California Wants to Spend Millions to Take a Pointless Stand Against Oil Companies

Image: Marcio Jose Sanchez (AP)

Blame is the name of the game in trying to find out why California’s gas prices are higher than everyone else’s. State officials have wanted answers for over a year now after gas prices were $2 higher than the national average over the summer of 2022. But after oil company executives ghosted state officials at a scheduled hearing over claims of divulging trade secrets, The Sacramento Bee reports California Attorney General Rob Bonta wants millions of dollars to potentially bring a case against oil companies over the prices. And it has the potential to go nowhere.

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The California Attorney General’s office, led by Attorney General Rob Bonta wants $8 million to fill 20 jobs to help the office investigate and possibly prosecute oil companies over California gas prices.

But such a move could prove to be harder than it looks and some experts don’t think any investigation would lead to findings that the companies violated the law. One industry expert, Severin Borenstein director of UC Berkeley’s Energy Institute said one of the reasons an investigation wouldn’t really get anywhere is because “antitrust laws are very narrow.”

“What’s illegal is independent companies getting together to set prices or merging in order to become more powerful in the market. What’s not illegal is for a big company in a market to raise its prices to make more money,” he said, according to the Bee.

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While it would be hard to go after these companies, it’s not impossible. The state has done it before with minor success. In 2017, a suit was brought against one of the state’s largest oil refiners, Valero Energy Corporation after it attempted to buy out a smaller petroleum distribution terminal. The Attorney General’s office argued the acquisition would affect competition and result in higher gas prices.

A few months later a federal court sided with the state by blocking the acquisition for 10 years. Another suit was brought against two oil companies in 2020 over claims of the companies allegedly manipulating the gas price index after the 2015 ExxonMobile refinery explosion. That resulted in a gas price spike and the case is expected to go to trial in September 2023.

The blame for the state’s high gas prices can’t all be placed on big oil, however. Some of the blame can be placed on the state and its officials. The state’s unique position as a “fuel island” – most fuel in the state is produced at in-state refineries – makes it more susceptible to price disruptions. Strict environmental regulations can also be blamed for the state’s higher gas prices. These regulations force oil companies to refine cleaner burning fuel blends. And then there are state taxes. A 2021 report found that $1.18 of the state’s gas prices were comprised entirely of six different taxes and fees.

So while oil companies definitely play a part in how the state’s gas prices are affected, state officials should also consider their role, though high gas prices might also be the point.