Dawn Geske Jul. 25, 2016, 12:12pm

SACRAMENTO – Subpoenas have been issued to several oil refiners by the California attorney general in an investigation on how gas prices are put in place in California.

Attorney General Kamala Harris handed out the subpoenas to Chevron Corp., Exxon Mobile Corp., Valero Energy Corp. and Tesoro Corp., which have all confirmed receipt. The investigation takes a look at California’s notoriously high fuel prices, which have consistently come in higher than most other states.

Through the investigation, the attorney general is requesting information from the oil refiners on fuel supplies and pricing. It is also examining fuel plant shutdowns that occur because of maintenance and is suspected to create shortages and increase the price of gasoline.

“The idea that refineries in California are colluding is ridiculous,” Chet Thompson, president for the American Fuel and Petrochemical Manufacturers (AFPM) told the Northern California Record. “Gasoline prices have been investigated repeatedly and no wrongdoing have ever been found. We are confident that this will be the case again. Numerous government reports have shown that gasoline markets are extremely competitive and transparent. Instead, California’s higher gasoline prices reflect the state’s onerous and burdensome regulations that do little for the environment, but adversely impact consumer costs.”

California has some of the strictest emissions regulations in the country, which Thompson is referring to. It has its own regulatory body with the California Air Resources Board (CARB) that sets emissions regulations for the state, especially in nonattainment areas

While consumer advocacy groups allege that refiners are guilty of driving prices up for fuel by routinely shutting down plants that occur frequently and for long periods of time, AFPM maintains that this is far from the truth as plant shutdowns are required for maintenance, which must be planned in advance and is a costly part of business for refineries.

“Like regular maintenance on a car, refinery turnarounds are a critical part of maintaining safe and functional refineries,” said Thompson. “Such turnarounds are a significant and costly undertaking and can require nearly 2,000 contractors and years of planning. As a result, they are nearly impossible to reschedule on short notice. For legal and competitive reasons, refiners do not coordinate their schedules and indeed many treat such information as confidential business information. However, market forces – such as the limited availability of skilled labor and engineering firms – actually serve to spread out planned refinery turnarounds while refiners take steps to ensure their customers are adequately supplied during periods of shutdown.”

Further emphasizing his point, Thompson referred to a report by the Energy Information Administration (EIA) that indicates how costly shutdowns can be for refineries. He also said there wasn’t a time the AFPM was aware of that the Secretary of Energy suggested a refinery alter turnaround schedules.

“A refinery has no economic incentive to shut down its operations any longer than necessary to ensure continued safe operations,” said Thompson. “According to a 2007 EIA (Energy Information Administration) report, a turnaround cost one refinery $39 million and an additional $1.2 to $3 million each day that the plant was down, and could cost even more in today’s dollars.”

Most of the of the oil refinery companies subpoenaed said they will cooperate with the investigation.

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Organizations in this Story

American Fuel & Petrochemical Manufacturers
1667 K St NW
Washington, DC 20006

California Attorney General's Office
1515 Clay St
Oakland, CA 94612

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