximum penalty of a $10,000 fine and one year in jail. Violators also are subject to civil enforcement actions for unlawful practices.
N a aez requested that Governor Arnold Schwarzenegger direct the California Energy Commission to investigate possible price gouging by oil companies in an April 21, 2006, letter. The governor ordered the commission to investigate prices on April 24, 2006, and provide information to the attorney general without hesitation. The commission has yet to issue its findings.
Lockyer in September 2005 launched a price-gouging investigation of the substantial gasoline price spikes that hit California drivers following Hurricane Katrina. While dozens of gas stations around the state raised pump prices more than 10%, Lockyer's investigators found that the retailers were passing on the higher prices they paid their suppliers, including oil companies and other market participants. The anti-gouging statute allows retailers to exceed the 10% cap if they can attribute the increase to their additional supply costs. The Katrina probe convinced Lockyer the law needed to be strengthened to, among other reforms, permit actions against oil companies.
In addition, Lockyer in April 2006 issued subpoenas to the oil companies that operate refineries in California, and he will be taking depositions from industry executives. The investigation is focused on oil companies refining margins in California, which have risen at a substantially higher rate than the price of crude oil in first-quarter 2006, he said.
The price of gas continues to go up every single day, N a aez said in a parking lot next to a Sacramento Union 76 station, added a San Jose Mercury News report. The question is, is there no end in sight? Should we expect it'll go up to $4 or $5 a gallon and we just have to make adjustments necessary to swallow the excuses we continue to get from the oil companies?
Added Lockyer, In the post-Katrina investigations where we collected hundreds of complaints, there were numerous cases where prices increased by around 17% or more. [We] found it wasn't the corner gas stations gouging people, but it was those further up the supply chain pushing costs onto corner stations. So, there was no one to prosecute and we couldn't go after the refineries.
It's the refineries that are making extraordinary profits, he said. If it's the price of crude going through the supply chain, that's understandable. But if they're taking advantage of consumers during disasters, then we want them to be responsible and not take extra profits during times of crisis.
Oil industry advocates questioned the need for the legislation. Our industry has been subject to investigation after investigation after investigationmore than 30 from my countand in none of these instances was there a finding that the industry conducted itself in an illegal or improper way, Tupper Hull, representative for the Western States Petroleum Association, told the newspaper. I'm not sure what the purpose of this is.
High gas prices are expected to be a prominent issue in the governor's race, said the report. Democratic nominee Phil Angelides has accused Schwarzenegger of refusing to act on high gasoline prices and has cited it as one reason voters are frustrated and want change. At a campaign stop in Redding, Schwarzenegger was asked what he could do about high fuel prices. I cannot personally do anything about the gas prices, he said, stressing that the energy commission is investigating gouging. If gouging is occurring, we're going to go after those oil companies in no time, I can guarantee you that. But oil prices, as you know, all depend on supply and demand. The more there is demandthe more we drive, the more we use gasthe more the price will go up. And this is why I say, let's be vigilant about that, by carpooling, buying energy-efficient cars and promoting alternative fuels.
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