ALL RIGHT. GOOD AFTERNOON AND
WELCOME TO TODAY'S INAUGURAL
MEETING OF THE SELECT COMMITTEE
ON GASOLINE SUPPLY AND PRICING.
UH WE ARE GOING TO BE TAKING
PUBLIC TESTIMONY AT THE END OF
THE MEETING FOR THOSE FOLKS WHO
ARE HERE IN ATTENDANCE. WANT TO
THANK EVERYBODY FOR JOINING US
HERE TODAY? ALL. AND IT WILL
COME AS NO SURPRISE THAT GAS
PRICES HAVE INCREASED BY ALMOST
$2 PER GALLON IN THE LAST FEW
MONTHS, A SHARP INCREASE THAT
CANNOT GO UNEXPLAINED. THERE
HAVE BEEN A NUMBER OF SHORT TERM
SOLUTIONS PROPOSED EVERYTHING
FROM, UH, PAUSING THE STATE GAS
TAX TO DIRECT PAYMENTS TO
VEHICLE OWNERS. EACH PROPOSAL
HAS HAD ITS OWN ADVANTAGES AND
PITFALLS, WHICH MADE AGREEING TO
ONE A DIFFICULT DECISION.
HOWEVER LAST NIGHT, THE ASSEMBLY
AND THE SENATE SNT A BILL TO
THE GOVERNOR'S DESK TO PROVIDE
RELIEF PAYMENTS TO CALIFORNIA
TAXPAYERS HAVE SIGNED MY SUPPORT
FOR THIS AND OTHER SHORT TERM
PROPOSALS SINCE MARCH. AND I WAS
HAPPY TO BE ABLE TO VOTE ON ONE
OF THE SOLUTIONS YESTERDAY, BUT
SHORT TERM SOLUTIONS ARE NOT THE
PRIMARY GOAL OF THIS COMMITTEE.
WHILE WE MAY LOOK AT SOME MORE
SHORT TERM SOLUTIONS IN THE
FUTURE HEARING, WE FIRST NEED TO
HEAR THE SYSTEMATIC REASONS FOR
GASOLINE PRICES BEING SO HIGH IN
OUR STATE. AND THAT IS WHERE WE
WILL BE BEGINNING. THIS IS NOT
THE FIRST TIME THAT THE
LEGISLATURE HAS ENDEAVORED TO
LOOK AT GAS PRICES AND I HAVE
NEWS FOR YOU. IT WON'T BE THE
LAST IT IS AN ESSENTIAL ROLE OF
THE LEGISLATURE TO PROVIDE
OVERSIGHT ON ISSUES IMPACTING
CALIFORNIANS AND TO BRING THE
RESOURCES OF THE STATE TO BEAR
UPON THESE PROBLEMS WHEN AND
WHERE IT IS ABLE THERE IS A LOT
OF FINGER POINTING AS TO WHO IS
TO BLAME. OUR GOAL IS TO CUT
THROUGH THE RHETORIC AND FIND
ANSWERS. WE HAVE ASKED HERE
TODAY, SOME OF THE MOST ACTIVE
RESEARCHERS AND REGULATORS
LOOKING INTO THESE ISSUES TO
INFORM THE COMMITTEE ON WHAT HAS
ALREADY BEEN FOUND. WE ARE
GRATEFUL TO HAVE REPRESENTATIVES
FROM THE ENERGY COMMISSION, THE
L. A. OH AND THE DEPARTMENT OF
JUSTICE ALONG WITH THE LEADING
ACADEMIC FROM UC BERKELEY. I
LOOK FORWARD TO HEARING TODAY AS
I HOPE MANY CALIFORNIANS
WATCHING THIS HEARING WILL ABOUT
THESE ISSUES. AND I HOPE WITH
THE PRISON SET. THE
PRESENTATIONS TODAY WILL SPUR
QUESTIONS AMONGST THE COMMITTEE
MEMBERS SO THEY CAN DIRECT THE
WORK OF THE COMMITTEE AND HELPED
TO FIND THE ANSWERS. WE NEED TO
ADDRESS THIS PROBLEM. UM NEXT,
IF ANY MEMBERS OF THE COMMITTEE
THAT ARE CURRENTLY HERE WOULD
LIKE TO MAKE SOME BRIEF OPENING
REMARKS, I WILL ENTERTAIN THEM
NOW. ALL RIGHT. OH, MISS DAVIS.
THANK YOU, MADAM CHAIR. I'M
HONORED TO BE PART OF THIS VERY
IMPORTANT SELECTED COMMITTEE. I
CAN TELL YOU WHILE GOING BACK
SINCE JANUARY, GOING BACK TO MY
DISTRICT ON THE WEEKENDS. THE
NUMBER ONE CONCERN, AND I'M SURE
WE'VE ALL HEARD THAT IS THE HIGH
PRICE OF GAS. WHETHER AT THE DRY
CLEANERS, SO I'M IN THE GROCERY
STORE. I'VE GOT FAMILIES COMING
UP AND ASKING, LIKE, WHAT ARE WE
SUPPOSED TO DO? DO WE PUT THE
MONEY TOWARDS FOOD. WE PUT IT
TOWARDS GAS TO GET TO WORK AND
YOU KNOW, AND THIS IS ONGOING
AND OBVIOUSLY AFFECTING EVERYONE
IN CALIFORNIA. AND I THINK IT'S
REALLY IMPORTANT THAT YOU KNOW
WE HAVE SHORT TERM AND WE HAVE
LONG TERM SOLUTIONS, AND I
APPRECIATED THAT WE'RE GOING TO
BE DOING THAT WELL. RIGHT NOW.
WE HAVE A SHORT TERM SOLUTION,
AND I JUST WANT TO POINT OUT
THAT THE REPUBLICANS DID PUT OUT
AN IMMEDIATE SOLUTION WHERE WE
COULD GO AHEAD AND REDUCE THE
DECK. THE TEXT, UM THE GAS TAX
IMMEDIATELY. WE DID GO AHEAD AND
PASS SOMETHING LAST NIGHT AND I
WOULD LOVE TO SEE IF WE COULD
GET THAT REBATE COME BACK SOONER
THAN OCTOBER OF POSSIBLE BECAUSE
AGAIN, THEY DO NEED IMMEDIATE.
RELIEF AND I HOPE THAT'S
SOMETHING THAT WE CAN WORK ON.
PART OF THIS CONVERSATION MUST
INCLUDE THE REGULATORY BACKLOG
WELL PERMITS THAT ARE SITTING IN
THE DEPARTMENT OF CONSERVATION
DESK AT MY LAST LOOK, THE NUMBER
OF PERMITS APPLICATION WAS
AROUND 1000. CALIFORNIA IS THE
LEADER IN CLEANING, ENERGY,
TECHNOLOGY AND INNOVATION. IF WE
CAN GET A FEW SOURCES HERE AT
HOME WITH THE SAFEST AND
CLEANEST STANDARDS WE MUST
MEMBERS. THE ALTERNATIVE IS
CONTINUING TO IMPORT VIEW FROM
COUNTRIES WITH DESPICABLE HUMAN
RIGHTS VIOLATIONS IN ATROCIOUS
ENVIRONMENTAL STANDARDS, AND
LASTLY, LET'S TRULY INVESTIGATE
IF THERE IS A PRICE GOUGING
GOING ON HERE. IF THERE'S A
CONCLUSIVE EVIDENCE THAT THERE
IS PROFITEERING TAKING PLACE IN
OUR CONSTITUENTS ARE THE ONES
THAT ARE PAYING THE PRICE. WE
ABSOLUTELY MUST HOLD THEM
ACCOUNTABLE AGAIN. THANK YOU FOR
THE TIME, MADAM CHAIR AND BOTTOM
LINE IS WE NEED TO GET TO WORK
TO BRING CALIFORNIA'S RELIEF AT
THE PUMP AS SOON AS POSSIBLE.
THANK YOU. AND QUÊ
ASSEMBLYMEMBER'S DAVIS
ASSEMBLYMEMBER'S PETRIE-NORRIS.
THANK YOU, CHAIR IRWIN AND THANK
YOU FOR BRINGING US TOGETHER FOR
THIS INITIAL HEARING OF THIS
LIKE COMMITTEE. THE BOTTOM LINE
IS THAT ALL CALIFORNIANS ARE
FEELING PAIN AT THE PUMP RIGHT
NOW, AND THESE HIGHER FUEL COSTS
ARE DRIVING UP COSTS FOR SMALL
BUSINESSES FOR GROCERIES AND
PUSHING UP PRICES FOREVERYTHING
FROM FOOD TO TOILET PAPER. WE
KNOW THAT TOO MANY CALIFORNIANS
ARE BEING FORCED TO DECIDE
WHETHER THEY CAN FILL UP THEIR
GAS TANK OR FILL UP THEIR
GROCERY CART. UM IS IT
OUTRAGEOUS? YES. IS IT TOTALLY
UNACCEPTABLE. ABSOLUTELY. CAN WE
DO SOMETHING ABOUT IT? YES I
BELIEVE WE CAN. AND I BELIEVE
THAT THAT'S WHY WE ARE. WE ARE
ALL HERE AS CHAIR IRWIN AND
ASSEMBLYMEMBER'S, DAVIES NOTED
JUST YESTERDAY, THE ASSEMBLY AND
SENATE DID SEND TO THE
GOVERNOR'S DESK, A BUDGET, WHICH
INCLUDES A GAS RELIEF PACKAGE,
WHICH PROVIDES $1000 FROM MOST
CALIFORNIA FAMILIES, AND I THINK
THAT'S A REALLY IMPORTANT STEP.
COULDN'T AGREE MORE WITH YOU,
MISS DAVIES. LET'S DO EVERYTHING
WE CAN TO GET THOSE DOLLARS OUT
AND INTO PEOPLE'S POCKETS AS
QUICKLY AS POSSIBLE. UM AND YOU
KNOW BEYOND THAT, THAT REALLY
IMPORTANT SHORT TERM STEP I DO
LOOK FORWARD. TO WORKING WITH
YOU. CHAIR IRWIN AND WITH THE
OTHER MEMBERS OF THIS COMMITTEE
TO IDENTIFY EVERY POSSIBLE
OPPORTUNITY FOR US TO PROVIDE
RELIEF FOR CALIFORNIANS NOW AND
INTO THE FUTURE. SO THANK YOU.
THE OTHER COUNTRIES.
ASSEMBLYMEMBER'S PHÊN. THANK
YOU, CHAIR IRWIN AND MEMBERS.
TODAY. IT'S AH. WE'VE BEEN
HEARING FROM MANY OF OUR
CONSTITUENTS ABOUT THEHIGH GAS
PRICES AND OUR DISTRICT AND
THROUGHOUT THE GREAT STATE OF
CALIFORNIA. MINT TODAY I LOOK
FORWARD TO HEARING FROM MUELLER
EXPERTS AND FROM THE TESTIMONY
FROM ALL OF FOCUS AGAIN REALLY
ADDRESS THESE ISSUES, AND WE
KNOW THAT MANY FOLKS ARE HURTING
AT THE PUMP. WE KNOW THAT MANY
BUSINESS OWNERS ARE ALSO
HURTING. FROM THE HIGH GAS
PRICES AS WELL. SO LOOK FORWARD
TO WORKING WITH HER WIN AND OUR
COLLEAGUES TO REALLY ADJUST
THESE ISSUES. IN CALIFORNIA,
WHICH ARE SO SHARED AMONGST ALL
OF US. THANK YOU. ALL RIGHT.
THANK YOU. ANY OTHER COMMENTS
FROM COMMITTEE MEMBERS? ALRIGHT
THEN WE ARE GOING TO MOVE ON TO
THE SECOND ITEM ON OUR AGENDA
PAST EFFORTS TO IDENTIFY AND
ADDRESS HIGH GAS PRICES. I'D
LIKE TO WELCOME A DREW BOWEN.
EXECUTIVE DIRECTOR OF CALIFORNIA
ENERGY COMMISSION FOR YOUR
TESTIMONY, AND YOU DO HAVE A
POWER POINT. I UNDERSTAND. WE
DO. THANK YOU. AND I WOULD
ENCOURAGE ALL COMMITTEE MEMBERS
TO DROP DOWN QUESTIONS AS YOU
HEAR THE TESTIMONY. THANK YOU.
THANK YOU. CHAIR IRWIN AND
MEMBERS OF THE SELECT COMMITTEE
AGAIN. MY NAME IS DREW BOW AND
I'M, THE EXECUTIVE DIRECTOR OF
THE CALIFORNIA ENERGY
COMMISSION. AND I'M JOINED BY
ALICIA GUTIERREZ TO MY LEFT WHO
RUNS OUR ENERGY ASSESSMENTS
DIVISION AND ALSO ONLINE BY
GORDON SHRIMP, WHO RUNS A SMALL
BUT MIGHTY TEAM FOCUSING ON
FUELS. AND HE CAN ANSWER ANY
DETAILED QUESTIONS YOU HAVE, BUT
I'VE GOT ABOUT SEVEN POWER POINT
SLIDES TO SHARE WITH AN IDEA
WITH THE IDEA BEING TO PROVIDE
AN OVERVIEW OF SOME OF THE
ISSUES YOU'RE GOING TO BE
DISCUSSING. WE'RE GRATEFUL FOR
THE OPPORTUNITY TO BE ABLE TO
SHARE WITH YOU. SOME OF WHAT
WE'VE LEARNED AND ARE EAGER TO
HELP IN ANY WAY WE CAN. WE
CERTAINLY SHARE THE CONCERNS.
SOME OF THE MEMBERS EXPRESSED
AND THE CHAIR ABOUT THE
CHALLENGES CALIFORNIA'S FACING
SO WITH THAT, IF I COULD ASK THE
PERSON WHO'S CONTROLLING THE
SLIDES TO ADVANCE TO THE NEXT
ONE, JUST BRIEFLY TO SET THE
STAGE, WANT TO JUST SHARE THE
ENERGY COMMISSION DOES A LOT OF
DIFFERENT THINGS. BUT TODAY
WE'RE JUST GOING TO FOCUS ON OUR
ROLE WITH REGARD TO FUELS. AND
WE DO THREE THINGS. WE COLLECT
DATA FROM THE 11 REFINERIES IN
CALIFORNIA, THE 10,000 OR SO, UH
, GASOLINE STATIONS AND LOTS OF
OTHER PLAYERS IN THE MARKET. WE
PUBLISH THAT DATA. IT'S UTILIZED
BY POLICYMAKERS LIKE YOURSELVES.
UH OTHERS IN ACADEMIA AND
ELSEWHERE AND BY THE PUBLIC. WE
ALSO DO ANALYSIS AND YOU'RE
GOING TO HEAR THIS AFTERNOON A
LITTLE BIT ABOUT THE ANALYSIS
WE'VE DONE ON SOME OF SOME OF
THESE TOPICS. FINALLY JUST TO
ROUND OUT THIS ISSUE. WE DO SOME
EMERGENCY RESPONSE WORK WHEN
THERE IS A FUEL EMERGENCY CAUSED
BY AN EARTHQUAKE OR SOME OTHER
EVENT, WE MAKE SURE THAT FUELS
GET TO FIRST RESPONDERS. AND
OTHER CRITICAL SERVICES IN TIME
OF NEED. NEXT SLIDE, PLEASE.
THIS IS JUST A BACKGROUND TO SET
THE STAGE OF HOW MUCH GASOLINE
DO WE CONSUME IN CALIFORNIA? SO
THE CHART THIS THIS GRAPH SHOWS
THAT IN 2021, CALIFORNIA
CONSUMED 13.82 BILLION GALLONS
OF GASOLINE IN A YEAR. AND
THERE'S ALSO ETHANOL. THAT IS
THAT IS MIXED WITH GASOLINE, AND
THE CHART SHOWS THAT PERCENTAGE
IN GREEN IN THE GASOLINE IS IN
BLUE. THE. UH WHAT I WANT TO
FOCUS ON IS IF YOU NOTICE THE
COLUMNS, THE PRICE OR THE VOLUME
KIND OF GOES UP AND DOWN OVER
THE YEARS, THIS GOES BACK AS FAR
IF YOU CAN'T SEE THE DATE 2000
AND THREE BUT IF YOU LOOK AT THE
LAST FEW YEARS YOU'LL SEE A
DOWNWARD TREND OVER THE FAR
RIGHT. THERE'S THE OBVIOUS
ANOMALY IN 2020 ASSOCIATED WITH
THE PANDEMIC, BUT YOU CAN SEE A
DOWNWARD TREND AND LET ME ASK
THE TO SHIFT TO THE NEXT SLIDE.
THE THING TO FOCUS ON HERE THAT
WE WANT TO CALL YOUR ATTENTION
TO IS THAT SINCE 2019 GASOLINE
CONSUMPTION IN CALIFORNIA HAS
DROPPED 10% AND THAT IS
ATTRIBUTABLE LARGELY TO TWO
FACTORS. ONE REMOTE WORK. AND TO
ELECTRIC VEHICLES WE NOW HAVE IN
2021 12% OF ALL NEW VEHICLE
SALES, ZERO EMISSION VEHICLES.
IN THE FIRST QUARTER OF THIS
YEAR. 2021 16% OF ALL VEHICLES
SOLD IN CALIFORNIA WHERE ZERO
EMISSION VEHICLES WHEN YOU THINK
, JUST 15 YEARS AGO, THERE WERE
EFFECTIVELY ZERO. WE'VE REALLY
COME QUITE A DISTANCE, AND I
THINK WHAT YOU SEE IN THE
GASOLINE FIGURES DROPPING IN THE
LAST FEW YEARS. UM THESE ARE
THESE ARE TWO OF THE PRIMARY
DRIVERS FOR THAT. NEXT SLIDE,
PLEASE. WANTED TO TALK A LITTLE
BIT ABOUT WHERE THIS FUEL COMES
FROM. SO THIS SLIDE SHOWS BACK
TO 1982 THE SOURCES OF OUR OIL
AND THEY ARE TODAY THE
PERCENTAGES ARE STATED
PROMINENTLY. SO WE PRODUCE HERE
IN CALIFORNIA JUST SHY OF 30% OF
OUR OWN OF CRUDE OIL. ABOUT 15%
COMES FROM ALASKA AND THE
BALANCE IS FOREIGN. AND AS YOU
CAN SEE, FROM THE COLORS, THESE
THESE CHANGE OVER TIME. NEXT
SLIDE, PLEASE. SO WHILE WE GET
JUST I'M SORRY, MADAM CHAIR IF
WE CAN JUST GO BACK TO THAT I
KNOW THAT CERTAINLY COUPLE
MEMBERS CAN'T SEE THAT. BUT, UM,
JUST FASCINATING TO BE ABLE TO
SEE THAT THE LARGEST SHARE OF
OUR CRUDE OIL SOURCES ARE
FOREIGN. AND THAT IS ACTUALLY
BEEN AN INCREASING VIRTUALLY
EVERY SINGLE YEAR, GOING BACK TO
THE TO THE 19 NINETIES, SO THAT
IS A VERY KEY POINT FOR POLICY
MAKERS. TO UNDERSTAND THAT
ALASKA HAS BEEN SHRINKING.
CALIFORNIA SOURCES HAVE BEEN
SHRINKING, BUT FOREIGN SOURCES
HAVE BEEN INCREASING. THAT'S
THAT'S WHAT WE NEED TO PUT A
STICK IN THAT THAT'S AN
IMPORTANT POINT. TO THE CHAIR
THAT ARE THE SLIDES GOING TO BE
MADE AVAILABLE? YES. ALL THE
WAY.
RIGHT. NEXT SLIDE, PLEASE. SO
THAT SLIDE WE JUST LOOKED AT
SHOWED THE CREW. THIS IS OF
COURSE, WHERE WE GET OUR OIL
FROM AND BUT ONCE WE GET THE
CRUDE, VIRTUALLY ALL OF IT OVER
90% OF IT IS REFINED HERE IN
CALIFORNIA, SO THE FUEL WE PUT
INTO OUR CARS IS REFINED HERE IN
CALIFORNIA. THERE ARE THERE ARE
SOME EXCEPTIONS. WE DO GET
OCCASIONAL SHIPMENTS WHEN
SUPPLIES ARE TIGHT. BUT THE VAST
MAJORITY OF THE FINISHED FUEL
COMES FROM THESE 11 FINERY THAT
ARE FLAGGED HERE IN THIS SLIDE.
THERE ARE FOUR IN THE BAY AREA.
THERE ARE SIX IN LOS ANGELES
ROUGHLY EQUAL SIZE. THEY VARY,
BUT THEY'RE ALL IN THE
NEIGHBORHOOD OF 89 10% OF THE
TOTAL. AND THEN THERE'S A
SMALLER ONE IN BAKERSFIELD. SO
THIS IS WHERE WE GET OUR OUR
FUEL AND WE DON'T HAVE ANY
PIPELINES COMING INTO CALIFORNIA
FOR FUEL. WE DO HAVE PIPELINES
GOING TO ARIZONA AND NEVADA AND
WE SUPPLY BOTH OF THOSE STATES
WITH SOME GASOLINE, BUT WE DON'T
GET ANY IN IN IN FROM PIPELINES
AND THIS IS SIGNIFICANT, UH,
WE'LL GET TO IN THE IN THE NEXT
SLIDE OF FOOD, WE COULD ADVANCE
TO THE NEXT ONE. THE THIS IS
JUST A BREAKDOWN IN THE NEXT
SLIDE AFTER THIS IS GOING TO GO
INTO A LITTLE BIT MORE DETAIL,
BUT THIS IS A THIS IS A JUST A
GRAPHIC SHOWING THAT CHIEF
DRIVERS OF GAS PRICES IN
CALIFORNIA OBVIOUSLY CRUDE CRUDE
OIL IS A SIGNIFICANT DRIVER. IT
MAKES UP NEARLY HALF THE OVERALL
COST OF GASOLINE. ALSO
GEOPOLITICAL ISSUES. WE'VE SEEN
HOW THE RUSSIA AND UKRAINE
SITUATION HAS EXACERBATED
SUPPLIES AND RATTLED NERVES, AND
THAT'S A CONTRIBUTOR. WERE
ISOLATED AS I WAS JUST
DISCUSSING IN THAT IF YOU LOOK
AT THE REST OF THE COUNTRY, THE
GULF HAS A COUPLE OF DOZEN
REFINERIES. THE EAST COAST HAS A
NUMBER OF REFINERIES. THE
MIDWEST HAS A NUMBER OF
REFINERIES, AND THEY'RE ALL
CONNECTED. BY PIPELINE SOFA
REFINERY GOES OUT THERE THAT
SUPPLY THAT WOULD BE COMING FROM
THAT REFINERY CAN BE MADE UP BY
THE OTHER REFINERIES AGAIN.
THAT'S NOT THE CASE IN
CALIFORNIA IF WE HAVE A REFINERY
THAT GOES OUT HERE. AND IT'S IN
THE NEIGHBORHOOD OF 10% OF OUR
SUPPLY. THAT IS A VERY MAJOR
IMPACT ON THE PRICE AT THE PUMP.
FINALLY TWO OTHER ISSUES. TAXES
IN CALIFORNIA ARE HIGHER THAN
OTHER PARTS OF THE COUNTRY, MANY
OF THE OTHER PARTS OF THE
COUNTRY AND WE HAVE
ENVIRONMENTAL PROGRAM COSTS AS
WELL, NAMELY CAP AND TRADE AND
THE LOW CARBON FUEL STANDARD.
NEXT SLIDE. WE'LL GET INTO THAT
A LITTLE BIT MORE DETAIL. SO IF
YOU LOOK AT THIS ONE, THIS IS A
BREAKDOWN OF HOW YOU GET TO IF
YOU LOOK AT THE BOTTOM THERE
$6.27 WAS A SNAPSHOT PRICE OF A
COUPLE OF DAYS AGO. OF THE
AVERAGE PRICE OF GASOLINE AT THE
PUMP IN CALIFORNIA. SO WHAT IS
THAT? WHAT IS THAT COMING FROM?
SO I WON'T GO THROUGH ALL THESE,
BUT IF YOU LOOK AT THE BOTTOM,
THE BROWN IS CRUDE OIL, AND
THAT'S NEARLY HALF $3 OUT OF THE
$6.27 IS THE IS THE CORE PRODUCT
ITSELF. CERTAINLY CERTAINLY SO
I'LL GO GO THROUGH THEM WITH
YOUR PERMISSION, SO THE BOTTOM
ONE IS BROWN AND THAT IS THAT
SCREWED. SO THAT'S $3. AND SO
THEY'RE EXPRESSED IN SENSE AND
DOLLARS AND CENTS RATHER THAN
PERCENTAGES. THE NEXT LARGEST
WEDGED, THERE IS YELLOW, AND
THAT'S REFINERY COST AND PROFIT.
THE NEXT ONE UP THE ORANGE IS
DISTRIBUTION AND MARKETING COSTS
AND PROFITS. 56 CENTS. THE NEXT
ONE IS OUR STATE EXCISE TAX THAT
THE LEGISLATURE HAS BEEN TALKING
ABOUT RECENTLY AND THAT'S 51
CENTS TODAY. IT'S SET TO GO UP.
TO APPROXIMATELY 54 IN THE NEXT
WEEKS NEXT AFTER THAT IS THE
LIGHT GREEN, AND THAT'S THE
ENVIRONMENTAL PROGRAMS I JUST
MENTIONED ABOVE. THAT IS A
FEDERAL EXCISE TAX AND PART OF
ME. THAT'S 36 CENTS THE
ENVIRONMENTAL PROGRAMS. THE NEXT
ONE IS FEDERAL EXCISE TAX.
THAT'S 18 CENTS. ABOVE THAT THE
LIGHT BLUE AS STATE AND LOCAL
TAXES AT 14 CENTS, AND THEN
FINALLY, THE TOP WEDGE THERE IN
DARK BLUE IS THE STATE
UNDERGROUND STORAGE TANK FEE. I
JUST WANT TO INTERRUPT FOR ONE
SECOND FOR MEMBERS. THIS IS ON.
YOU CAN GET THIS ON YOUR IPAD
PORTFOLIO ON THE ON THE ASSEMBLY
WEBSITE AND WE ARE PRINTING
COPIES RIGHT NOW, TOO. AND THEN,
UM, I KNOW THAT A LOT OF PEOPLE
HAVE QUESTIONS, SO I THOUGHT
MAYBE WE SHOULD CHECK AFTER EACH
SLIDE TO MAKE SURE THAT THAT
THOSE QUESTIONS GET ANSWERED IN
A TIMELY MANNER. SO AH! DID YOU
HAVE MORE TO SAY ABOUT THIS
SLIDE BEFORE WE ASKED QUESTIONS
? THERE'S JUST ONE MORE SLIDE.
SO IF MEMBERS HAD QUESTIONS
ABOUT THIS, ASSEMBLYMEMBER'S,
UH, ONE OF THE THINGS THAT WE AS
POLICYMAKERS AND OUR
CONSTITUENTS OFTEN SCRATCH OUR
HEADS ABOUT IS YOUR GOSH WIRE
CALIFORNIA'S PRICES SO MUCH
HIGHER THAN OTHER STATES. CAN
YOU JUST HELP LEVEL SET US
WHETHER IT'S IN THE NATIONAL
AVERAGES FOR THESE NUMBERS?
PRESUMABLY CRUDE OIL IS THE
SAME. CAN YOU JUST PROVIDE US
SOME NATIONAL AVERAGES FOR THE
OTHER ELEMENTS OF THAT? I DON'T
HAVE THOSE NUMBERS HANDY. UM, WE
CAN CERTAINLY SUPPLY YOU WITH
THOSE NUMBERS, THOUGH. THAT'S
SUPER IMPORTANT FOR US TO YEAH,
WE'VE GOT A WE'VE GOT A NUMBER
OF CHARTS THAT WE KEPT THIS HIGH
LEVEL. WE'VE GOT A NUMBER OF
CHARTS. WE CAN SUPPLY YOU WITH
IT DO COMPARISONS AGAINST THE
NATIONAL AVERAGE AGAINST THE
HIGHEST AND LOWEST STATE AND
THAT SORT OF THING. I THINK THAT
WOULD BE SUPER HELPFUL. FOLLOW
UP. THANK YOU. ASSEMBLYMEMBER'S
MAZE. TO LOOKING AT THIS SLIDE.
THERE'S $6.27 THERE, AND I KNOW
WE'RE GOING TO GET INTO THIS AT
AT SOME SOME POINT. UM BUT YOU
KNOW, THERE'S ALWAYS THIS SENSE
IN POLITICIANS. I AM ONE, BY THE
WAY, HAVE BEEN ONE FOR ALMOST 20
YEARS. SO I'VE BEEN REALLY GOOD
AT MESSAGING AND TRYING TO SHIFT
BLAME ONE WAY OR THE OTHER EVERY
ONCE IN A WHILE, YOU KNOW, WE'RE
HONEST TO, UM SO WE'RE WE'RE
LOOKING AT THESE NUMBERS AND
LOOKS PRETTY STRAIGHT. UH YOU
KNOW, I MEAN, WE KIND OF ARE
GETTING RIGHT TO THE POINT HERE
OF THIS OF THIS COMMITTEE. AND
IT LOOKS LIKE YOU KNOW, TAKE
CREW COSTS THAN ALL OF THE STATE
COSTS THAT REALLY WE'RE LOOKING
AT A DOLLAR 50 AND REFINERY
COSTS AND PROFIT AND 56 CENTS IN
DISTRIBUTION, MARKETING COSTS
AND PROFITS ARE REALLY TALKING
ABOUT $2. SO THAT'S CALLED 30%
OF THE TOTAL COSTS. SO OF THAT,
30% THAT'S THERE. HOW MUCH OF
THAT IS DUE TO COLLUSION BY THE
OIL COMPANIES. ABOUT HOW MUCH OF
THAT BECAUSE THAT'S REALLY WHAT
WE'RE GOING TO TALK ABOUT
GETTING RIPPED OFF THAT TAX OR
THAT THAT YOU KNOW DRIVERS ARE
GETTING RIPPED OFF. WE'RE REALLY
TALKING ABOUT THE ONLY THING
WE'RE GONNA TALK ABOUT. OKAY
OKAY, I KNOW, BUT I'M JUST I
MEAN, GETTING RIGHT TO THE POINT
OF TALKING ABOUT WHICH I KNOW
COLLUSION IS ILLEGAL IN IN IN
BOTH FEDERAL LAW AND EVEN STATE
LAW. BUT OF THAT, $2, THAT'S
THAT'S THEIR, UM, I MEAN, CAN
YOU GET YOU KNOW IT IS SOME OF
THAT TWO BUCKS BECAUSE THEY'RE
ALL WORKING TOGETHER TO TRY TO
KEEP THAT THAT TWO BUCKS? UM HI.
EXCELLENT QUESTION. WE WERE
ASKED BY THE GOVERNOR IN 2019 TO
PREPARE A REPORT THAT LOOKED AT
THE VERY QUESTION. YOU'RE ASKING
. WHAT? WHERE, WHERE SOME OF
THESE COSTS COMING FROM AT THE
TIME. THERE WAS A LOT OF
CONVERSATION IN THE PRESS ABOUT
THE SO CALLED MYSTERY SURCHARGE
TERM. MANY OF YOU MAY HAVE HEARD
AND SO WE LOOKED AT THAT, AND WE
SPENT A COUPLE OF MONTHS
INVESTIGATING IT AND TRYING TO
GET TO THE BOTTOM OF IT. AND
WHAT WE LEARNED IS THAT THIS.
THIS DOESN'T COVER ALL THE COSTS
THAT YOU SEE UP ON THE SCREEN.
BUT IT WAS IT WAS A COST. WE
COULDN'T FIND A HOME FOR AND
WHAT WE CONCLUDED WAS THAT IT
WAS ACTUALLY JUST THE RETAILERS
THAT THERE WERE CHARGING MORE IN
CALIFORNIA. AND WHAT WE WHAT WE
FOUND IS THAT THERE ARE A GROUP
OF HIGHER PRICED GASOLINE
STATIONS, AND THEN THERE ARE THE
HYPERMARKETS. AND THEN THERE ARE
LOWER PRICED ONES THAT PRICES
VARY. BUT IF YOU LOOK AT THE
HIGHER PRICED ONES, THEY WERE
THEY THIS THIS THIS? WE CALLED
IT. THE RESIDUAL PRICE INCREASE
WAS 30 CENTS. AND WE, YOU KNOW,
WE SAID THAT IF YOU HAD AN
AVERAGE 15 GALLON TANK IN YOUR
CAR THAT WOULD BE 4 50. EVERY
TIME YOU FILL UP THE TOTAL COST
OVER THE FIVE YEAR PERIOD WE
LOOKED AT WAS OVER $2 BILLION
PER YEAR. JUST ATTRIBUTABLE TO
THIS ONE COST. NONE OF THE THING
. NONE OF THE SPECIFIC BREAKOUTS
YOU'RE SEEING ON THE SCREEN. AND
SO WE ASKED OURSELVES AND LOOKED
AT WHY, AND WE REACHED OUT TO
INDUSTRY. WE TALKED TO INDUSTRY.
WE TALKED TO OTHER EXPERTS.
OTHER OTHER ECONOMISTS AND OUR
CONCLUSION WAS THERE'S A COUPLE
OF REASONS ONE UH, THE.
PURCHASING PUBLIC LIKES THE
HIGHER PRICED GASOLINE. THEY GO
TO THE STATIONS THAT CHARGE MORE
BECAUSE THEY PERCEIVE ITS BETTER
QUALITY. THEY THEY LIKE THE FOOD
SELECTION. BETTER. THEY LIKE THE
BATHROOMS, BETTER BRAND LOYALTY
, ANY NUMBER OF ANY NUMBER OF
TOTALLY LEGITIMATE REASONS. WHY
FOLKS MIGHT BE MAKING THOSE
CHOICES. UM WE ALSO LOOKED AT
THE POSSIBILITY THAT THERE WAS
SOME SORT OF MARKET MANIPULATION
TO YOUR QUESTION. ASSEMBLY
MEMBER AND WE ARE THE ARM OF
GOVERNMENT THAT IS EQUIPPED WITH
THE TOOLS TO DO A THOROUGH
INVESTIGATION. SO OUR
RECOMMENDATION IN THIS DOCUMENT
WE SHARED WITH GOVERNOR NEWSOM
WAS THERE ARE OTHER AGENCY
CHARGED WITH THAT RESPONSIBILITY
. ONE IS ON YOUR PANEL TODAY
FROM THEN THAT'S THE ATTORNEY
GENERAL'S OFFICE AND YOU CAN
HEAR FROM THEM. BUT WE SUGGESTED
THAT IF YOU WERE TO LOOK TO SEE
IF THERE WAS SOME SORT OF
COLLUSION OR MARKET MANIPULATION
OF VIOLATIONS OF ANTITRUST LAWS
THERE. THERE ARE BETTER EQUIPPED
ENTITY TO DO THAT FINAL POINT
IS, WE ALSO LOOKED AT THE POSIT
. WE ALSO SPECULATED THERE WAS
ANOTHER POSSIBLE EXPLANATION,
AND THAT WAS FALSE ADVERTISING
SOME OF THE PREMIUM BRAND
GASOLINE ADVERTISES CERTAIN
ADDITIVES AND OTHER THINGS THAT
THEY PUT IN THE GASOLINE. AND
THE CLAIM IS THAT THE GASOLINE
THEREFORE IS BETTER. OUR REVIEW
REVEALED THAT THAT'S NOT THE
CASE THAT THERE IS NO
APPRECIABLE DIFFERENCE BETWEEN
ONE GASOLINE AND ANOTHER. AND WE
HAVE VERY HIGH STANDARDS IN
CALIFORNIA. YOU CAN'T SELL GAS.
THAT DOESN'T MEAN A VERY HIGH
STANDARD. BUT ONCE YOU MEET THAT
STANDARD, THE GASOLINE IS MORE
OR LESS THE SAME FROM STATION TO
STATION. UH, AGAIN, THAT DOESN'T
PROVE FALSE ADVERTISING BY ANY
MEANS, NOR DID WE SUGGEST THAT
BUT WE POSITED THAT IF YOU LOOK
AT THE THREE POSSIBILITIES OF
THIS, THIS PRICE INCREASE, ONE
COULD BE THAT ONE COULD BE SOME
SORT OF COLLUSION IN ANOTHER
COULD BE JUST FOLKS MAKING
CHOICES. SO JUST JUST ON THAT
POINT, I THINK I UNDERSTAND THIS
A LITTLE BIT MORE BECAUSE MY
WIFE HAS THIS AFFINITY FOR GUCCI
, AND IT'S AMAZING THAT SHE'LL
PAY $1500 FOR GUCCI PURSE, WHICH
HAS THE EXACT SAME UTILITY AS
ONE THAT YOU CAN BUY AT TARGET
FOR ABOUT $25. SO I GUESS I
REALLY DO UNDERSTAND. UNDERSTAND
THAT. SO THANK YOU VERY MUCH.
THANK YOU, MR MAYS. UH,
ASSEMBLYMEMBER'S MURATSUCHI. OH,
OKAY. ASSEMBLYMEMBER'S
PETRIE-NORRIS JUST CYCLING BACK
TO THE 2019 REPORT. SO UM, THERE
WAS THERE'S KIND OF THIS 30 CENT
STILL SORT OF MYSTERY. I BELIEVE
COMING OUT OF THAT. 2019 REPORT,
ONE OF THE BELIEVE
RECOMMENDATIONS REQUESTS.
SUGGESTIONS, UM. FROM THE WAS
THAT THE ATTORNEY GENERAL OFFICE
INVESTIGATE WAS THEIR
INVESTIGATION AND WAS THERE ANY
FINDINGS FOLLOWING THAT 2019
REPORT? WE ARE WE GOING TO HEAR?
PROBABLY THAT'S GOING TO BE THE
BETTER QUESTION. ATTORNEY
GENERAL. ALRIGHT WE'RE SAVING
OURSELVES FOR THAT THE BIG
REVEAL UNLESS YOU WOULD LIKE TO
ADD SOMETHING I DON'T KNOW. THAT
IS WHY WE INVITED THE ATTORNEY
GENERAL TO SEE IF THERE'S ANY
PUBLIC INFORMATION. OKAY BUT
JUST SO I UNDERSTAND. SO THE
HYPOTHESIS. FOR THE WORK LIKE
THE WORKING HYPOTHESIS FROM THE
C E C. IS THAT THAT 30 CENTS IS
BECAUSE YOU KNOW, RETAILERS WILL
KIND OF CHARGED WITH PEOPLE WILL
PAY. AND NAME BRAND GAS STATIONS
AS SOMEONE WHO DOESN'T BUY GUCCI
BAGS AND DOESN'T GO TO THESE
FANCY NAME BRAND GAS STATIONS.
UM SO THAT SO THAT'S YOUR KIND
OF WORKING HYPOTHESIS IS THAT
IT'S RETAILERS CHARGING HIGHER
PRICES BECAUSE PEOPLE ARE
WILLING TO PAY OUR CONCLUDE.
WELL OUR CONCLUSION WAS.
RETAILERS ARE CHARGING HIGHER
PRICES, AND THAT'S WHERE THE
THAT'S WHERE YOU WOULD FIND
THAT'S WHERE THAT 30 CENTS IS.
WHY IT'S HAPPENING. WE REALLY
DIDN'T SPECULATE OR HYPOTHESIZE
. WE JUST OFFERED THREE
EXPLANATIONS. IT'S A IT'S AN
UNREGULATED MARKET WITH REGARD
TO PRICE AND BUSINESSES ARE FREE
TO CHARGE WHAT THEY CAN COMMAND.
AND THEY'RE DOING THAT AND
WHETHER THERE'S COLLUSION OR, UM
, FALSE ADVERTISING. WE DIDN'T
SAY WE SIMPLY POSITED THE NOTION
THAT THAT THOSE ARE POSSIBLE
CAUSES. OKAY THANK YOU. MEMBER
CHOLERA. THANK YOU CHAIR AND
JUST FOLLOWING UP ON A SUMMER
MAY'S QUESTION. I THINK I THINK
YOU KIND OF WENT THROUGH THE
NEXT SLIDE IN YOUR ANSWER. YES.
SO, UM YEAH. AND IN PARTICULAR.
MHM. IN THE FIRST KIND OF QUOTE
THIS THEY'RE JUST DISCUSSES HOW
CALIFORNIA RETAIL GASOLINE
OUTLETS. ARE CHARGING HIGHER
PRICES THAN THOSE IN OTHER
STATES AND UM WHAT. IS PART OF
THE REASON WHY THAT'S YOU KNOW,
BECAUSE THERE'S WE HAVE A LOT OF
THINGS AREN'T REGULATED IN TERMS
OF COST, AND YOU HAVE MARKET
FORCES THAT COMPETE AND USUALLY
THE IDEA IS THAT THE COMPETITION
DRY PARTS OF THE PRICES DOWN
BECAUSE I CAN TELL YOU A BURGER
FOR 25. CENTS LESS FOR 50 CENTS
LESS. WHAT HAVE YOU BUT IN THIS
CASE IT SEEMS LIKE IT'S KIND. IT
POTENTIALLY IS GOING THE OTHER
DIRECTION. IT COULD BE BECAUSE
AGAIN, YOU DON'T KNOW IF YOU
HAVE THIS AMOUNT OF MONEY THAT
ISN'T NECESSARILY ACCOUNTED FOR
A NORMAL MARKET PROFIT TAKING
WHATEVER OF THE PRODUCT
TRADITIONALLY, SO THAT'S WHERE
THAT 30 CENTS COMES FROM, BUT IS
PART OF THE FACT THAT GASOLINE.
THE REASON WHY GASOLINE PRICES
FLUCTUATE SO MUCH THEY ALWAYS
OUR WHOLE LIVES HAVE FLUCTUATED
. UM TENDER, THE OVERALL TREND
GOES UP, BUT IT DOES FLUCTUATE
UP AND DOWN ALONG THAT TREND
LINE. ISTHE FACT THERE'S SO
MANY FACTORS THAT ARE CONSIDERED
QUOTE OUTSIDE OF THE CONTROL. OF
LOCAL MARKET FORCES SO IT COULD
BE LIKE OH, WELL, THERE'S SOME
SUPPLY ISSUES ANOTHER PART OF
THE WORLD OR THIS HAS TO DO
WITH, YOU KNOW. IT WAS SOME
ISSUE THAT WE CAN'T CONTROL IS
THAT SOMETHING THAT CAN BE TAKEN
ADVANTAGE OF IN TERMS OF BEING
ABLE TO FLUCTUATED AND BOOST THE
PRICE WITHOUT CONSUMERS REALLY
HAVING OR EVEN POLICYMAKERS
HAVING A SENSE OF CONTROL OVER
IT. WELL A SPEAKER RENDON SENT A
LETTER TO THE SOME OF THE FOLKS
RESPONDED YESTERDAY OUR CHAIR
DAVID HOAX SHIELD RESPONDED IN A
LETTER BACK TO THE SPEAKER. AND
ONE OF THE QUESTIONS THAT IN
THAT LETTER WAS ALONG THE LINES
OF WHAT YOU'RE ASKING. AND SO
WHAT WE WOULD WE NOTICE IS, IF
YOU IF YOU TRACK WE HAVE A GRAPH
THAT TRACKS CRUDE OIL PRICES AS
AGAINST PRICES AT THE PUMP AND
CRUDE OIL PRICES GO UP. PRICES
AT THE PUMP GO UP
CORRESPONDINGLY AS PRICES GO
DOWN. KURODA S CRUDE OIL PRICES
GO DOWN PRICES AT THE PUMP GO
DOWN. HOWEVER, THE PRICES TEND
TO GO UP MORE QUICKLY. THEN THEY
GO DOWN. AND SO THAT THE TERM IS
, UM, UH, ASYMMETRICAL PRICING.
I THINK WE REFER TO IT IN THE IN
THE LETTER AND WE DID OUR OWN
ANALYSIS AND WE LOOKED FOR
EXPERTS AROUND THE COUNTRY AND
WE FOUND THE FEDERAL RESERVE OUT
OF DALLAS, HAD DONE AN ANALYSIS
OF THIS AND CONCLUDED THAT THERE
ARE TWO POTENTIAL REASONS WHY
PRICES TEND TO GO DOWN A LITTLE
BIT MORE SLOWLY THAN THEY GO UP.
ONE IS THAT THE RETAILERS ARE
LOSING IN THE WAY UP, BECAUSE AS
IT'S GOING UP THERE TRYING TO
RAISE THEIR PRICE QUICKLY, BUT
THERE HAVE COMPETITORS AND AT
LEAST WHERE I LIVE, THERE'S AN
INTERSECTION WITH FOUR GAS
STATIONS ON EACH ONE IN EACH
CORNER. AND, YOU KNOW, I PAID
VERY CLOSE ATTENTION TO THOSE
PRICES, SO THEY ARE THEN GETTING
GETTING BACK IF YOU WILL, SOME
OF WHAT THEY MAY HAVE LOST ON
THE WAY UP. BUT THE OTHER
POSSIBILITY IS THAT CONSUMERS AS
THE PRICES COMING DOWN, GET A
LITTLE LESS CHOOSY. AND THEY
HAVE AN OPPORTUNITY TO KEEP THE
PRICE A LITTLE BIT HIGHER AND
AGAIN. IT'S AN UNREGULATED
MARKET WITH REGARD TO PRICE AND
SO THEY MAY BE TAKING ADVANTAGE
OF THAT SITUATION TO CHARGE WHAT
FOLKS WILL PAY. AND IN TERMS OF
THE BRAND, AND YOU QUOTE
SPECIFICALLY 76 CHEVRON SHELL SO
AS THOSE MAJOR BRANDS YOU HAVE
HIGHER INCREASE THE MARGINS FAR
BEYOND THEIR COMPETITORS AND
STATED IS OR CAN THERE BE A
TENDENCY FOR THOSE OTHER OFF
BRANDS OR NON NAME BRANDS OR
DISCOUNT GAS STATIONS? THAT
FOLKS ARE KIND OF SEARCH FOR IS
THERE I IMAGINE THEY ALSO KIND
OF GO UP. BECAUSE THEY CAN TO,
YOU KNOW THEY'RE GOING TO HAVE
TO KEEP THEMSELVES LOWER TO BE
THAT OPTION. THAT'S THE CHEAPER
OPTION, BUT I IMAGINE IF THE
MORE NAME BRANDS ARE PUSHING UP
, UM, YOU KNOW THAT PERSON
TARGET MIGHT GO UP ANOTHER FIVE
BUCKS BECAUSE THEY'RE ABLE TO
CHARGE X AMOUNT FOR THE KNOCKOFF
MIGHT GO UP FIVE BUCKS BECAUSE
THE OTHER ONE GOES UP. THE SAME
THING WITH GASOLINE IN THAT
SENSE, WHERE A OFF BRAND CAN SEE
THE OPPORTUNITY THAT THEY KNOW
THAT WELL, THOSE FOLKS WENT UP
30 40 CENTS HIGHER THAN US
CLEARLY WE HAVE A CHANCE TO GO
UP. 5 10 CENTS MORE. ABSOLUTELY.
WHAT WE FOUND WAS WHEN WE WERE
LOOKING AT THIS. WHAT WE CALL
RESIDUAL PRICE INCREASE WAS THAT
THESE PREMIUM STATIONS WENT UP.
30 CENTS, BUT THE AVERAGE
THROUGHOUT ALL STATIONS IN
CALIFORNIA WAS 10 CENTS, SO
EVERYBODY'S RETAIL PRICE WENT UP
IN CALIFORNIA, BUT THE MORE
EXPENSIVE BRANDS WENT UP QUITE A
BIT HIGHER THAN THE OTHERS WENT
UP. NOT NOT, AS MUCH OF YOUR
ADVERTISING ESCALATE. THEY'RE
THEY'RE SELLING A BRAND BUT ALSO
IN SOME CASES, POTENTIALLY COULD
BE SELLING A QUALITY OF GASOLINE
THAT MAY OR MAY NOT HAVE SOME
VALIDITY IS CERTAINLY NOT TO THE
EXTENT OF CHARGING 2030. CENTS
MORE ARE ARE EVIDENCE REVEALED.
NO NO QUALITY DIFFERENCE. WE
REACHED OUT TO INDUSTRY. WE DID
RESEARCH AND WE DIDN'T GET A
RESPONSE FROM INDUSTRY ON THAT
QUESTION. OF OUR THE ARE THESE
PRODUCTS BETTER THAN THE
COMPETITORS. WE DIDN'T GET ANY
INFORMATION WE NOR COULD WE FIND
IN OUR LITERAL LITERAL
LITERATURE RESEARCH ANYTHING TO
SUPPORT THAT IDEA. THANK YOU.
ASSEMBLYMEMBER'S DAVIS. THANK
YOU, UM. IT'S BRINGING THIS UP
TWO WEEKS AGO WENT TO FILL UP
THE TANK AND LITERALLY FIRST GAS
STATION AND I WON'T NAME IT WAS
6, 55 AND LITERALLY TWO BLOCKS
AWAY. IT WAS 605. SO RIGHT THERE
REALLY SHOWS YOU THE DIFFERENCE
OF YOU KNOW WHERE YOU WERE
GOING. AND SO LOOKING AT THE
COMMISSION'S REPORT THAT THEY
HAD IN 2019 BASICALLY KIND OF
DETERMINED THAT REFINERIES
REALLY BURNT HAVING ANY PRICE
INCREASED. DID YOU AGREE WITH
THAT? YEAH, WE DID NOT. YES WE
DID NOT FIND THAT THE REFINERY
MARGIN WAS WAS CHANGING, AND SO
WHEN WE'RE TRYING TO DETERMINE
IT WAS IT WAS FOLLOWING THE
NATIONAL AVERAGE TENDS TO BE
HIGHER THAN THE NATIONAL AVERAGE
. THE REFINERY MARGIN, BUT IT
WASN'T IT WASN'T CHANGING, LIKE
THE RETAIL MARGIN WAS AND IT
BROKE ABOUT THINK IT WAS 2017.
AND I THINK IT WAS ASSOCIATED
WITH THE MAYOR MAY NOT HAVE BEEN
A CORRELATION WITH A REFINERY
OUTAGE WHEN PRICES TYPICALLY GO
UP, AND BUT THEY STAYED UP. AND
SO UH YES. SHORT ANSWER IS YES.
DID THEY FIND ANY GASQUE ALGAE
AT THAT TIME, EITHER. WELL YOU
KNOW THAT, UM, WE TRY TO JUST
EXPLAIN THE FACTS NEUTRALLY AND
WHETHER WHETHER CHARGING MORE IS
GOUGING OR NOT, IS FOR SOMEONE
ELSE TO JUDGE. BUT WE TRY TO
SHARE. YEAH WE TRIED TO SHARE
THE NUMBERS. WE FOUND
ASSEMBLYMEMBER'S MAZE. JUST.
THIS IS FASCINATING. THIS IS
ACTUALLY VERY INSIGHTFUL. UH THE
ONE OTHER ACTUALLY, JUST LOOKING
AT THE REFINERY COST AND PROFIT
BECAUSE THE DISTRIBUTION AND
MARKETING COSTS THAT'S REALLY
THE RETAILERS THAT ARE THERE, SO
I WANT TO TALK A LITTLE BIT
ABOUT THE REFINERY COST AND
PROFIT BECAUSE YOU KNOW THE
HEADLINES READ, YOU KNOW, BIG
OIL IS GOUGING US AND SO YOU
KNOW, OTHER THAN THE CRUDE OIL
COSTS, WHICH IS THE GLOBAL
MARKETPLACE. THERE'S THAT
REFINERY COSTS AND YOU KNOW
WHAT? YOUR FIRST SLIDES 90% OF
REFINERY THE REFINING FOR WHAT
WE CONSUME COMES FROM
CALIFORNIA. UH I'M WONDERING IF
WE'RE CALIFORNIA. REFINERY COSTS
ARE COMPARED TO THE REST OF THE
COUNTRY, AND I KNOW WE HAVE OUR
OWN SPECIAL BLEND IN IN
CALIFORNIA. UM SO SOME OF THAT
HAS TO DO WITH PUBLIC POLICY AS
WELL. BUT DECISIONS AT THE STATE
OF CALIFORNIA OUR GOVERNMENT
HERE HAS HAS HAS FORCED. UM BUT
WHERE'S OUR REFINERY COSTS
COMPARED TO THE REST OF THE
COUNTRY. IS IT BECAUSE
ELECTRICITY PRICES ARE HIGHER IN
CALIFORNIA, AND WE HAVE OTHER
POLICIES THAT CALIFORNIA HAS PUT
IN PLACE THAT HAVE DRIVEN UP THE
COST PER KILOWATT OF ELECTRICITY
? I'M SURE THAT MIGHT BE SOME OF
IT. BUT HAVE YOU DONE A STUDY ON
OUR REFINERY COSTS COMPARED TO
THE REST OF THE REFINERIES
ACROSS THE COUNTRY WE HAVE DO WE
KNOW OF GORDON'S ON. HE NEEDS TO
BE A MUTED IF WE COULD UNMOVED
IF IT WITH YOUR INDULGENCE.
GORDON SHRIMP ARE FEW ONE OF OUR
FIELDS. EXPERTS ARE LEAD IS ON
THE LINE, AND HE COULD SOMEBODY
MORE ANSWER THAT QUESTION BETTER
THAN I COULD. THE ANSWER IS YES,
WE HAVE THAT INFO, OKAY? ABOUT
THE TECHNOLOGY IRAN WE CAN'T
HEAR YOU.
ALTERNATIVELY WE COULD GET YOU
THAT INFORMATION. WE ARE IN
CALIFORNIA IN THE HIGH END OF
THAT PARTICULAR CATEGORY, BUT WE
CAN GET YOU ALL THAT INFORMATION
AND WE'VE GOT IT AND HOPEFULLY
WE CAN YOU KNOW IF HE IF HE'S
ABLE TO GET OUT TECHNOLOGY IN
LINE OKAY. THANK YOU.
ASSEMBLYMEMBER'S.
ASSEMBLYMEMBER'S MURATSUCHI. NO.
IT'S NOT IN THE ENVIRONMENTAL
PROGRAMS. THAT'S A GOOD QUESTION
, BUT I'M PRETTY SURE IT'S IN
THE REFINERY COST BECAUSE THE
REFINING IS MORE EXPENSIVE. IF
THAT'S INCORRECT, I'LL MAKE SURE
TO CLARIFY THAT. AND. IF HE CAN
GO BACK TO THE PREVIOUS SLIDE.
THE ONE THAT LISTED THE KEY
FACTORS. SO I'M TRYING TO
RECONCILE. UM YOUR COMMENTS ON
THIS SLIDE WITH THE FOLLOWING
SLIDE.LIKE WHAT YOU INDICATED
EARLIER, FOR EXAMPLE, THAT 50%
OF CALIFORNIA'S A GAS PRICES,
YOU KNOW, ARE DUE TO THE GLOBAL
CRUDE MARKETS. AND YET, YOU KNOW
THE FOLLOWING SLIDE, IT HAD THE
CRUDE PRICE BEING LESS THAN HALF
OF THE CALIFORNIA GAS PRICE AND
SOME YEAH. YEAH, A LITTLE LESS
THAN HALF IT'S A LITTLE LESS
THAN THAN NOW. OKAY BUT OKAY, SO
THAT'S WHAT YOU WERE TALKING
ABOUT THAT IT'S ABOUT. IT'S THE
BIGGEST DRIVER, BUT BUT THEN UM
, I AM AGAIN. I'M TRYING TO
RECONCILE THIS SLIDE WITH THE
PREVIOUS SLIDE BECAUSE BECAUSE I
ALWAYS HEAR THAT. THAT YOU KNOW
THE BIGGEST DRIVERS OF
CALIFORNIA GAS PRICES ARE ARE
THE GLOBAL MARKET AS WELL AS THE
RUSSIA'S WAR ON UKRAINE. YOU
KNOW WHERE WHERE IS THE RUSSIA'S
WAR ON UKRAINE, YOU KNOW,
REFLECTED IN IN IN THIS
BREAKDOWN HERE. IT WOULD MOSTLY
BE IN THE CRUDE PRICE CRUDES AT
ABOUT $109. THAT WAS THAT WAS
WHEN I SAW YESTERDAY WE ALSO
LOOK AT THESE ARE DRIVERS THAT
WE LISTED BOTH. OF PRICE SPIKES
AND JUST DID THE PRICE.
GENERALLY THE TWO DRIVERS OF
SPIKES ARE THE CRUDE PRICE. IT
CAN GO UP VERY QUICKLY. YOU CAN
GO DOWN VERY QUICKLY AND THEN
REFINERY OUTAGES AND WE'VE GOT A
CHARGE THAT WILL SHOW REFINERY
OUTAGES OVER TIME. AND WHEN ONE
HAPPENS AGAIN WHEN WE ONLY HAVE
10 LARGE ONES, ONE GOES OUT THAT
DRIVES THE PRICE UP VERY, VERY
QUICKLY. SO ESSENTIALLY THE
GLOBAL CRUDE MARKET AS WELL AS
THE GEOPOLITICAL UM, FACTOR IS
IT? THOSE ARE BOTH REFLECTED IN
THIS CHART AND IN TERMS OF THE
CRUDE PRICE, I THINK THAT'S
RIGHT THERE. THE OUR OUR EXPERT
IS NOT ABLE TO COMMAND BUT THERE
ARE, UM THE GEOPOLITICAL ISSUES
CAN HAVE IMPACTS BEYOND CRUDE.
BUT THAT'S CHIEFLY WHERE YOU
WOULD SEE THAT. MM. AND I KNOW
THAT MRS PETRIE-NORRIS. IS.
CHOMPING AT THE BIT TO TALK
ABOUT CALIFORNIA RELATIVE TO THE
OTHER STATES. BUT IT IS THE
PRIMARY DIFFERENCE IN TERMS OF
CALIFORNIA GAS PRICES RELATIVE
TO OTHER STATES. THE TOTAL TAXES
AND FEES. I CAN'T SAY WITH
CERTAINTY, BUT IT'S CERTAINLY A
LARGE ONE. THE OTHER THE OTHER
THE OTHER ONES WOULD BE THE
REFINERY COSTS AND PROFITS AND
THE DISTRIBUTION OF MARKETING
COSTS TOGETHER. THOSE ARE $2.
THOSE ARE HIGHER THAN THE REST
OF THE MOST OF THE REST OF THE
NATION. AND THEN YES, THE
ENVIRONMENTAL PROGRAM COSTS AND
THE STATE TAXES ARE HIGHER THAN
MOST STATES. OKAY, SO BUT WE'RE
GOING TO HEAR MORE ABOUT WHETHER
THERE IS ANY EVIDENCE OF PRICE
CAL JING REFLECTED IN THE REFUND
REFINERY COST AND PROFIT. UM,
PART OF THAT. ALL RIGHT. THANK
YOU. SO JUST TO, UM. DIG IN A
LITTLE BIT MORE THAT YOU HAVE
THE DOLLAR 50 REFINERY COSTS AND
THE DISTRIBUTION. THERE'S WHAT
IS THE DIFFERENCE BETWEEN THE
SUMMER AND WINTER BLEND? AND
WHERE IS THAT REFLECTED LIKE
COST WISE. AGAIN. I BELIEVE THAT
IS IN THE YELLOW, SO THE
REFINERY COST AND PROFIT BECAUSE
THEY MAKE A DIFFERENT MIX, AND
IT'S MORE EXPENSIVE TO MAKE THE
SUMMER BLEND. AND THAT'S GOING
TO BE REFLECTED IN THAT YELLOW
AND I, WE WILL GET BACK TO YOU
IF THAT'S INCORRECT, BUT I'M
PRETTY SURE THAT'S RIGHT. MAYBE
ARE WE ABLE TO GET SOMEBODY ON
THE LINE YET? THE EXPERT YEAH.
YOU HEAR ME? DREW? YES, GORDON,
YOUR YOU'RE ON. OKAY. THANK YOU
VERY MUCH. COULD YOU REPEAT?
REPEAT THE QUESTION, PLEASE. I
THINK THE ASSEMBLYMEMBER'S
WANTED TO KNOW WHERE THE MOST
RECENT QUESTION FROM THE CHAIR
WAS. WHERE IN THE WE'RE LOOKING
AT THE SLIDE, EIGHT THAT SHOWS
THE GAS PUMP AND THE VARIOUS
COMPONENTS OF THE PRICE. AND THE
QUESTION WAS THE SUMMER BLEND.
WHERE WHERE WHICH OF THE WEDGES
IS THAT? IS THAT IN. THAT WOULD
SHOW UP IN IN REFINING MARGIN.
THE COST WOULD BE HIGHER EARLIER
IN THE YEAR. WE'VE ALREADY
TRANSITION FROM OUR WINTER
RECIPE TO SUMMER RECIPES, SO
THAT'S ALREADY OCCURRED, BUT
THAT'S WHERE WE SHOW UP. SO IS
THAT'S IN THE YELLOW GORDON. I
GUESS THE QUESTION IS, HOW MUCH
DOES YES, WHAT IS THE VARIATION
OF THE YELLOW RIGHT HERE? YOU
HAVE A DOLLAR 50 IS THAT
INCLUDED IS THAT THE SUMMER
BLEND IS THAT THE WINTER BLEND
OR BUT WHAT WOULD THAT, UM WHAT
WOULD THAT BE? SO GORDON. WHAT'S
THE PRICE IMPACT OF SWITCHING
FROM WINTER TO SUMMER? HOW MUCH
MORE? DOES IT INCREASE THAT
WEDGE? SO THE PRICE IMPACT CAN
VARY, BUT IT CAN BE AS MUCH AS
30 CENTS A GALLON TEMPORARILY
UNTIL THE REST OF US SWITCHES AS
WELL. THE REFINING COSTS IN
PROFIT CATEGORY. THAT IS PART OF
IT. THAT'S CORRECT, BUT IT'S
ALSO THEIR FIXED OPERATING COSTS
FOR THE REFINERIES. IT'S THEIR
VARIABLE OPERATING COSTS THAT
WERE MENTIONED EARLIER. BIRTH,
EXPENSIVE ELECTRICITY, NATURAL
GAS WATER. AND IT IS WHAT.
EXECUTIVE DIRECTOR BOWEN
MENTIONED WHEN THERE'S UNPLANNED
OUTAGES, THEY HAVE TO PURCHASE
MORE EXPENSIVE COMPONENTS SO
THAT CAN SHOW UP IN THE REFINERY
COSTS NUMBER GETTING BIGGER OVER
TIME, AS WELL AS PROFIT. WHICH
ARE NEAR RECORD HIGH AT THIS
MOMENT IN TIME. GORDON THE
COMMITTEE ALSO ASKED, COULD YOU
COULD YOU EXPLAIN? MAYBE JUST
VERY BRIEFLY. GENERALLY HOW DOES
OUR REFINERY COSTS AND PROFIT
AND THE NEXT ONE ABOVE IT? THE
DISTRIBUTION MARKETING COSTS A
DOLLAR 50 AND 56. CENTS. HOW DO
THOSE FIGURES COMPARE? TO THE
NATIONAL AVERAGE. REFINERY
OPERATING COSTS IN CALIFORNIA
ARE NORMALLY HIGHER. THERE IS A
NUMBER OF REASONS FOR THIS, UH
THEY'RE HIGHER AVERAGE LABOR
COSTS IN CALIFORNIA. PROPERTY
TAXES OR HIGHER UTILITY COSTS
ARE HIGHER FOR THEM ACROSS THE
BOARD. THERE'S ALSO, UM IN
EMISSION. YOU KNOW THE IMPORTANT
EMISSION REDUCTION REGULATIONS
FOR BOTH AIR EMISSIONS AS WELL
AS WHAT IT DISCHARGED WATER.
THAT OTHER STATES DON'T HAVE NOT
NEARLY THAT SEVERELY SO THAT
THAT'S ADDITIONAL COST FOR THE
REQUIREMENTS IN CALIFORNIA, AND
THAT WILL THAT CAN BE REFLECTED
IN THOSE COMPANIES THAT DO
PUBLICLY SURE THAT INFORMATION
BY REFINERY IN THE REST OF THE
FILINGS, RURAL MARATHON OR A
COUPLE OF EXAMPLES.
ASSEMBLYMEMBER'S BASS. THANK YOU
FOR THAT ANSWER. I'M NOT QUITE
SURE YOU KNOW THAT THIS
BREAKDOWN THEN IS FULLY
APPROPRIATE BECAUSE IF WE WERE
TO BREAK IT DOWN BY MATTERS OF
PUBLIC POLICY THAT WOULD
ACTUALLY HAVE TO INCREASE
INCREASE, NOT ONLY THE STATE
UNDERGROUND STORAGE TANK FEE,
THE STATE AND LOCAL SALES TAX
THE FEDERAL EXCISE TAX, WE
PROBABLY HAVE TO ADD SOME OF
THAT INTO ENVIRONMENTAL PROGRAMS
OF STATE POLICY AS IT RELATES TO
LABOR. ALL OF THE PUBLIC POLICY
DECISIONS THAT CALIFORNIA HAS
MADE IS INCREASING THE COST
COMPARED TO OTHER STATES, SO I
DON'T I DON'T I THINK IT'S VERY
CLEAR THAT THAT'S THAT THAT'S
THE CASE. SO IS THERE ANALYSIS
THEY MUST HAVE DONE HAVE
ANALYSIS TO THAT EFFECT, WHICH I
THINK ACTUALLY WOULD BE
INCREDIBLY HELPFUL AGAIN IS A
FOLLOW UP FOR ALL COMMITTEE
MEMBERS TO SEE AND BE ABLE TO
DIGEST. THEN, UH, ARE YOU ABLE
TO DETERMINE BOTH FOR THE
DISTRIBUTION AND THE REFINERY?
WHAT THE PROFITS ARE OVER TIME.
YOU YOU MENTIONED THAT THE
PROFITS ARE AT RECORD HIGHS IS
THAT BOTH FOR THE LOCAL AND
REFINERY COSTS? IMPORTANT TO
HEAR THAT QUESTION. YES, I DID.
SO WE'LL TALK ABOUT PROCESS SO I
MENTIONED YOU KNOW RECORD OR
NEAR RECORD PROFITS IN THE
REFINING INDUSTRY AT THIS TIME.
THAT IS THE CASE ACROSS THE
BOARD IN THE UNITED STATES,
REFINERY MARGINS HAVE INCREASED
DRAMATICALLY, UH, SINCE MARCH OF
THIS YEAR. AND THEY'RE EVEN
HIGHER IN CALIFORNIA, WHICH IS
NORMALLY THE CASE. SO MOST OF
THAT INCREASE OR THAT RISE OUR
PROFIT. REFINING INDUSTRY IS
GOING TO BE VERY PROFITABLE THIS
YEAR. IN LARGE PART BECAUSE WE
FUNDING CAPACITY IN THE UNITED
STATES HAS DECLINED. BY 4.3% AND
REFINING CAPACITY IN CALIFORNIA
HAS DECLINED BY 9.3% THIS IS
CONSTRAINED THE MARKETS IN THE
UNITED STATES AND CALIFORNIA.
AND ALL MARKET CLEARING PRICES
ARE SIGNIFICANTLY HIGHER.
ANOTHER REASON IS DEMAND HAS
COME BACK FULLY FROM THE
PANDEMIC FOR DIESEL AND NOW JUST
FUEL AND EVEN MORE SO IN
GASOLINE IS GETTING BACK CLOSE
IN THE UNITED STATES. THAT WON'T
RETURN TO 2019 LEVELS. PER YOU
KNOW. DIRECTOR BOWEN'S COMMENTS
ABOUT ZEB VEHICLES REMOTE
WORKING, SO DEMAND IS RISING
REFINERY CAPACITY CONSTRAINTS,
SO THE MARKET PRICES AND
WHOLESALE LEVEL ARE MUCH HIGHER
AND THERE ARE RECORD PROFITS.
BUT IT'S JUST NOT ISOLATED TO
CALIFORNIA AT THIS TIME IN A IN
THE LAST FACTOR RELATED TO
RUSSIA'S INVASION OF UKRAINE.
ARE. DECREASE AVAILABILITY
REFINED PRODUCTS FROM RUSSIA.
BESIDES THE CRUDE OIL THAT HAS
HAS CAUSED EXPORTS, ADDITIONAL
EXPORTS TO LEAVE THIS COUNTRY,
AS WELL AS OTHERS AND
CONSTRAINING PRICES GLOBALLY.
CAN YOU WHEN YOU SAID, UH,
REFINING CAPACITY, FIRST SAID.
IT'S CONSTRAINED AND THEN YOU
YOU ALSO SAID DECLINED, HAS IT.
THE REFINERY CAPACITY DECLINED
IN CALIFORNIA. YES THE REFINERY
CAPACITY DECLINED AT 9.3% OF WAS
A RESULT OF MARATHON MARATHONS
DECISION TO SHUTTER THEIR
REFINERY IN MARTINEZ,
CALIFORNIA. NORTHERN CALIFORNIA
BACK IN APRIL OF 2020. THERE
HAVE BEEN SOME OTHER REFINERY
CLOSURES IN THE UNITED STATES.
AS WELL OVER THIS PERIOD OF TIME
COMPARED TO JANUARY OF 2019 THAT
HAVE ALSO REDUCED THE ABILITY TO
CREATE GASOLINE IN THE UNITED
STATES. AND BESIDES, I JUST WANT
TO REMIND THE COMMITTEE. THIS IS
ALL WORK THAT HAS BEEN DONE
ALREADY. AND I WANT TO MAKE SURE
THAT EVERYBODY TAKES NOTE OF THE
ISSUES THAT WE SHOULD BE DELVING
INTO AT THE NEXT, UM FEW
MEETINGS. SO DO WE HAVE ANY MORE
QUESTIONS ON THIS SLIDE? DAVIS
THANK YOU APPRECIATE IT. JUST
ONE QUESTION WHEN WE WERE
TALKING IN THE DECREASE IN
CAPACITY. AND WOULD YOU SAY THAT
THE CONSTRAINTS HERE IN
CALIFORNIA MAKES IT HARD? AND
THAT'S ONE OF THE REASONS WHY WE
DO HAVE THE DECLINING CAPACITY.
OR ARE YOU ASKING ME WHAT WAS
THE REASON MARATHON DECIDED TO
SHUTTER THEIR REFINERY. THAT
WOULD BE RIGHT. IF YOU WANT TO
ANSWER THAT, AND THEN JUST, YOU
KNOW, ONE OF THE REASONS TO WHY
YOU KNOW, BECAUSE OF THE
CAPACITY IS DEPLETING. IS IT
BECAUSE DIFFERENT COMPANIES LIKE
MARATHON ARE LEAVING? AND IS
THAT DUE TO ANY REGULATIONS OR
POLICY HERE IN THE STATE? I'M
NOT A MARATHON DECISIONS THEY
PUBLICLY STATED WAS RELATED TO
THE PANDEMIC WHEN GASOLINE
DEMAND DECLINED RATHER QUICKLY
BY MORE THAN 15. AND SO THERE
WAS TOO MUCH REFINING OR GASSING
PRODUCTION CAPACITY IN
CALIFORNIA TIME REFINING MARGINS
HAD DECLINED TO VERY LOW LEVELS,
AND IT WAS INEVITABLE. SOMEONE
WAS GOING TO TEMPORARILY SHUT
DOWN OR PERMANENTLY SET DOWN. SO
MARATHON MADE THAT DECISION. BUT
THE SAME TIME THEY HAD ANOTHER
PLAN TO REPURPOSE THE REFINERY.
TO BE ABLE TO PRODUCE RENEWABLE
DIESEL AS MUCH AS THEY WERE
PRODUCING PRIOR TO THE PANDEMIC
AND THE CLOSURE OF THE REFINERY
SO THAT CONSTRUCTION WORK IS
UNDERWAY. SO THAT WAS AN
ECONOMIC DECISION AND THE
DECISION TO REPURPOSE TO RENEWAL
. THE DIESEL WAS DRIVEN CHIEFLY
BY THE LOW CARBON FUEL STANDARDS
IN CALIFORNIA. THAT COMPELS
OBLIGATED PARTIES TO USE LOW
CARBON INTENSITY MATERIAL LIKE
RENEWABLE DIESEL AND SO MARATHON
MEAN THAT AS A BUSINESS
DECISION, BUT WE THINK IT WAS
INEVITABLE. BECAUSE OF THE
PANDEMIC THAT SOME REFINERY
CAPACITY WOULD HAVE BEEN
CURTAILED IN CALIFORNIA. AND
THAT TO YOUR EARLIER QUESTION.
YES SO THE MARKET IN CALIFORNIA
COMPARED TO 2019 IS CONSTRAINED
IN THE SENSE IF THERE ARE SOME
UNPLANNED REFINERY, ADJUST OR
DIFFICULTIES THAT SPIRIT
CAPACITY TO MAKE GASOLINE IS NOW
GONE. THERE IS NO GASSING
PRODUCTION OCCURRING FROM THAT
FACILITY IN NORTHERN CALIFORNIA.
AND WHEN THEY WERE OPERATING
THEIR CAPACITY TO PROCESS CRUDE
OIL WAS IN EXCESS OF 160,000
BARRELS PER DAY. SO THE MARKET
IN CALIFORNIA IS TIGHTER AND HAS
BECOME A BIT MORE CONSTRAINED
THAN THAT OF THE UNITED STATES.
I WANT TO GO BACK. YOU SAID, UM
THE NUMBER OF WHERE WE'RE AT 16%
OF THE NEW CARS SOLD R E V S.
THAT'S RIGHT. AND SO NO.
OBVIOUSLY THESE OIL COMPANIES
ARE NOT GOING TO TEMPORARILY,
UH, INCREASE CAPACITY TO HELP US
RIGHT NOW BECAUSE THEY SEE DOWN
THE LINE OR ARE I WOULD IMAGINE
THEY WOULDN'T BECAUSE THEY SEE
DOWN THE LINE THAT, UM THERE IS
GOING TO BE A CONTINUING DECLINE
IN DEMAND ONCE THAT NUMBER GOES
UP. AND SO WHERE. HOW FAST DO
THE NUMBER OF E V S HAVE TO
INCREASE TO START TO SEE THIS
LESS CONSTRAINED CAPACITY OF, UM
, LESS CONSTRAINED REFINERY
CAPACITY. SO WE DIDN'T TEASE OUT
THE PRECISE SPLIT BETWEEN THE
SORT OF WORKING FROM HOME FACTOR
THAT HAS DRIVEN DOWN GASOLINE
DEMAND OVER THE LAST COUPLE OF
YEARS AND THE PENETRATION OF
ZEB, BUT WE'RE TAKING A LOOK AT
THAT NOW, BUT OF THAT 10% A
LITTLE BIT SMALLER PERCENTAGE WE
THINK IS FROM FROM THE SERVES
BUT TO YOUR POINT AS THE NUMBER
OF ZEROS GROW. WE'D EXPECT THAT
THE DEMAND FOR GASOLINE TO
CORRESPONDINGLY GO DOWN. BUT HOW
MUCH OVER WHAT TIME IS ANYBODY'S
GUESS. LOOKED AT THAT, OKAY? DO
WE HAVE ANY OTHER QUESTIONS ON
THIS SLIDE? AND I THINK YOU HAVE
ONE MORE SLIDE ON RIGHT SIDE.
BUT I THINK WE ALREADY COVERED
IT WHICH WAS SIMPLY THE REPORT
AND SOME OF THE I'VE QUOTED
THERE SOME OF THE KEY FINDINGS
WE MADE IN THAT REPORT. SO I
THINK WE COVERED THAT. RIGHT UH
, MISS WILSON QUESTION ON THE ON
THE NOTE AND THE, UH, I GUESS
QUOTE FROM THE REPORT THAT SAYS,
HOWEVER, UM, NO, WAIT. THE PRICE
OF GASOLINE AND CALIFORNIA'S
UNREGULATED COMPANIES CAN CHARGE
PRICES BASED ON WHAT CONSUMERS
ARE WILLING TO PAY. IS THERE ANY
STATE OR UM OTHER NATIONS
SUCCESSFULLY REGULATING PRICES.
AND WHAT DOES THAT LOOK LIKE? I
DON'T KNOW. MAYBE GORDON KNOWS
THE QUESTION GORDON WAS, ARE
THERE OTHER STATES OR NATIONS
THAT REGULATE GASOLINE PRICES?
WE DO NOT. BUT ARE WE AWARE OF
IT ELSEWHERE? YES THERE ARE.
THERE ARE NATIONS THAT DO HAVE
EITHER PRICE CONTROLS ON THEIR
FUEL. OR COMBINATION OF REBATES
TO CONSUMERS TO KEEP PRICES LOW
AND ALMOST ALL OF THESE NATIONS
ARE NATIONS THAT ARE CRUDE OIL
PRODUCERS AND EXPORTERS.
VENEZUELA IS AN EXAMPLE. AND
THEY HAVE SOME OF THE LOWEST
GASOLINE DIESEL PRICES IN THE
WORLD. OF LESS THAN 10 CENTS PER
GALLON. STILL THERE, SUBSIDIZED. BUT THEY HAVE THE ABILITY OF
THAT BECAUSE THEY'RE EXPORTING
CRUDE OIL AND EARNING REVENUE
FROM CRUDE OIL EXPORTS. GORDON
COULD YOU ALSO DO THE BREAKDOWN
OF THE ENVIRONMENTAL PROGRAMS
THAT INCLUDE CAP AND TRADE? YEAH
SO IN THE ENVIRONMENTAL PROGRAMS
SLICE, I THINK IS, YOU KNOW 36
CENTS PER GALLON. YOU'RE CORRECT
THE TWO GOVERNMENTAL PROGRAMS
THAT ACCOUNT FOR THAT OR THE LOW
CARBON FUEL STANDARD. AND CAP
AND TRADE AS APPLIED TO
TRANSPORTATION FEELS, AND IN
THIS EXAMPLE GASOLINE. ALL RIGHT
. AND THEN WE HAD I HAVE SOME
KIND OF ENDING THE PRESENT IT
WELL. GO AHEAD WITH OUR WRAP UP
QUESTIONS. WHAT ARE SO THIS IS
WHAT WE'RE REALLY TRYING TO LOOK
AT TODAY IS WHAT IS THE RESEARCH
THAT'S BEEN DONE ALREADY. WHAT
ARE THE FINDINGS AND THEN WE'RE
GOING TO HAVE A WORK PLAN. GOING
FORWARD. WE HAVE A GENERAL IDEA
OF WHAT IT IS THAT WE WANT TO
DO, BUT WE WANT TO GET INPUT
FROM BOTH THE PUBLIC AND THE
COMMITTEE MEMBERS, BUT, UM JUST
OUT OF CURIOSITY, IF YOU WERE ON
THIS COMMITTEE WHAT DO YOU THINK
THE AREAS ARE THAT WE SHOULD
DELVE INTO. WELL, THAT' A GOOD
QUESTION. AND I THINK WE'VE
TALKED ABOUT SOME OF THEM TODAY.
I THINK YOU'RE ON THE RIGHT
TRACK TO LOOK AT WHAT ARE THE
COMPONENTS OF THE PRICE AND THE
PRICE INCREASE AND YOU'LL HEAR
FROM OTHERS. I KNOW ON YOUR
PANEL THIS AFTERNOON AND CAN
MAYBE EXPLORE WHETHER SOME OF
THE LESS UM AH, SAVORY REASONS
MAY BE IN PLAY. WE DON'T KNOW.
UH SO I THINK THOSE ARE THOSE
ARE MAJOR ONES. OKAY AND THEN,
UM, BASED ON THE CC STAFF
CONCLUSION, DO YOU THINK THAT
THE REGULATORS HAVE ENOUGH
AUTHORITY TO INVESTIGATE THE
RETAIL SECTOR. DID YOU SAY
SHOULD SHOULD THE SHOULD WE HAVE
THE AUTHORITY TO DO THAT? DO YOU
THINK THEY HAVE ENOUGH AUTHORITY
TO INVESTIGATE THE RETAIL
SECTOR? UM MY APOLOGIES AGAIN. I
DEFER TO THE ATTORNEY GENERAL
REPRESENTATIVE ON THAT. I'M NOT
FULLY AWARE OF THEIR THEIR
INVESTIGATORY POWERS. OKAY. AND
THEN DO YOU HAVE ANY OPINIONS ON
WHETHER THERE SHOULD BE
ADDITIONAL LEGISLATION TO
COLLECT INFORMATION REGARDING
GASOLINE PRICING. WE DON'T HAVE
A FORMAL POSITION ON THAT, OKAY?
AND THEN, UM. WHAT INFORMATION
IS. I GUESS THIS WOULD BE A BIG
QUESTION. WHAT INFORMATION IS
CURRENTLY SHARED PUBLICLY OR
CONFIDENTIALLY TO GOVERNMENT
REGULATORS ABOUT GASOLINE
PRICING. SO GORDON COULD SPEAK
TO THIS AT LENGTH IF YOU'D LIKE
, BUT WE DO COLLECT THAT
INFORMATION VERY REGULARLY, AND
WE REPORT IT SO YOU CAN GET
REALLY UP TO DATE INFORMATION ON
WHAT THE PRICES ARE AT ANY GIVEN
TIME. SO THERE'S QUITE A BIT OF
INFORMATION OUT THERE ON THAT.
SO GORDON, CAN YOU KIND OF
SUMMARIZE THAT FOR US OR OR IS
IT ALL CONFIDENTIAL? COMMENT.
WHAT THE PRESS INFORMATION THAT
WE DO SEE, MOST OF THAT IS
PROPRIETARY INFORMATION THAT WE
PURCHASED THROUGH SUBSCRIPTIONS.
SO RETAIL PRICING AS AN EXAMPLE
WOULD BE FROM OIL PRICE
INFORMATION SERVICE. THEY
COLLECT CREDIT CARD SWIPE DATA
BY INDIVIDUAL LOCATION. AND
GENERATE A FILE EACH DAY SO WE
CAN SEE AS ANY PARTICULAR
LOCATION. YOU KNOW THAT THE
DIRECTOR MENTIONED, YOU KNOW 9
10,000 LOCATIONS A DAY. WHAT THE
PRICE WAS THAT MORNING, AND IT
WILL FURTHER TELL US WHAT THE
BRAND IS AND THE PHYSICAL
LOCATION, SO WE HAVE VERY GOOD
INSIGHT AS TO DIFFERENT PRICES
BEING CHARGED BY BRAND IN
DIFFERENT LOCATIONS ON THE DAILY
BASIS. WE ALSO PURCHASE EACH DAY
WHOLESALE INFORMATION WHAT
REFIRE REFINERY TRANSACTIONS IN
WHAT WE CALL THE SPOT PIPELINE
MARKET, BUT THE WHOLESALE MARKET
AT DISTRIBUTION TERMINALS
THERE'S ABOUT 50 16, CALIFORNIA
SO WE SEE DAILY PRICING
INFORMATION BY COMPANY. OF ALL
THAT, BUT ONCE AGAN, THIS IS
PROPRIETARY INFORMATION NOT
REQUIRED TO BE PROVIDED TO US.
AND. AND SO IT CAN BE AVAILABLE
TO OTHER ENTITIES AS WELL AS
THEY WERE TO PURCHASE THIS
INFORMATION, BUT IT IS
PROPRIETARY. THANK YOU. RIGHT DO
WE HAVE ANY QUESTIONS BEFORE WE
WRAP UP MR BONES TESTIMONY? THIS
HAS BEEN EXTREMELY HELPFUL.
THANK YOU VERY MUCH. AND UM WE
APPRECIATE YOU COMING IN. THANK
YOU ALL VERY MUCH. RIGHT. NEXT
WE HAVE DOCTOR SEVERIN
BORENSTEIN FROM THE ENERGY
INSTITUTE AT THE HAAS SCHOOL OF
BUSINESS, AND HE WILL BE
PARTICIPATING VIA WEBEX. MR
BORNSTEIN ALSO HAS A POWER POINT
PRESENTATION. YOU. CAN YOU HEAR
ME? ALL RIGHT, AND THAT THAT'S A
THAT POWER POINT WAS JUST PASSED
OUT. GOOD AFTERNOON. CAN YOU
HEAR ME? BUT CAKES. ALL RIGHT.
GOOD AFTERNOON, DR BORENSTEIN.
GOOD AFTERNOON. CAN YOU HEAR ME?
OKAY IS THERE ANY WAY TO IS
THERE ANY WAY TO INCREASE THE
VOLUME OR HOW ABOUT THIS? IS
THAT BETTER? YES, THAT IS
BETTER. OKAY AND THANK YOU FOR
JOINING US HERE TODAY. THANK YOU
FOR HAVING ME JOIN YOU. UM AND,
UH, THE MR BOWEN COVERED QUITE A
BIT, BUT I THINK I CAN ADD A BIT
TO IT. YOU SHOULD HAVE MY SLIDES
THERE. SO IF YOU WE COULD EITHER
JUST DO THIS WITHOUT WELL OKAY?
UM SO IF YOU GO TO THE SECOND
SLIDE UH, THIS IS THE PRICE OF
GASOLINE. ALL OF MY SLIDES ARE
ADJUSTED FOR INFLATION. SO THE
NO SURPRISE HERE. PRICES OF
GASOLINE ARE VERY OH, BEFORE I
START, I SHOULD SAY I'M A
PROFESSOR AT UC BERKELEY. BUT I
WAS ALSO CHAIR OF THE C. E. C S
PETROLEUM MARKET ADVISORY
COMMITTEE FROM 2014 TO 2017,
WHICH FOR MOST OF THAT TIME,
WHICH WAS THE LENGTH OF THE LIFE
OF THAT COMMITTEE. WE DID IF YOU
WERE A FINAL REPORT. THAT REPORT
FIRST IDENTIFIED WHAT I CALL THE
MYSTERY GASOLINE SURCHARGE,
WHICH CONTINUES TO THIS DAY AND
WHICH I'M GOING TO FOCUS ON
PRIMARILY, I'VE ALSO FILED
WRITTEN TESTIMONY, WHICH I SENT
IN THIS MORNING, WHICH PROBABLY
HAS A BIT MORE DETAIL THAN I
WILL BE ABLE TO GET TO SO THIS
IS THE PRICE OF GASOLINE
DEFINITELY GOES UP THROUGH MAY,
THE JUNE NUMBER WILL PUSH IT
ABOVE THAT THAT PEAK THAT
OCCURRED IN 2000 AND SEVEN UH
AND SO WE WILL HAVE THE HIGHEST
REAL PRICES OF GASOLINE. IN
RECENT TIMES. NEXT SLIDE,
PLEASE. PART OF THE CAUSE IS THE
HIGH PRICE OF CRUDE OIL. THE
BENCHMARK PRICE OF CRUDE IS
BRENT CRUDE. UM YOU AS YOU CAN
SEE HAS GONE WAY UP SINCE THE
DEPTHS OF THE OF THE PANDEMIC.
IT'S NOT AT ALL TIME HIGHS. AT
ALL, BUT IT IS MASSIVELY HIGHER
THAN IT WAS A YEAR AGO. THIS IS
THIS PRICE IS SET IN THE WORLD
MARKET. UH IT INCLUDES ALL THE
SUPPLY AND DEMAND IN THAT WORLD
MARKET. PRODUCING MORE GASOLINE
OR MORE OIL IN CALIFORNIA, WHEN
PRICES ARE HIGH, WILL CERTAINLY
BRING IN REVENUES TO PEOPLE WHO
ARE PRODUCING THEM AND TO SOME
OF THE TAXES THEY PAY. BUT
THAT'S NOT GOING TO CHANGE THE
WORLD PRICE OF CRUDE OIL VERY
MUCH AT ALL. AH SO I THINK IT'S
IMPORTANT FOR THIS COMMITTEE TO
RECOGNIZE THAT THE CRUDE OIL
COMPONENT OF THE PRICE OF
GASOLINE IS PRETTY MUCH OUT OF
THE CONTROL OF ANYTHING THAT
THIS COMMITTEE COULD DO. NEXT
SLIDE, PLEASE. THIS IS THE SPOT
PRICE OF GASOLINE. UM AND THERE
ARE THREE BASIC LOCATION.
SELENA'S PRICE. THIS IS FOR THE
COMMODITY. ONE IS LOS ANGELES
AND THAT'S FOR THE CARB. MY TYPE
OF GASOLINE AND THE OTHER TWO
ARE IN NEW YORK AND THE GULF
COAST, AND THOSE ARE VERY
CONVENTIONAL GASOLINE. AND THE
THING YOU SEE HERE IS FIRST OF
ALL. THEY ALL MOVE TOGETHER
BECAUSE THEY'RE ALL PRICED, UH
TO CRUDE OIL. AND SECONDLY, THAT
CALIFORNIA IS CONSISTENTLY
HIGHER. AND IF YOU GO TO THE
NEXT, UH, SLIDE. PLEASE WHAT
YOU'LL SEE IS THIS IS THE
DIFFERENTIAL BETWEEN THE L. A
SPY PRICE. AND NEW YORK AND GULF
AVERAGE. AND IF YOU LOOK CLOSELY
, YOU CAN SEE THERE IS THIS
SUMMER BEGINNING OF SUMMER
BLENDS SPIKE. UH BUT WHAT YOU
ALSO SEE HERE IS THAT THE PRICE
FOR THE ACTUAL COMMODITY, THE
GASOLINE COMMODITY IN
CALIFORNIA, THOUGH IT'S HIGHER
IT IS ACTUALLY BEEN DECLINING
RELATIVE TO THE REST OF THE
COUNTRY TO THE CONVENTIONAL
GASOLINE OVER THE LAST NEARLY 20
YEARS, SO THE CALIFORNIA
GASOLINE DOES COST MORE TO MAKE.
AH AH, AND YOU CAN CERTAINLY SEE
THINGS LIKE THE 2015 REFINERY
DISRUPTION THERE AND WHEN WE DO
HAVE THOSE SORTS OF REFINERY
DISRUPTIONS, WE SEE BIG SPIKES.
BUT THE AVERAGE DIFFERENTIAL FOR
THE ACTUAL GASOLINE COMMODITY.
IS NOT REALLY MUCH HIGHER TODAY
IS ACTUALLY LOWER TODAY,
ADJUSTED FOR INFLATION. THAN IT
WAS 20 YEARS AGO. SO AGAIN, AS
THIS COMMITTEE THINKS ABOUT
WHERE TO INVESTIGATE. UH THEY
THINK FOCUSING ON SOMETHING
DOWNSTREAM FROM THE COMMODITY
PRICE OF GASOLINE WILL BE
IMPORTANT. BUT THAT ALSO
ADDRESSES AN ISSUE AND I
COULDN'T KEEP TRACK. I WAS
TRYING TO KEEP NOTES HERE THAT
SOMEBODY RAISED OF IS THIS A
PROBLEM WITH CALIFORNIA REFINERY
CAPACITY? AND THIS SUGGESTS,
IT'S NOT THAT THE ACTUAL
COMMODITY PRICE OF GASOLINE IT
DOES. THE TIGHT CALIFORNIA
MARKET DOES CAUSE MORE
VOLATILITY, BUT THE ACTUAL
COMMODITY PRICE OF GASOLINE HAS
NOT. DIFFERED MORE HAS NOT GONE
UP RELATIVE TO THE REST OF THE
COUNTRY. IN FACT, IT'S GONE DOWN
VERY GRADUALLY OVER THE LAST 20
YEARS. SO AGAIN, I THINK THE
PROBLEM WE'RE SEEING IN
CALIFORNIA THAT IS UNIQUE TO
CALIFORNIA. AND THAT IS
SOMETHING THIS COMMITTEE CAN
POTENTIALLY DO SOMETHING ABOUT.
IS NOT AT THE REFINERY LEVEL. WE
DO PAY MORE OR THE OUR GASOLINE
DOES COST MORE TO MAKE. UH WE
ARE SOMEWHAT ISOLATED MARKET
THAT WE DO REGULARLY BRING IN
GASOLINE THAT MEETS OUR
SPECIFICATIONS FROM OTHER PARTS
OF THE WORLD. BUT UM, BUT AND IF
WE DO PAY A BIT MORE FOR IT
BECAUSE OF THAT, BUT THAT'S NOT
THE BIG PIECE OF WHY ARE PRICES
ARE HIGHER THAN IN THE REST OF
THE COUNTRY. ALRIGHT WHAT, AS
WAS POINTED OUT EARLIER. A BIG
PIECE OF Y. OUR PRICES ARE
HIGHER IS WE HAVE HIGHER TAXES
AND ENVIRONMENTAL FEES? UH AND
THOSE, OF COURSE, ARE DECISIONS
THAT THE LEGISLATURE AND THE
GOVERNOR MAKE TO SET THOSE TAXES
AND TO HAVE A CAP AND TRADE
PROGRAM AND TO HAVE A LOW CARBON
FUEL STANDARD. UH AND THOSE
DEFINITELY HAVE DRIVEN UP OUR
PRICE RELATIVE TO THE REST OF
THE COUNTRY. BUT THERE IS AN
ADDITIONAL COMPONENT WHAT I
REFER TO AS THE MYSTERY GASOLINE
SURCHARGE. THAT WAS NOT THEIR
PRIOR TO 2015 NEXT SLIDE,
PLEASE. SO THIS IS CALIFORNIA'S
GASOLINE PRICE MINUS THE
GASOLINE PRICE AVERAGE IN THE
REST OF THE UNITED STATES TAKING
CALIFORNIA OUT OF THE NATIONAL
AVERAGE. AH ADJUSTED FOR THE
DIFFERENTIAL IN TAXES AND
ENVIRONMENTAL FEES BETWEEN
CALIFORNIA AND THE REST OF THE
COUNTRY. AND WHEN YOU LOOK AT
THIS, IT'S REALLY STARK. PRIOR
TO THE FEBRUARY 2015 FIRE AT THE
EXXON TORRANCE REFINERY. OUR
PRICES WERE HIGHER THAN THE REST
OF THE COUNTRY, BUT THE
DIFFERENCE WAS PRETTY MUCH
ENTIRELY EXPLAINED BY THE
DIFFERENCES IN TAXES AND FEES.
SINCE 2015. OUR PRICES ARE
PRICES WENT UP IN 2015 WHEN WE
HAD THOSE REFINERY OUTAGES, UH
AND, UH, BUT THEY NEVER CAME
DOWN AGAIN, EVEN AFTER THE
TORRANCE REFINERY. WAS PREPARED
AND FULLY BACK ONLINE. AND WHILE
WE HAVE HAD REFINERY OUTAGES
BEFORE, SOME NOTABLE ONES IN
2000 AND EIGHT AND 2012, THOSE
DID NOT CAUSE US TO HAVE A
PERMANENTLY HIGHER PRICE.
SOMETHING HAS CHANGED SINCE 2015
. AND THAT'S WHAT THE PETROLEUM
MARKET ADVISORY COMMITTEE TRIED
TO LOOK INTO. WE DID NOT HAVE UH
, ANY AUTHORITY TO COMPEL
TESTIMONY. THE WESTERN STATES
PETROLEUM ASSOCIATION, WHICH Ó
UP, BUT NONE OF THE ACTUAL OIL
COMPANIES, WHISPER WOULD SIMPLY
SAY THEY AREN'T AT LIBERTY TO
DISCUSS PRICES. SO WE REALLY
COULDN'T MAKE MUCH PROGRESS. WE
ALSO HAD ONE HALF OF ONE STAFF
MEMBER FROM THE CC AND NO BUDGET
TO DO AN INVESTIGATION IN 2017.
YEAH, CAN YOU JUST, UH CLARIFY
AGAIN. THE CALCULATION ON THIS
SLIDE. OH, YEAH. SO THIS IS THE
RETAIL PRICE IN CALIFORNIA. MY
AVERAGE RETAIL PRICE AND THE
REST OF THE COUNTRY TAKING
CALIFORNIA OUT OF THAT AVERAGE.
UM AND THEN TAKING OUT THE
DIFFERENCE BETWEEN OUR TAXES AND
ENVIRONMENTAL FEES AND THE
AVERAGE TAXES AND ENVIRONMENTAL
FEES FOR THE REST OF THE
COUNTRY. AND THEN TAKING OUT AN
EXTRA 10 CENT DIFFERENTIAL,
WHICH HAS BEEN GENERALLY VIEWED
AS A GENEROUS, UH, ADJUSTMENT
FOR THE ADDITIONAL COST OF
MAKING CALIFORNIA'S CLEANER
BURNING GASOLINE. OKAY, SO THE
AND. AND PRIOR TO 2015, AS YOU
CAN SEE THAT PRETTY MUCH
EQUALIZED EVERYTHING. AND SINCE
2015 THERE HAS BEEN A
DIFFERENTIAL THAT HAS NOT GONE
AWAY. ALL RIGHT. THANK YOU. SURE
UM, SO LET ME TALK ABOUT WHERE I
THINK THE MR BOWEN SPECULATED A
BIT UM, BUT I THINK THAT WE CAN
SAY A BIT MORE ABOUT WHERE THIS
DIFFERENTIALS COMING FROM. FIRST
OF ALL, LET ME SAY IS 30 TO 50
CENTS YOU'RE SEEING AS THE
ANNUAL AVERAGES. THAT AMOUNTS TO
4 TO $6 BILLION A YEAR IN
ADDITIONAL PAYMENTS.
CALIFORNIANS ARE MAKING IT FOR,
UH, FOR THEIR GASOLINE BECAUSE
OF THIS MYSTERY GASOLINE
SURCHARGE. AH! IT IS SO I THINK
SOMEONE COMMENTED WELL, IT'S NOT
GOING TO THE REFINERS, AND
THAT'S NOT QUITE RIGHT. UM IT IS
TRUE THAT REFINERS SELL GASOLINE
AT A COMMODITY PRICE. BUT THE
BRANDED REFINERS IN CALIFORNIA
ALTHOUGH THEY DO NOT OWN
STATIONS, THEY HAVE COMPLEX
CONTRACTS WITH THE DOWNSTREAM
STATIONS THAT ALLOW THEM TO
PRICE DIFFERENTLY TO DIFFERENT
STATIONS. AND TO EXTRACT THOSE
EXTRA REVENUES THROUGH VARIOUS
MONTHLY FEES AND PAYMENTS. SO IN
PRACTICE, THE REFINERS ACTUALLY
HAVE A QUITE A BIT OF INFLUENCE
OVER RETAIL PRICE AND ARE ABLE
TO PROFIT NOW. IF THE MARKET
WERE VERY COMPETITIVE. THAT
WOULDN'T BE A HUGE PROBLEM. BUT
CALIFORNIA IS ALSO VERY
DIFFERENT AND THAT WE HAVE FAR
FEWER UNBRANDED STATIONS. THEN
THEN THE REST OF THE COUNTRY A
FAR SMALLER SHARE OF OUR
GASOLINE IS SOLD THROUGH THOSE
UNBRANDED STATIONS. WHILE IT IS
MAYBE TRUE THAT CALIFORNIANS
HAVE A STRONGER PREFERENCE FOR
BRANDS THAN IN THE REST OF THE
COUNTRY, IT IS CLEARLY TRUE THAT
CALIFORNIANS HAVE LESS ACCESS TO
THOSE UNBRANDED STATIONS. NOW
WHETHER THAT THAT'S A CHICKEN
AND EGG PHENOMENON THAT THEY'RE
NOT HERE BECAUSE NOBODY WANTS TO
GO TO THEM OR THEIR SOME SORT OF
RESTRICTION, WHETHER IT'S
ENVIRONMENTAL REGULATION OR
INABILITY TO ACCESS UNBRANDED
GASOLINE. AH SOME OF THE
REFINERS MAY REFUSE TO SELL TO
THEM. IT IS HARD TO KNOW. AND I
THINK THAT IS WHERE THE THIS
COMMITTEE SHOULD REALLY DIG IN
AND INVESTIGATE WHAT IS GOING ON
BETWEEN THAT REFINERY COMMODITY
PRICE. AND THE DOWNSTREAM RETAIL
PRICE THAT IS CAUSING US TO HAVE
A MUCH BIGGER MARGIN IN THERE
THAN THE REST OF THE COUNTRY.
AND I SUSPECT IT IS PARTIALLY
RELATED TO THE FACT THAT WE
DON'T HAVE MANY UNBRANDED
STATIONS, UH, AND THAT PEOPLE
HAVE TO DRIVE FURTHER TO GO TO
THEM, AND AS A RESULT, THEY
CLINTON NOT GO TO THEM AS MUCH.
WHEN THAT HAPPENS. NOT ONLY ARE
THOSE PEOPLE PAYING HIGHER
PRICES, BUT THEY'RE NOT PUTTING
DOWNWARD PRESSURE ON THE BRANDED
STATIONS. IF PEOPLE DID GO, AND
I ALWAYS SAY THIS WHEN I TALKED
TO THE MEDIA, IF YOU SHOP
AROUND, NOT ONLY WILL YOU GET A
BETTER PRICE. AS ONE OF THE
COMMITTEE MEMBERS POINTED OUT A
50 CENT DIFFERENTIAL IN HER TOWN
. THERE'S A IN WHERE I LIVE IN
ORINDA. THERE'S A 60 CENT
DIFFERENTIAL BETWEEN THE BRANDED
AND UNBRANDED STATION. BUT NOT
ENOUGH PEOPLE ACTUALLY CHOOSE
THAT UNBRANDED. UH WHICH IS A
LITTLE FURTHER AWAY? UH AND
THEREFORE THE BRANDED STATIONS
ARE ABLE TO KEEP THEIR PRICES
UP. I THINK THAT'S THE REAL
PUZZLE HERE, AND IT'S THE REAL
PLACE THAT THIS COMMITTEE COULD
MAKE A DIFFERENCE. TO BE HONEST
, THIS COMMITTEE IS NOT GOING TO
CHANGE THE PRICE OF CRUDE OIL.
AH I THINK THERE MAY BE A SMALL
EXTRA MARGIN IN THE REFINING
COSTS THAT THEY'RE ABLE TO LEARN
IN CALIFORNIA. BUT THAT'S NOT
THE BIGGEST PIECE OF IT AND I
HAVE SOMEONE ON THE COMMITTEE
SAID. IT'S VERY HARD TO TELL
THEM THEY SHOULD INVEST IN MORE
REFINERY CAPACITY. AT THE SAME
TIME, WE'RE TELLING THEM THAT
WE'RE GOING TO PHASE OUT THEIR
PRODUCT. BUT I DO THINK THAT
SOMEWHERE BETWEEN THAT REFINERY
PRICE THAT SPOT PRICE OF
GASOLINE AND THE RETAIL PRICE
THERE'S AN EXTRA MARGIN BEING
ADDED IN THAT CLEARLY WAS NOT
THERE BEFORE 20 FEBRUARY, 2015.
AH AND THAT IS COSTING
CALIFORNIA DRIVER'S BILLIONS OF
DOLLARS EVERY YEAR. LET ME JUST
CLOSE BY SAYING A COUPLE OF
THINGS THAT HAVE BEEN RAISED.
PEOPLE HAVE MADE COMPARISONS TO
GAS PRICES GOING UP FASTER THAN
INFLATION. THAT'S REALLY NOT A
USEFUL COMPARISON. GAS PRICES
ARE DRIVEN BY COMMODITY OIL,
WHICH SOMETIMES GOES UP FASTER
THAN INFLATION. SOMETIMES IT
GOES DOWN, SO I THINK THAT SORT
OF COMPARISON ISN'T THAT USEFUL?
I WOULD ALSO URGE THE COMMITTEE
TO AVOID FOCUSING ON THE PROFITS
OF OIL COMPANIES. AH THEY THIS
IS ANOTHER ARGUMENT FOR THEM TO
THAT THEY CAN EASILY ADDRESS
THEY THEY'RE PRODUCING OIL PRICE
OF OIL IS VERY HIGH, JUST LIKE
SOMEONE WHO BUYS A HOUSE IN THE
PRICE OF THEIR HOUSE GOES UP.
THEY'RE ABLE TO MAKE A BUNCH OF
MONEY OFF OF IT. AND THEY
CERTAINLY ARE. UM BUT THAT
DOESN'T MEAN THEY'RE THE THEY'RE
CAUSING THE PRICE OF OIL TO BE
HIGH, AND I THINK THERE'S
ACTUALLY NO EVIDENCE THAT
CALIFORNIA OR US OIL COMPANIES
DO HAVE ANY INFLUENCE OVER THE
PRICE. AND THEN LASTLY, THIS
ASYMMETRIC ADJUSTMENT ISSUE. I
ACTUALLY DID SOME OF THE FIRST
RESEARCH ON THIS. IT IS CLEARLY
TRUE. PRICES GO UP FASTER THAN
THEY COME DOWN. UH AND BUT THE
ACTUAL COST IMPACT OVER THE
CYCLE OF UP AND DOWN IS ACTUALLY
PRETTY SMALL, AND THAT'S NOT THE
BIG COST ISSUE. AS YOU CAN SEE,
THE BIG COST ISSUE IS THAT FOR
THE LAST SEVEN YEARS,
CALIFORNIANS HAVE BEEN PAYING AN
EXTRA 30 TO 50 CENTS A GALLON.
AND THAT'S OBVIOUSLY NOT MOST OF
THE COST ISSUE WE'RE FACING
RIGHT NOW. MOST OF THE COST
ISSUE WE'RE FACING RIGHT NOW IS
HIGH UP CRUDE OIL PRICES.
THERE'S NOTHING THAT CALIFORNIA
CAN DO ABOUT THAT. BUT WE COULD
DO SOMETHING ABOUT THE MYSTERY
GASOLINE SURCHARGE. AH! THERE
ARE A COUPLE OTHER ISSUES THAT
CAME UP. I WILL SAY THAT, UH,
SOMEBODY ASKED ABOUT OTHER
STATES OR COUNTRIES REGULATING
GAS PRICES. WE ACTUALLY DO HAVE
A HISTORY WITH THAT FROM THE 19
SEVENTIES, IT WAS A DISASTER.
WHEN YOU TRY TO FORCE GAS PRICES
BELOW THE MARKET CLEARING PRICE,
YOU END UP WITH LONG GAS LINES,
WHICH AS MUCH AS YOUR
CONSTITUENTS ARE UNHAPPY ABOUT
HIGH PRICES. THEY'RE GOING TO BE
A LOT UNHAPPY, MORE UNHAPPY IF
THEY HAVE TO WAIT IN LINE FOR AN
HOUR OR TWO TO BUY GASOLINE. I'M
JUST OLD ENOUGH TO REMEMBER
DOING THAT WHEN JUST WHEN I GOT
MY DRIVER'S LICENSE. IN THE
SEVENTIES. AH AND THEN YOU KNOW,
I THINK THERE IS A REAL ISSUE IN
CALIFORNIA ABOUT OVERSIGHT OF
THIS INDUSTRY. THE C E C IS VERY
GOOD AT COLLECTING DATA AND, UM,
INTERPRETING IT. BUT THEY ARE
NOT SET UP. AND I SAY THIS WITH
COMPLETE RESPECT AND HAVING
WORKED VERY CLOSELY WITH THEM AS
CHAIR OF THE MAC, UM THEY ARE
NOT SET UP TO DO COMPETITION
ANALYSIS. UM THE ATTORNEY
GENERAL'S OFFICE ACTUALLY HAS A
DIFFERENT ISSUE, WHICH, UM,
KATHLEEN FOOT CAN ADDRESS.
ATTORNEY GENERAL'S OFFICE IS SET
UP TO PROSECUTE CRIMES
VIOLATIONS OF THE LAW. THEY ARE
NOT SET UP TO ACTUALLY
INVESTIGATE. UH WHAT'S GOING
WRONG AND WHAT REGULATORY
CHANGES MIGHT ADDRESS IT. AND SO
I THINK YOU REALLY TO ADDRESS
THIS ARE GOING TO NEED TO TURN
TO OTHER EXPERTS. THERE ARE
PEOPLE WHO HAVE STUDIED
REGULATIONS AND OTHER PARTS OF
THE COUNTRY. I'LL JUST GIVE YOU
ONE EXAMPLE. AND I'M NOT
SUGGESTING THIS. AS SOMETHING WE
SHOULD DO, BUT THERE ARE
DIFFERENT WAYS THIS IS TREATED
WON. SOME STATES DON'T ALLOW
BRANDED DEAL BRANDED REFINERS.
TO SELL A DIFFERENT PRICES TO
DIFFERENT DEALERS TO DIFFERENT
RETAILERS. IN FACT, WHAT THEY DO
IS, THEY SAY ANY RETAILER CAN
BUY FROM THE FROM THE BRANDED
REFINER. AT WHERE AT ANY
LOCATION, THE BRANDED REFINER
SELVES. SO THEY CAN IF YOU TRY
TO JACK UP PRICES IN ONE AREA
THEY CAN BUY FROM A DIFFERENT
AREA. THAT'S NOT. THAT'S NOT THE
CASE IN CALIFORNIA. UM AND SO
THERE ARE REGULATORY CHANGES
THAT MIGHT BE POSSIBLE. TO
REDUCE THIS WHAT I THINK IS
LIKELY TO BE EXCESSIVE POWER OF
BRANDED REFINERS ON THE
DOWNSTREAM MARKET THAT IS
CAUSING US TO SEE THIS MYSTERY
GASOLINE SURCHARGE. AND I'LL
STOP THERE. I'M HAPPY TO ANSWER
QUESTIONS. UH AND, UH DISCUSS
ANY OF THESE ISSUES. CERTAINLY
AND, UH, THANK YOU, AND WE WILL
GO TO ASSEMBLYMEMBER'S COLORADO.
THANK YOU, MADAM CHAIR AND THANK
YOU FOR THE PRESIDENT LEARNING A
LOT HERE, AND I THINK IT'S UH,
IT WAS REALLY HELPFUL TO HEAR
ABOUT THE MYSTERY SURCHARGE. UH,
BEING BEYOND THE DIFFERENCE IN
THE TAX AND APPEASE AND THE FACT
THAT OVER THE LAST 20 YEARS THE
DIVIDE AND COST, UM FROM
CALIFORNIA GAS IS ACTUALLY BEEN
BRIDGE SOMEWHERE, AND I THINK,
BUT FOR THIS MYSTERY SURCHARGE
30 50 CENTS A LOT. UM AND THE
ONE POINT OF. THE KEY POINT THAT
I THINK WAS, UH, THAT WAS
REFERRED TO A COUPLE OF TIMES BY
THE PROFESSOR IS THAT SOME OF
THE REFINERIES REFUSED TO SELL
THE OFF BRAND RETAILERS. UM YOU
KNOW THAT'S A PROBLEM. YOU HAVE
A FIXED NUMBER OF REFINERIES YOU
CAN GET. UM YOU CAN GET FUEL
FROM AND I THINK THIS IS PART OF
THE REASON WHY I THINK MORE AND
MORE, AT LEAST IN MY
RECOLLECTION, YOU KNOW, SINCE
I'VE BEEN DRIVING 2030 PLUS
YEARS I DO SEE LESS OFF BRAND,
AND IT JUST SEEMS LIKE YOU SEE
MORE AND MORE OF THESE BRAND GAS
STATIONS OPENING UP AND SO YOU
KNOW IF I'M DRIVING 90% OF THE
TIME, IF I JUST STOPPED AT A
RANDOM GAS STATION IS GOING TO
BE A BRANDED A NAME BRAND GAS
STATION AND DIDN'T KNOW THAT
THAT REFINERIES HAD THAT LEVEL
OF, UH, OF NOT POWER IS NOT THE
RIGHT WORD, BUT THAT THEY'RE
USING THAT DISCRETION AWAY TO
NOT SELL THE OFF BRAND, WHICH
AGAIN WOULD BE FROM THE EARLIER
PRESIDENT. PRESENTATION ANOTHER
REASON WHY YOU HAVE THESE
INFLATED COST THAT IT'S HARD TO
FIND. COMPETITORS DO IF YOU'RE
IF THEY CAN'T GET THE SUPPLIES.
THAT WOULD BE ONE ISSUE.
CERTAINLY I'D BE REALLY
INTERESTED IN, YOU KNOW, DELVING
MORE INTO AS WE LEARN MORE ABOUT
THIS ISSUE, EVEN IN FUTURE.
HEARINGS AND AS A AS A AS A
LEGISLATURE. AND, OF COURSE, UM,
YOU KNOW THIS MYSTERY SURCHARGE
. I THINK THAT'S WHY THE FORMER
PRESENTER WAS TALKING ABOUT KIND
OF THE PROPHET AREA. THAT? YES
IT'S NOT NECESSARILY ABOUT HOW
MUCH PROFIT THESE COMPANIES ARE
MAKING. BUT IF THERE'S GOING TO
BE SOMETHING LIKE A SEARCH, I'M
JUST GOING TO BE HIDDEN IN THOSE
AREAS WHERE THERE'S PROFIT
TAKING HAPPENING, AND SO IT'S
NOT A MATTER OF A NO. YOU CAN'T
MAKE PROFIT, BUT IF WE'RE GOING
TO DELVE DEEPER INTO WORDS
COMING FROM, THAT'S PROBABLY THE
AREA THAT WE'RE GONNA WANT TO
LOOK TO SEE. OKAY WELL, HOW IS
IT BEING KIND OF SIPHONING
THROUGH THE MYRIAD OF DIFFERENT
COSTS AND INTO THAT PROFIT NOT
TO SAY YOU HAVE TO TAKE THE
PROFIT AWAY. BUT THIS THAT I
THINK THAT THAT'S PROBABLY WHERE
WE GOT THE DRILL DOWN SOME MORE
EVEN WITH THE REFINERY LEVEL AT
THE RETAIL LEVEL.
ASSEMBLYMEMBER'S DAVIS. THANK
YOU APPRECIATE IT. I'M LOOKING
AT THIS IN 2015, AS YOU SAID
THAT, YOU KNOW, BASICALLY THIS
MYSTERY, UM, CHARGE CAME UP AND
I MEAN, HONESTLY, I FIND IT KIND
OF UNBELIEVABLE THAT WE'VE GONE
THIS MANY YEARS AND WE STILL
HAVEN'T BEEN ABLE TO FIGURE THE
MYSTERY OUT. AND SO ONE OF MY
QUESTIONS IS 2015. THIS WAS THE
SAME YEAR THAT, UM, CAPTAIN
CHANGE CAME IN. AND SO CAP AND
TRADE CAME IN. SO DID THIS HAVE
ANY EFFECT ON THE INCREASE? AND
HAVE YOU LOOKED INTO THAT? YEAH
SO THE THIS DIFFERENTIAL ADJUST
FOR THE COST OF THE CAP AND
TRADE ALLOWANCES. NOW ONE THING
WE DID HERE I DID A COUPLE OF
INTERVIEWS WITH TRADERS. AND
THEY WHEN I WAS CHAIR OF THE PEE
MAK, THEY WOULD NOT COME AND
SPEAK PUBLICLY AT OUR MEETINGS
BUT ARE MOST OF THEM WENT, BUT
ONE OF THEM SAID THAT MADE THE
MARKET MORE COMPLICATED FOR OFF
BRAND DEALERS TO DEAL WITH AND
THEREFORE THERE MAY HAVE BEEN
FEWER OFTHESE TRADERS AVAILABLE
BECAUSE THEY NEEDED TO NOT ONLY
BRING IN GASOLINE AND HE WALKED
ME THROUGH THE WHOLE PROCESS.
THEY USED TO DO THAT, BUT ALSO
TO LINE UP THE ALLOWANCES. UM I
WAS NEVER REALLY ABLE TO VERIFY
THAT, BUT THAT'S A POSSIBILITY
THAT, UH, THE NOT THE DIRECT
COSTS BECAUSE THAT'S IN HERE,
BUT INDIRECT COSTS OF DEALING
WITH. IT HAS BEEN PART OF THIS.
I FIND IT IMPLAUSIBLE THAT
THAT'S A SIGNIFICANT PART OF IT
. I GIVEN WHAT GIVEN WHAT THE
COST OF DEALING WITH THE CAP AND
TRADE MARKET IS THERE'S SOME
PRETTY WELL ORGANIZED TRADERS
AND SO FORTH OF THOSE
ALLOWANCES. BUT IT COULD BE A
FEW CENTS OF IT. OKAY, SO I
MEAN, OBVIOUSLY YOU YOU'VE HAD
SOME INFORMATION SENT TO YOU,
BUT THIS IS REALLY NEVER BEEN
PROVEN. AND WAS THERE EVER ANY
EVIDENCE THAT YOU SAW WITH GAS
GUN JUDGING FROM THE REFINERIES?
UH I'M NOT SURE WHAT YOU MEAN BY
EVIDENCE. I THINK OF THIS GRAPH
IS CERTAINLY GIVING US SOME
CONCERN. UM I NEVER SAW ANY
EVIDENCE OF COLLUSION. IN THE
SENSE THAT COMPANIES WERE
ACTUALLY TALKING TO EACH OTHER
IN ORDER TO RAISE TO AGREE TO
RAISE PRICE. BUT AS SOMEONE SAID
, YOU KNOW THE I THINK MR BOWEN
SAID THAT WE RECALL WE RELY ON A
COMPETITIVE MARKET TO SET THESE
PRICES AND THE REFINERS ARE
GOING TO CHARGE WHAT THEY CAN.
UH I'M CONCERNED THAT THE
CONCENTRATION AMONG THE
PRODUCERS OF THE GASOLINE AH,
THAT COMBINED WITH THEIR
VERTICAL RELATIONSHIPS
DOWNSTREAM WITH THEIR BRANDED
DEALERS HAS ALLOWED THEM TO
CHARGE MUCH HIGHER PRICES AND
EARN MUCH HIGHER PROFITS IN
CALIFORNIA INDIVIDUALLY, NOT
THROUGH COLLUDING WITH ONE
ANOTHER. BUT SINCE THE REFINERY
FIRE JUST EACH OF THEM FIGURING
OUT WE CAN GET AWAY WITH A MUCH
HIGHER PRICE. APPRECIATE ALL
THAT INFORMATION. I THINK THAT'S
SOMETHING THAT THIS COMMITTEE
NEEDS TO LOOK AT FOR LOOKING AT
30 CENTS A GALLON THAT HASN'T
GONE DOWN AND WE STILL HAVE NO
IDEA WHY. LOOKING AT SOME OF
PERHAPS OUR POLICIES THAT WE PUT
IN AGAIN, SUCH AS CAPTAIN TRADE
AND LOOK INTO THE THINGS THAT
YOU SUGGESTED AS WELL, BUT I
HOPE THAT WE CAN FIGURE OUT
WHERE THE 30 CENTS IS GOING.
SINCE IT'S GOING ON EIGHT YEARS,
AND I THINK WE CAN HOPEFULLY,
YOU KNOW. FINISH THAT UP. THANK
YOU, SIR. UH THANK YOU, MADAM
CHAIR. UH GOOD TO SEE YOU,
SEVERIN. I'VE ALWAYS ENJOYED
WORKING WITH YOU OVER OVER THE
YEARS. UM AND I DO ACTUALLY HAVE
A QUESTION FOR YOU. YOU KNOW, AS
WE'RE GOING THROUGH THE SLIDES
ABOUT WHERE THE COST OF A GALLON
OF GAS COMES FROM FROM OUR
ENERGY COMMISSION. WE HAVEN'T
REALLY BEEN TALKING ABOUT, YOU
KNOW THE STATE SALES TAX AND THE
FEDERAL EXCISE TAX AND THE YOU
KNOW ALL OF THE STATES SORT OF
BUILT IN ST STATE COST, YOU
KNOW, JUST THE STANDARD A GAS
TAX. JUST ONE QUICK COMMENT IF
CAN, UM MADAM CHAIR BECAUSE MY
COLLEAGUE WHO IS CURRENTLY TO
THE LEFT OF ME WASN'T AROUND
DURING THE CONVERSATIONS ABOUT
CAP AND TRADE, I WAS AND AS, UH
, AS MANY OF YOU KNOW, UM, I
PAID, UH, AN INCREDIBLE PRICE
FOR THAT. I'LL JUST REMIND
REMIND YOU SINCE YOU WEREN'T
HERE THAT CAP AND TRADE WOULD
NOT HAVE MORE THAN LIKELY WOULD
HAVE NOT GOTTEN THE VOTES TO
HAVE PASSED HAD SP 32. NOT BEEN
ADOPTED THE YEAR BEFORE. IT WAS
THE AFFECT THE ENTIRETY OF THE
BUSINESS COMMUNITY, BELIEVING
THAT CAP AND TRADE WAS GOING TO
GET US TO OUR GOAL. AT A LOWER
COSTS, IN FACT, EVEN CARBS, UM
STUDIES WERE SAYING WE'RE GOING
TO GET US, YOU KNOW, REDUCING
CARBON AT A LOWER COST THAN WHAT
COMMAND AND CONTROL WAS, WHICH
IS ULTIMATELY WHY WE ADOPTED THE
CAP AND TRADE PROGRAM. THE FACT
THAT'S FOR ME AND MY YEARS IN
THE LEGISLATURE. IT'S ONE OF MY
I'LL CALL THAT ONE OF MY FINEST
ACHIEVEMENTS BECAUSE I WANTED TO
KEEP THE PRICE OF GASOLINE AS
LOW AS POSSIBLE BECAUSE I'M IN A
DISTRICT WHERE PEOPLE DRIVE A
LOT AWFUL AN AWFUL LOT. NOW WE
CAN DEBATE WHETHER CAP AND TRADE
WAS THE RIGHT POLICY. WE CAN
DEBATE ABOUT L C. F S, BUT IT'S
ALSO A FACT THAT, UH, THIS, UM
EXTERNALITY, THIS NEGATIVE
EXTERNALITY THAT WE HAVE. WHEN
YOU BURN FOSSIL FUELS. IT'S REAL
. THERE HAS TO BE A COST FOR
THAT THE REST OF THE COUNTRY IS
NOT FACTORING. THAT COST IN
CALIFORNIA, HAS SAID. IT'S OUR
RESPONSIBILITY TO DO THAT, AND
WE ALSO HAVE TO FACTOR THEM INTO
THE COST. THOSE OF US THAT OUR
POLITICIANS AND POLICYMAKERS
NEED TO BE STRONG ENOUGH TO
SPEAK HONESTLY. TO OUR
CONSTITUENCIES AND TELL THEM
THAT THAT THAT WAS A, UH, A
POLICY BECAUSE WE BELIEVE THAT
CLIMATE CHANGE IS REAL. AND
BECAUSE WE BELIEVE THAT WE HAVE
A RESPONSIBILITY TO REDUCE THAT
IMPACT THAT THAT THAT THAT THAT
WE JUST NEED TO BE HONEST ABOUT
THAT. MY QUESTION. I'M SORRY,
MADAM CHAIR JUST FOR OPINING
THERE FOR APPRECIATE THE
REMINDER, THE. AH IN SEVERAL.
MAYBE YOU CAN ANSWER THIS
QUESTION JUST BECAUSE YOU'RE
BEFORE US. BUT IN THE LAST
PRESENTATION IN REGARDS TO THE
REFINERS, THERE ARE NINE
REFINERIES. IS IT THE SAME OWNER
OF ALL NINE? UM OR THEY ALL ALL
OF THOSE NINE INDEPENDENTLY
OWNED. NEITHER IS THE CASE. UM I
DON'T KNOW THE OWNERSHIP SHARE.
I DO KNOW THAT OUTPUT CHAIR AND
, UH, 22 COMPANIES. CHEVRON AND
WHATEVER TO SORROW IS NOW CALLED
. I CAN NEVER REMEMBER. THEY'VE
CHANGED THEIR NAME TWICE. I
THINK, UM EACH HAVE ABOUT 25% OF
THE MARKET. AH AND THEN THE REST
, UH, IS SPREAD AMONG THREE OR
FOUR OTHER COMPANIES. THE MOST
OF THE REST IS SPREAD AROUND
AMONG. I THINK THREE OR FOUR
OTHER COMPANIES. AND IF AS AS
WE'RE THINKING ABOUT THIS, AND
WITHIN THIS SELECT COMMITTEE AS
WELL AND I KNOW WE'RE TRYING TO
GET TO THE POINT BECAUSE OUR
CONSTITUENCY IS HOT ABOUT THE
PRICE OF GASOLINE, BUT IT'S NOT
JUST GOING TO BE IN 2022 2023
2024. IF ONE OF THOSE REFINERIES
SHUT DOWN, MAYBE WHAT FROM NINE
REFINERIES TO EIGHT REFINERIES
WERE 27 REFINERIES AND AS WE
TRANSITION FROM FOSSIL FUEL
BASED TRANSPORTATION TO ELECTRIC
TRANSPORTATION, CAN YOU GIVE US
ANY INSIGHT ON WHAT THAT'S GOING
TO DO TO THE MARKET? AND WHAT DO
WE DO WHEN ALL OF A SUDDEN WE
HAVE NO REFINERY REFINING
CAPACITY? ANY LONGER, BUT WE
STILL HAVE A BUNCH OF FOLKS THAT
RELY ON GASOLINE TO BE ABLE TO
PUT IN THEIR CAR. WHAT'S THAT
GOING TO DO TO GAS? WELL THERE'S
SORT OF BAD NEWS AND GOOD NEWS
THERE. UH THE BAD NEWS IS, IT'S
GONNA BE A BUMPY RIDE BECAUSE
WHAT WILL HAPPEN IS WE WILL
GRADUALLY BE REFINED AND WE'RE
ALREADY SEEING IT, OF COURSE,
WILL GRADUALLY SEE REFINERIES
SHUT DOWN. AND WHEN THEY DO,
WE'LL LOSE SOME CAPACITY. AH AH,
AND THERE WILL BE SHOCKS IN THE
SYSTEM IN THE IN BETWEEN, WE
MIGHT ACTUALLY HAVE EXCESS
CAPACITY FOR AWHILE AND GET
LOWER PRICES. UM BUT AS WE GET
TO FEWER AND FEWER REFINERIES
IT'S GOING TO BE MORE
CONCENTRATED, AND AS THAT
HAPPENS, I THINK WE'RE GOING TO
HAVE MORE OF A COMPETITION
PROBLEM IN THE GASOLINE SECTOR.
I MEAN, ONE PIECE OF GOOD NEWS
IS MANY PEOPLE WON'T BE BUYING
GASOLINE, BUT MANY PEOPLE WILL
BE AND THEY WILL BE HURT BY
THAT. THE BIT OF GOOD NEWS IS
THAT WE ARE GOING TO ALMOST
CERTAINLY LEAD THE REST OF THE
WORLD OUT OF USING GASOLINE, AND
WE DO IMPORT CARBS, SPEC
GASOLINE, AND SO WE WERE DOING
THAT ALREADY. AT TIMES IN THE
PAST, WE HAVE IMPORTED QUITE A
BIT OF CARB GASOLINE THESE DAYS
. IT'S MORE SORT OF UP AND DOWN,
BUT NOT A BIG SHARE OF THE
MARKET. BUT I AM CERTAIN THAT IF
CALIFORNIA PRICES FOR SPOT
GASOLINE START TO RISE
REFINERIES OUTSIDE OF CALIFORNIA
, THEY'RE ONES IN WASHINGTON
STATE IN SINGAPORE. IN THE GULF
. THERE HAVE IN THE PAST BEEN
ONES IS FAR AWAY AS NORWAY THAT
CAN PRODUCE CALIFORNIA
SPECIFICATIONS. GASOLINE. AND
THEN MADAM CHAIR. JUST ONE OTHER
QUESTION IF THAT'S OKAY, BUT
ACTUALLY BEFORE I DO THAT, I
THINK THAT'S MOUNT SANTA SCINTO
OF YOUR OF THE PHOTO THAT WE'RE
SEEING SEVERIN ON YOUR SCREEN.
WHICH IS MY DISTRICT, SO THANK
YOU FOR I DIDN'T DO IT. FOR THAT
REASON. I'M SURE YOU PROBABLY
SAW THE WINDMILLS AND THOUGHT
THAT THAT WAS THAT WAS WHY, BUT
THAT IS MOUNT SANTA SANTA.
ACTUALLY VISITING YOUR DISTRICT.
YEAH. UM. YOU'VE BEEN WORKING ON
THIS IN HIS POLICY AREA FOR A
LONG TIME. AND AS AN ACADEMIC,
YOU ARE FREE FROM ALL OF THE
THINGS THAT AS POLITICIANS HAVE
TO DO, AND PLAYING, PLAYING THE
BLAME GAME. AND IT HAS SEEMED
CLEAR TO ME IN MY EIGHT YEARS IN
THE LEGISLATURE THAT THE POLICY
OF THE STATE OF CALIFORNIA HAS
BEEN TO ACTUALLY INCREASE THE
PRICE OF GASOLINE. AND THAT'S
BEEN A PURPOSEFUL AND THE REASON
FOR THAT IS THERE'S THIS.
THERE'S THIS OVERALL BELIEF THAT
ALL FOSSIL FUELS ARE SOMEHOW
INTRINSICALLY EVIL. BECAUSE
THEY'VE YOU KNOW, THE BIRD
CREATED, PUTTING MORE CARBON IN
THE ATMOSPHERE AND ONE OF THE
GOALS OF THE STATE OF CALIFORNIA
HAS BEEN TO BE SPECIFIC IN
RAISING THE PRICE OF GASOLINE TO
TRY TO CHANGE BEHAVIOR AND MY
OFF BASE THERE, OR DO YOU THINK
THAT'S WHAT YOU'VE SEEN AS WELL?
YEAH, I THINK THAT TO SOME
EXTENT THAT HAS BEEN, I WOULDN'T
USE THE WORD EVIL BUT DEFINITELY
A POLLUTER AND DEFINITELY
SOMETHING WE HAVE TO RATCHET
DOWN AND THE RECOGNITION THAT.
CAP AND TRADE. THE LOW CARBON
FUEL STANDARDS. HIGH GAS TAXES
ARE ALL RAISING GAS PRICES, I
THINK HAS GENERALLY BEEN
UNDERSTOOD, UH AND HAS BEEN PART
OF THE PLAN TO MAKE ALTERNATIVE
VEHICLES MORE. AH ATTRACTIVE BUT
NOT THE MAJOR PART OF THE PLAN.
THE MAJOR PART OF THE PLAN HAS.
IN FACT, MOST ECONOMISTS WOULD
BE FRUSTRATED THAT WE HAVEN'T
RAISED GAS PRICES MORE TO
REFLECT THE NEGATIVE
EXTERNALITIES. THE MAJOR PLAN
HAS BEEN TO SUBSIDIZE ELECTRIC
VEHICLES AND TO SUBSIDIZE EVIE
CHARGING AND TO INVEST IN
HYDROGEN VEHICLES AND TRY TO
PUSH THE COST OF THOSE OTHER
VEHICLES DOWN AND FOR A
COMPLETELY UNDERSTANDABLE
POLITICAL REASONS. THAT'S A MUCH
MORE ATTRACTIVE OPTION THAN JUST
SAYING WELL, YOU SHOULD PAY A
LOT FOR GASOLINE. UH BUT I THINK
THERE IS MORE ACCEPTANCE IN THIS
STATE BECAUSE WE RECOGNIZE THAT
ULTIMATELY WE DO HAVE TO GET OFF
FOSSIL FUELS AND TRANSPORTATION
IS NOW THE LARK, NOT IN THE
WORLD. BUT IN CALIFORNIA, THE
LARGEST COMPONENT OF OUR
GREENHOUSE GAS EMISSIONS. ALL
RIGHT, UH, MR MURATSUCHI. THANK
YOU VERY MUCH. UH, PROFESSOR
BORENSTEIN. GOOD TO SEE YOU. I
UM. APPRECIATE YOUR GRAPH
SHOWING THE. AH RAISING YOUR
CONCERNS ABOUT THE MYSTERY
SURCHARGE, AND I PARTICULARLY
APPRECIATE THE TORRANCE REFINERY
SPIKE, GIVEN THAT I LIVE JUST A
FEW MILES FROM THE TORRANCE
REFINERY. WHEN THE EXPLOSION
HAPPENED, I WOULD I WOULD CALL
IT AN EXPLOSION RATHER THAN A
FIRE, BUT UM, BE THAT AS IT MAY,
UM I WAS JUST CURIOUS. UM, IF
YOU DID A YOU OR ANYONE DID AN
ECONOMIC ANALYSIS. UH, YOU KNOW,
TO RELATED TO THE EARLIER
QUESTIONS ABOUT REFINERY
CAPACITY. UM AND THE IMPACT OF
HAVING ONE REFINERY DOWN, YOU
KNOW, UM WHETHER THAT. SPIKE IN
THE. THE GAS PRICES, YOU KNOW,
TAKING OUT THE TAXES AND FEES
AND THE ENVIRONMENTAL PROGRAM
COSTS WHETHER THAT SPIKE WAS
JUSTIFIED BY THE SHUTTING DOWN
OF THAT ONE TORRANCE REFINERY
FOR I FORGET THE PERIOD OF TIME
THAT IT WAS SHUT DOWN. IT WAS
OUT FOR MANY MONTHS. SO UM, TO
BE COMPLETELY HONEST WITH YOU,
AND I WAS CHAIR OF THE P MAC. AT
THIS TIME WE LOOKED INTO OUR
NEFARIOUS THINGS HAPPENING RIGHT
THEN THAT ARE MAKING IT WORSE.
AND THERE WERE SOME ACCUSATIONS
THAT EXXON WAS NOT BEING
FORTHCOMING ABOUT WHEN THEY WERE
GOING TO OPEN THE REFINERY. AND
AT THE SAME TIME PEOPLE WERE
SAYING, WELL, YOU KNOW, THEY'RE
NOT SURE AND IT DID END UP
TAKING LONGER THAN PEOPLE HAD
THOUGHT, INCLUDING EXXON. UM SO
THAT CREATED SOME UNCERTAINTY
ABOUT BRINGING SHIPMENTS IN FROM
OUTSIDE THE STATE. UM AND BACK.
I ALSO SERVED ON THE GASOLINE
PRICE TASK FORCE OF ATTORNEY
GENERAL LOCKYER IN 1999 AND ONE
OF THE THINGS WE TALKED ABOUT TO
TRY TO BRING IT BE ABLE TO HAVE
A SMOOTHER MARKET WAS TO
ACTUALLY, UH, SET UP SOME SORT
OF FUTURES MARKET FOR GASOLINE
SO THAT SHIPPERS BRINGING IN
GASOLINE COULD BE ASSURED THEY
WOULDN'T ARRIVED JUST AS THE
MARKET CRASHES. AH WE DIDN'T
FIND THAT WAS A BIG ENOUGH
EFFECT THAT IT WAS PROBABLY
WORTHWHILE. BUT OF COURSE, THAT
WAS BEFORE THE MYSTERY GASOLINE
SURCHARGE. AH BUT THE SHORT
ANSWER. YOUR QUESTION IS WE
DIDN'T FIND WE COULDN'T NAIL
DOWN ANY PARTICULAR BEHAVIOR AT
THAT TIME. NOW THE ATTORNEY
GENERAL'S OFFICE AND KATHLEEN
FOOT CAN TALK ABOUT THIS. BY THE
WAY. KATHLEEN FOOT WAS ALSO A
MEMBER OF THE P MAC. UM HAS
SINCE INVESTIGATED AND HAS
BROUGHT A CASE AGAINST A COUPLE
OF TRADERS. UM I THAT CASE SEEMS
QUITE CREDIBLE TO ME, BUT I
DON'T WANT YOU TO THINK THAT
THAT ADDRESSES THE MYSTERY
GASOLINE SURCHARGE THAT FIRST OF
ALL VERY SHORT RUN, AND SECOND
OF ALL, IT IS IN THE COMMODITY
PRICE. NOT IN THIS DOWNSTREAM
COMPONENT. THANK YOU VERY MUCH.
ASSEMBLYMEMBER'S PETRIE-NORRIS.
WELL, THANK YOU SO MUCH FOR
JOINING US TODAY. ALWAYS GOOD TO
SEE YOU. UH, SO I JUST WANT TO
MAKE SURE I'M GOING TO BREAKING
DOWN LIKE ARE SORT OF POINT IN
TIME ACCURATELY, SO WE KNOW
RIGHT NOW. CALIFORNIA'S AVERAGE
GAS PRICE, I GUESS IT WAS JUNE
13TH WAS 6 27 A GALLON WHICH IS
$1.20 6 CENTS, 25% MORE THAN THE
NATIONAL AVERAGE. SO LOOKING AT
THE CHART FROM OUR EARLIER FROM
THE CDC. ABOUT. 40 CENTS OF THAT
DELTA IS DUE TO OUR DIFFERENTIAL
TAX STRUCTURE IN CALIFORNIA,
COMPARED TO NATIONAL AVERAGE AND
ABOUT 36 CENTS A GALLON IS
BECAUSE OF OUR DIFFERENTIAL,
ENVIRONMENTAL PROGRAMS AND
REGULATIONS. IS THAT KIND OF
BALLPARK CORRECT, AND THAT WOULD
LEAVE LIKE 50 CENTS WHICH IS
SORT OF IN THE RANGE OF YOUR
UNEXPLAINED SURCHARGE. OKAY I
ALSO ADD AN EXTRA 10 CENTS TO
CALIFORNIA COSTS TO REFLECT THE
HIGHER COST OF MAKING CARP GAS.
SO WE GOT THE 10TH ALRIGHT. SO
THAT SO 40 CENTS. SO THIS
MYSTERY SURCHARGE I BELIEVE YOU
SAID WHEN YOU WERE, UH WITH THE
C C. THAT YOU HAD A NUMBER OF
HEARINGS ON THE MYSTERY
SURCHARGE WHEN YOU HAVE INQUIRED
OF INDUSTRY FOR THEIR
EXPLANATION. WHAT IS INDUSTRIES
EXPLANATION FOR THAT SURCHARGE
AND THAT GAP WE DID NOT GET AN
EXPLANATION. NOBODY FROM THE
ACTUAL REFINERS WOULD COME TO
OUR MEETINGS WHISPER DID THE
WESTERN STATES PETROLEUM
ASSOCIATION AND GENERALLY BEGGED
OFF TALKING ABOUT PRICES,
PERIOD. AND THEY SAID, LOOK,
WE'RE A TRADE GROUP. TRADE
GROUPS AREN'T SUPPOSED TO BE
TALKING ABOUT PRICES. THAT IS A
POTENTIAL ANTITRUST VIOLATION.
WHICH IS TRUE, UM, AND THAT'S
WHY WE WERE ASKING THE REFINERS
TO COME AND TALK TO US, BUT THEY
WOULDN'T SO WE DIDN'T GET AN
EXPLANATION. WE HAVE SENSE OR I
HAVE SINCE HEARD, UH, PEOPLE
FROM INDUSTRY TALKING ABOUT THIS
, AND THEY'VE SAID CALIFORNIA
HAS HIRED TAXES AND FEES. THAT'S
TRUE, BUT THEY'RE TAKEN OUT OF
THIS CALCULATION. TELEPHONE YOU
USE AS A CLEANER BURNING
GASOLINE. THAT'S TRUE, BUT
THAT'S TAKEN OUT OF THIS
CALCULATION. AND I HAVEN'T HEARD
ANYONE REALLY DISPUTE THE 10
CENTS AS A REASONABLE, IF NOT
GENEROUS, CORRECTION FOR THAT.
THEY SAY CALIFORNIA IS MORE
EXPENSIVE PLACE TO DO BUSINESS.
THAT'S TRUE. BUT THAT WAS ALSO
TRUE BEFORE 2015. THERE WAS NO
SUDDEN DISCONTINUITY IN 2015
THAT MADE IT A MORE EXPENSIVE
PLACE TO DO BUSINESS. AH SO I'M
YOU KNOW, I WE HAVE. I DON'T
THINK THAT WHISPER HAS AH,
REALLY ADDRESS THIS AT ALL. SO
WHAT? IN YOUR VIEW? WHAT OTHER
INFORMATION DO WE NEED AND IN
ORDER TO EITHER GET TO THE
BOTTOM OF THAT, OR, YOU KNOW,
EITHER DEBUNK THAT THEORY OR
PROVE THAT THEORY. WHAT OTHER
INFORMATION DO WE NEED TO
DETERMINE? WHAT'S DRIVING THAT
ACTUALLY BEFORE YOU I WOULD LIKE
TO HEAR ABOUT ADDITIONAL
INFORMATION, BUT WHAT IS
ADDITIONAL AUTHORITY THAT WE
MIGHT NEED? INFORMATION
AUTHORITY? WHAT DO WE NEED TO
FIGURE OUT? YES. YEAH AND I'M
GOING TO BE HAVE A HARDER TIME
WITH AUTHORITY BECAUSE I'M NOT
SURE HOW MUCH AUTHORITY YOU
HAVE. UM I HAVE BEEN ASKING FOR
SOME SORT OF SELECT COMMITTEE
MODELED AFTER THE ONE SENATOR
DONE HEADED BACK IN 2000 AND ONE
LOOKING AT THE CALIFORNIA
ELECTRICITY CRISIS. AND THEY
ACTUALLY SUBPOENAED WITNESSES
AND CALLED PEOPLE IN AND
UNCOVERED RECORDINGS AND, UH,
EVIDENCE THAT NO ONE HAD FOUND.
SO I HOPE YOU HAVE THAT
AUTHORITY. AH I WOULD LOVE TO
SEE A MUCH DEEPER DIVE INTO
PARDON ME INTO. THIS VERTICAL
RELATIONSHIP AND HOW REFINERS
ARE SETTING PRICES TO RETAILERS
AND HOW THAT DIFFERS BY
LOCATION. I WOULD LOVE TO SEE A
DEEPER DIVE INTO THE BARRIERS
THAT OFF BRAND STATIONS FACE
BECAUSE IT'S QUITE CLEAR THAT
THE OFF BRAND FIRST OF ALL AS
HAS BEEN POINTED OUT OFF BRAND
STATIONS. HAVE MUCH LOWER
PRICES. AND THE GAP, BY THE WAY
, IS MUCH LARGER IN CALIFORNIA
BETWEEN THE OFF BRAND AND THE
BRAND THAN IT IS IN THE REST OF
THE COUNTRY. WHEN I LOOKED AT
SOME GAS BUDDY DATA IN 2018, IT
WAS SEVEN CENTS AND THE REST OF
THE COUNTRY IN 23 CENTS IN
CALIFORNIA. SO OFF BRAND
STATIONS ARE NOT HAVING THE
DISCIPLINING EFFECT HERE THAT
THEY HAVE ELSEWHERE, SO I WOULD
LOVE TO SEE A DEEPER
INVESTIGATION INTO WHAT? WHY?
WHY DON'T WE HAVE THOSE OFF
BRAND STATIONS? UM IS IT THAT
THEY CAN'T GET ACCESS TO PRODUCT
FROM BRANDED REFINERS? IS IT
THAT THEY CAN'T GET ACCESS TO
PORTS TO BRING IN GASOLINE? IS
THERE SOME REGULATORY BARRIER
THERE? ALSO PIPELINES THAT ARE
AN ISSUE SO ALL OF THESE ARE
POTENTIAL ISSUES, AND I'M SURE
IF WE ACTUALLY TALKED TO SOME OF
THOSE OFF BRAND STATION MANAGERS
AND JOBBERS. THEY WILL POINT TO
OTHER ISSUES THAT I'M NOT AWARE
OF. THIS IS WHAT WE WANTED TO DO
AT THE P. MAC AND WE DID NOT
HAVE THE INVESTIGATIVE POWER AND
WE DID NOT HAVE THE STAFF OR THE
BUDGET ACTUALLY DO IT. OH AND
THEN THE LAST THING I GUESS I
WOULD LIKE TO SEE IS, AS I
POINTED OUT, THERE IS A REAL GAP
HERE IN POLICY. THE CC IS NOT
SET UPTO REALLY GO BEYOND THE
DATA COLLECTION AND
INTERPRETATION. THE ATTORNEY
GENERAL'S OFFICE IS REALLY A,
UH, LAW ENFORCEMENT OFFICE. AND
I DON'T THINK THAT EITHER OF
THOSE IS GOING TO SOLVE THE
PROBLEM WE FACE TODAY. I THINK
THE PROBLEM IS GOING TO BE IN
CHANGES IN REGULATION. AND TO DO
THAT, WE'RE GONNA REALLY NEED
EXPERTISE THAT DOESN'T LIE IN
EITHER OF THOSE. OBVIOUSLY BOTH
OF THOSE WILL BE POTENTIALLY
VALUABLE INPUTS, BUT THERE'S
GOING TO BE NEED TO BE SOME
OTHER EXPERTISE.
ASSEMBLYMEMBER'S WARD. THANK
YOU, EVERYONE. THANK YOU FOR A
LOT OF BACKGROUND INFORMATION.
AND AS I'M TRYING TO GET MY MIND
AROUND ALL THE FACTORS THAT ARE
GOING INTO PRICING PART OF ME AS
I SOMETIMES DO WANT TO
OVERSIMPLIFY THINGS TO HELP TO
UNDERSTAND A LOT OF THE
FUNDAMENTALS. BUT OF COURSE,
NOTHING HERE IS SIMPLE. THERE'S
SO MANY OTHER FACTORS THAT GO
INTO EACH LAYER OF THE TOTAL
PRICING THAT IS HERE. AND I
WONDER IF YOU COULD JUST MAYBE
OFFER A LITTLE BIT MORE COMMENT
ON THE EXPERIENCES THAT WE HAD
IN THE SEVENTIES, AND WHEN WE
WERE TALKING ABOUT EXPERIMENTING
WITH A PRICE CONTROL AND WHY
THAT ACTUALLY INFLUENCED THE
SUPPLY CRUNCH THAT WE HAD, AND I
ONLY ASK THIS JUST PURELY FOR
BACKGROUND BECAUSE IF I'M
THINKING ABOUT YOU KNOW WHAT THE
PRICES ARE TODAY VERSUS WHAT
THEY WERE JUST LAST FEBRUARY OR
THIS FEBRUARY, YOU KNOW, MAYBE
COMPARED TO WHAT THEY WERE EVEN
TWO YEARS AGO. YOU KNOW HERE
LOOKING BACK FOUR MONTHS. YOU
KNOW, THERE'S NO ADDITIONAL TAX
THAT WE'RE PAYING TODAY THAT WE
DIDN'T PAY LACK BACK IN FEBRUARY
, BUT PRICES ARE ALMOST $2
HIGHER. YES CRUDE OIL HAS GONE
UP. BUT REFINERY COSTS, YOU
KNOW, SHOULDN'T HAVE GONE UP.
OVER THE LAST FOUR MONTHS. MAYBE
THERE'S MORE INFORMATION. WHY
THAT THAT THAT PART OF THE TOTAL
PIE HAD INCREASED. UM AND IF
THROUGHPUT OF THAT REFINERY IS
STILL MEETING THE DEMAND THAT WE
HAVE TODAY AS IT MET THE DEMAND
LAST FEBRUARY. THERE'S NOT A
SUPPLY CRUNCH THERE, UM, THAT I
THINK WOULD BE AFFECTING THE
PRICING. AND SO WHAT I'M
WONDERING IS, YOU KNOW FROM THAT
EXPERIENCE IN THE SEVENTIES, AS
YOU KNOW, YOU'RE THEORETICALLY
TALKING ABOUT MODEST PRICING
CONTROLS. DID THEY GO TOO FAR IN
THE SEVENTIES THAT THAT THAT
CAUSED SOMETHING ELSE TO REACT
OR IF THERE IS A NECESSITY TO
TRY TO UM, LOOK INTO CONTROLLING
PRICES BECAUSE THEY CAN CHARGE
WHATEVER THEY WANT TO CHARGE AND
MAYBE IF CONSUMERS ARE
RESPONDING, OR THEY ARE
ACCLIMATING TO WHATEVER THAT
PRICING IS TODAY, THEY'RE JUST
WILLING TO PAY IT. WITHOUT A
RESPONSE AND DEMAND THAT THAT IS
ALLOWING FOR, YOU KNOW MORE
PROFIT TO BLEED OUT THERE
THROUGH CONSUMERS BACK TO THESE
COMPANIES THAT THE OTHERWISE
WOULD WHAT WOULD NOT HAVE
ENJOYED SO IF MY QUESTION IS
MAKING ANY SENSE, I WONDER IF
YOU COULD JUST, YOU KNOW FOR
ANOTHER MINUTE OR TWO KIND OF
TALK ABOUT, UH, ANY ANY SWEET
SPOT THAT WE'RE LOOKING INTO, OR
WE MIGHT HAVE THE AUTHORITY TO
LOOK INTO WHEN IT COMES TO
TRYING TO HELP TO ATTENUATE SOME
OF THAT THAT PRICING SOME OF
THAT EXCESSIVE PRICING? YEAH AND
LET ME PREFACE BY SAYING I AM
NOT A, UH, RIGID ECONOMIST WHO
THINKS YOU SHOULD NEVER
INTERVENE IN THE MARKET. AND IN
FACT, DURING THE CALIFORNIA
ELECTRICITY CRISIS I WAS
ADVOCATING FOR PRICE CONTROLS.
AH, BUT AH, I THINK THEY HAVE TO
BE USED EXTREMELY JUDICIOUSLY
AND BECAUSE WHEN YOU USE PRICE
CONTROLS AND PUSHED THE PRICE
BELOW THE MARKET CLEARING LEVEL
, WHAT YOU END UP DOING IS
DISCOURAGING PRODUCTION. BECAUSE
THE PRODUCERS AREN'T MAKING AS
MUCH MONEY AND ENCOURAGING
CONSUMPTION BECAUSE THE PRICE
ISN'T AS HIGH AND THAT'S WHAT
CAUSES GAS LINES. UH WE THAT WE
HAD LONG GAS LINES IN THE 19
SEVENTIES BECAUSE WHILE THE
PRICE OF CRUDE OIL WENT UP AND
YES, THE ARAB OIL EMBARGO CAUSED
THE PRICE OF CRUDE OIL TO GO UP.
WE WOULDN'T HAVE SEEN GAS INES
EXCEPT WE DIDN'T ALLOW THE PRICE
OF GASOLINE TO GO UP. AH THE
COMPARISON THAT'S VERY
WORTHWHILE IS THE GAS LINES OF
1991. THAT DIDN'T HAPPEN AND YOU
DON'T REMEMBER BECAUSE WHEN THE
FIRST GULF WAR OCCURRED WITH THE
PRICE OF CRUDE OIL WENT WAY UP.
AND THE PRICE OF GASOLINE. WHY
NOT? SO WE PAID MORE FOR
GASOLINE, BUT WE DIDN'T HAVE GAS
LINES, AND THAT'S HAPPENING
AGAIN NOW. SO I AM REALLY
CONCERNED THAT IF WE GET INTO
THE AND I SHOULD ALSO SAY THAT
ONCE YOU REGULATE PRICES YOU
ALSO HAVE TO START ALLOCATING
SUPPLY BECAUSE SUPPLY IS GOING
TO TRY TO, FOR INSTANCE, LEAVE
THE STATE REFINER. IF YOU START
REAGAN IN CALIFORNIA PRICES WHO
CAN SHIP GASOLINE TO ARIZONA AND
NEVADA IS GOING TO BE LOOKING AT
AS THEY ALWAYS DO THAT TRADE OFF
. AND SO IF WE START PUSHING
CALIFORNIA PRICES DOWN, WE COULD
END UP ACTUALLY HAVING PRODUCT
LEAVE THE STATE AND AT THE SAME
TIME BEING DISCOURAGING,
DISCOURAGING IMPORTS INTO THE
STATE. AH, SO I THINK THAT. IF
YOU REALLY HAD A CRYSTAL BALL
AND COULD LOOK INTO EXACTLY WHEN
FIRMS ARE CHARGING MORE THAN THE
TRUE MARKET PRICE, UH, YOU MIGHT
BE ABLE TO DO HELP. BUT IT'S NOT
A MATTER OF JUST COMPARING TO
THE COST OF A REFINERY. THE
REFINERIES ARE RUNNING FLAT OUT
WHAT'S CLEARING THE MARKET IS
THAT SCARCITY PREMIUM THAT IN
THE PRICE THAT BY THE WAY, THE
SAME THING IS ALLOWS US TO SELL.
OUR HOUSE IS FOR MUCH MORE THAN
WE BOUGHT THEM FOR. UM THAT AND
THAT'S WHAT CLEARS THE MARKET,
AND IT'S HARD TO KNOW HOW HIGH
THAT ACTUALLY SHOULD BE, AND
STILL CLEAR THE MARKET. IF WE
HAD A CRYSTAL BALL, WE MIGHT BE
ABLE TO PUSH IT DOWN A BIT, BUT
I THINK THAT THAT ROUTE IS SO
FRAUGHT. THE POTENTIAL COSTS ARE
MUCH LARGER THAN THE BENEFITS,
NOT TO MENTION THE
ADMINISTRATIVE COSTS OF GOING
DOWN. THAT ROAD WOULD BE
ENORMOUS. I WOULD MUCH RATHER
SEE US REALLY FIGURE OUT WHAT
THE REGULATIONS ARE OR OTHER
MARKET RESTRICTIONS OR
CONCENTRATION THAT IS CAUSING
THIS MYSTERY GASOLINE SURCHARGE
AND TRY TO ADDRESS THOSE
LEGISLATIVELY. SO UH, THANK YOU.
YOU'VE GIVEN US A LOT OF FOOD
FOR THOUGHT, AND WE'LL
DEFINITELY BE LOOKING INTO THOSE
AREAS. I JUST WANTED TO CLARIFY
ONE THING. THE PREVIOUS SPEAKER
HAD SAID THAT 10% OF OUR GAS IS
PRODUCED OUT OF CALIFORNIA. SO
YOU WERE SAYING THERE'S JUST A
FEW COUNTRIES THAT AND
WASHINGTON STATE THAT HAVE THE,
UH THAT THAT HAS A CALIFORNIA
QUALITY GASOLINE IS THAT
CORRECT? WELL I I'M NOT A
PETROLEUM ENGINEER. UM BUT THERE
ARE ARE LIMITED NUMBER THAT
REGULARLY ARE CALLED UPON TO
DELIVER FULL CALIFORNIA
SPECIFICATIONS. GASOLINE, WHICH
KNOWN AS CAR, BOB. UM I THINK
THERE ARE A LOT OF REFINERIES
AND GORDON TRUMP WOULD KNOW THIS
BETTER THAN I WOULD, UH, THAT
ARE CAPABLE OF MAKING IT, BUT
THEY REQUIRE A BIGGER PRICE
PREMIUM TO DO THE CONVERSION. TO
BE ABLE TO DO IT. AH SO WE DO
IMPORT THE 10% NUMBER IS
PROBABLY AN AVERAGE OVER MANY
YEARS. SOMETIMES WE'RE NOT
IMPORTING AT ALL OTHER TIMES,
FOR INSTANCE, WHEN A REFINERY
GOES OUT UM, WE GET A LOT OF
IMPORTS, AND SO THOSE OTHER
REFINERIES THAT ARE IN IN
WHETHER IT'S SINGAPORE IS
ANOTHER PLACE THAT HAS A
REFINERY THAT CAN PRODUCE
CALIFORNIA SPEC GASOLINE. THE
THOSE REFINERIES TEND TO AH, BE
IT BE FLEXIBLE. AND WHEN THE
PREMIUM GOES UP IN CALIFORNIA,
THEY SWITCH AND MAKE SOME
CALIFORNIA GASOLINE BECAUSE I'M
THINKING AS WE'RE SWITCHING,
MOREOVER, TO RENEWABLES,
ELECTRIFICATION, HYDROGEN AND
THOSE BUMPS THAT YOU'RE TALKING
ABOUT, ESPECIALLY AS YOU KNOW
YOU HAVE REFINERY CAPACITY
DECREASING. WHETHER WE HAVE TO
LOOK MORE TO THE OUTSIDE TO GET
US THROUGH, UM, THOSE SPIKES.
YEAH, AND I YOU KNOW WE NOT
EVERY STATE, NOT EVERY LOCATION
IS GOING TO BE COMPLETELY SELF
SUFFICIENT IN EVERY PRODUCT AND
WE MAY GO THROUGH A PERIOD WHERE
OUR REFINERIES ARE SHUTTING DOWN
AND WE HAVE TO IMPORT MORE
GASOLINE. IF WE DO, I THINK THE
GOOD NEWS IS AS LONG AS WE CAN
MAKE SURE THAT THE PORTS AND THE
PIPELINES FROM THOSE PORTS ARE
WORKING WELL, THERE ARE A LOT OF
PLACES THAT CAN MAKE GASOLINE
FOR US, AND WE COULD GET A
PRETTY COMPETITIVE PRICE. BUT
THEIR COMPETITIVE PRICES GOING
TO INCLUDE THE SHIPPING COSTS
AND THAT DOES RAISE THE COST OF
MAKING GASOLINE FOR CALIFORNIA.
ALL RIGHT. UM I THINK THAT IS
IT. WE, UH DO YOU HAVE ONE MORE
QUESTION? SURE. SORRY. JUST ONE
MORE QUESTION. UM AS AS I KNOW,
YOU'RE AWARE, UH, WE'VE HAD
WE'VE WE'VE BEEN CONTEMPLATING
AND DEBATING THE MERITS OF
VARIOUS PROPOSALS TO PROVIDE
RELIEF FOR CALIFORNIANS WHO ARE
EXPERIENCING, UH, JUST. PAIN AT
THE PUMP. UM, CAN YOU JUST SPEAK
VERY BRIEFLY TO YOUR VIEW ON THE
RELATIVE MERITS OF A GAS TAX
SUSPENSION VERSUS A DIRECT
REBATE TO CONSUMERS? AND I THINK
SPECIFICALLY AROUND THE QUESTION
OF HOW MUCH OF A GAS TAX CUT YOU
WOULD ANTICIPATE GETTING PASSED
ON TO END CONSUMERS, WHICH I
FEEL LIKE HAS BEEN AT THE CRUX
OF SOME OF THE DEBATE AND
DISCOURSE WITH THOSE VARIOUS
PROPOSALS. UH UM, THIS IS NOT A
QUICK TOPIC. BUT ON YOUR LAST
QUESTION, I THINK THAT MOST OF A
GAS TAX CUT WOULD PROBABLY END
UP SHOWING UP AT THE PUMP. BUT
PROBABLY NOT ALL OF IT BECAUSE
WE ARE IN A PERIOD OF SCARCE, UH
, REFINERY CAPACITY, AND WE
PROBABLY WOULD SEE THE SELLER'S
ABLE TO TAKE A BIT OF THAT, SO
NOT LOWER PRICES QUITE AS MUCH.
I'M ACTUALLY A PRETTY BIG FAN OF
WHERE THE LEGISLATURE CAME OUT
WITH, UH, A PER CAPITA REBATE
THAT IS PARTICULARLY TARGETED
LOWER INCOME HOUSEHOLDS WHO ARE
OBVIOUSLY THE ONES BEING HIT
HARD BY HIGH GAS PRICES AND ALSO
BEING HIT HARD BY HIGH UTILITY
BILLS THAT ARE GOING UP. AND BY
HIGH RENT, ALL OF WHICH I THINK
ARE REAL CONCERNS FOR PEOPLE FOR
THE DISADVANTAGED PEOPLE IN THE
STATE. I'M GLAD THAT IT WAS
CAPPED. I PROBABLY WOULD HAVE
KEPT IT AT A LOWER INCOME THAN
THE LEGISLATURE DID. BUT UM AND
I THINK THAT THAT WAS A GOOD
OUTCOME. IN GENERAL ECONOMISTS
ARE NOT GOING TO BE A FAN OF AH
, SUSPENDING GAS TAXES SINCE
THEY PROBABLY ARE LOWER THAN THE
ACTUAL EXTERNALITIES THAT
DRIVERS CREATE WHEN THEY DRIVE.
EVEN WHEN THEY PAY SOME SOME OF
IT IS GOING TOWARDS THE CAP AND
TRADE PROGRAM. THERE ARE A LOT
OF LOCAL POLLUTION EFFECTS.
THERE ARE CONGESTION EFFECTS.
THERE ARE ACCIDENT RISKS IMPOSED
ON PEDESTRIANS AND AH, CYCLISTS
. NONE OF THOSE ARE PRICED IN.
SO I THINK THAT IF WE ACTUALLY
PAY THE FULL COST WE IMPOSED
WHEN WE DRIVE, PEOPLE WOULD
DRIVE LESS. THAT SAID. IT'S A
REAL SHOCK WHEN THE PRICE
SUDDENLY GOES UP. AND UH, THERE
ARE PEOPLE REALLY HURTING DUE TO
THOSE HIGHER GAS PRICES. A RULE
OF THUMB TO KEEP IN MIND IS
CALIFORNIANS CONSUME ABOUT ONE
GALLON PER PERSON PER DAY. WHEN
THE PRICE OF GASOLINE GOES UP TO
GALA AND I KNOW MANY OF YOU LIVE
IN DISTRICTS THAT WHERE THEY
CONSUME MORE THAN THAT, UM, WHEN
THE PRICE OF GAS GOES UP A
COUPLE OF DOLLARS A FAMILY OF
FOUR IS PAYING MAYBE $8 MORE PER
DAY, AND THAT AMOUNTS TO A LOT
OF MONEY IF YOU ARE ON A LIMITED
INCOME. SO I THINK SOME RELIEF
WAS JUSTIFIED, PARTICULARLY FOR
LOWER INCOME FAMILIES. THANK YOU
VERY MUCH, AND WE WILL CONTINUE
TO BE CALLING ON YOU AS WE MOVE
THROUGH THIS PROCESS, AND AS I
SAID IN MY TESTIMONY, I AM HAPPY
TO HELP OUT IN ANY WAY I CAN.
THANK YOU VERY MUCH. ALL RIGHT.
NEXT WE WOULD LIKE TO INVITE
SETH KIRSTEN, REPRESENTING THE
LEGISLATIVE ANALYST'S OFFICE AND
THANK YOU FOR JOINING US. UH IN
PERSON. THANK YOU, MADAM CHAIR
SETH KIRSTEIN WITH THE
LEGISLATIVE ANALYST'S OFFICE, SO
I'LL BE PROVIDING A BRIEF
PRESENTATION THAT WILL ZOOM IN
ON ONE OF THE PIECES OF THAT
VERY INTERESTING ENERGY
COMMISSION SLIDE, NAMELY THE
STATE'S EXCISE TAX ON GASOLINE.
AH AND MY PRESENTATION WILL BE
DIVIDED INTO TWO PARTS. FIRST
JUST SOME BASIC BACKGROUND ON
CALIFORNIA'S TAXATION OF
GASOLINE, AND THEN SECOND, THE
RELATIONSHIP BETWEEN THE STATES
GUESS TAX AND PRICES AT THE
PUMP. SO, CALIFORNIA'S PRIMARY
TAX ON GASOLINE IS AN EXCISE TAX
, WHOSE OFFICIAL NAME IS THE
MOTOR VEHICLE FUEL TAX, BUT I'LL
JUST REFER TO IT AS THE GAS TAX.
THE CALIFORNIA DEPARTMENT OF TAX
AND FEE ADMINISTRATION COLLECT
THIS TAX FROM FUEL SUPPLIERS.
THE SPECIFIC EVENT THAT TRIGGERS
TAX LIABILITY CAN VARY DEPENDING
ON THE PARTICULAR PATH THAT THE
FUEL TAKES TO GET TO THE GAS
STATION. ONE OF THE MOST COMMON
SCENARIOS IS A TRUCK WILL PULL
UP TO A LOADING RACK AT A
REFINERY. OR TERMINAL IN
CALIFORNIA, ANDIN THAT CASE,
THE STATE LEVIES THE GAS TAX ON
THE AMOUNT OF FUEL THAT'S
REMOVED FROM THAT LOADING RACK
AND PUT INTO THE TRUCK. TODAY
THE TAX RATE IS 51.1 CENTS PER
GALLON, AND THERE'S AN ANNUAL
INFLATION ADJUSTMENT THAT'S
DESIGNED TO KEEP THE REAL TAX
RATE CONSTANT OVER THE LONG
TERM. AND SO THAT CENTS PER
GALLON NUMBER GOES UP OR CHANGES
I SHOULD SAY EVERY YEAR ON JULY
1ST SO TOMORROW THE TAX RATE
WILL BE 53.9 CENTS PER GALLON.
IN THE 21 22 FISCAL YEAR, THE
GAS TAX RAISED $7.1 BILLION,
WITH NEARLY ALL OF THOSE
REVENUES DEDICATED TO
TRANSPORTATION PROGRAMS, AS
REQUIRED BY THE STATE
CONSTITUTION. SO THAT'S SORT OF
THE BASIC BACKGROUND AND IN THE
SECOND HALF OF MY PRESENTATION
OF DISCUSS THE RELATIONSHIP
BETWEEN THE STATES GAS TAX AND
RETAIL GASOLINE PRICES. AND IN
PARTICULAR, ALL SORT OF FRAME IT
IN TERMS OF THE FOLLOWING
POLICIES SCENARIO IF THE STATE
WERE TO REDUCE THE RATE OF THE
OF THE GAS TAX, HOW WOULD THAT
AFFECT PRICES AT THE PUMP? AND
SO WE LOOKED INTO THIS QUESTION
. UH RELATIVELY RECENTLY IN
JANUARY AND FEBRUARY, AS WE WERE
ANALYZING THE GOVERNOR'S
PROPOSAL TO SUSPEND A THREE CENT
PER GALLON PORTION OF THE GAS
TAX FOR ONE YEAR. AND OF THE
VARIOUS STUDIES WE REVIEWED. WE
IDENTIFIED FIVE THAT, IN OUR
VIEW, BROUGHT RELEVANT HIGH
QUALITY EVIDENCE TO BEAR ON THIS
QUESTION. BASED ON THAT BODY OF
EVIDENCE ARE FEBRUARY ANALYSIS
CONCLUDED THAT ROUGHLY 2 TO 3
CENTS OF THE PROPOSED THREE CENT
TAX CUT LIKELY WOULD BE PASSED
THROUGH TO RETAIL PRICES. BUT
SINCE THAT TIME TWO MAJOR
DEVELOPMENTS HAVE COMPLICATED
THAT CONCLUSION FIRST AS YOU'VE
HEARD IN PRIOR PRESENTATIONS,
FUEL SUPPLIES HAVE BECOME MORE
CONSTRAINT. UM AND IN THEORY, WE
WOULD EXPECT THAT TO WEAKEN THE
PASS THROUGH OF GAS TAX CUTS TO
RETAIL PRICES. BUT THAT'S NOT
SOMETHING JUST BASED ON THAT
NOTION THAT WE CAN QUANTIFY VERY
WELL. DOES IT WEAKEN THE PASS
THROUGH A LITTLE BIT OR A LOT?
KIND OF HARD TO SAY WITHOUT
ADDITIONAL INFORMATION, BUT THAT
BRINGS US TO THE SECOND MAJOR
SUBSEQUENT DEVELOPMENT, WHICH IS
THAT SOME MORE RECENT RESEARCH
HAS EXAMINED. THE EFFECTS OF GAS
TAX HOLIDAYS IN THAT GEORGIA,
MARYLAND AND CONNECTICUT,
IMPLEMENTED STARTING IN MARCH
AND APRIL. UH BASED ON THOSE
ESTIMATES, IT LOOKS LIKE ROUGHLY
60 TO 90% OF THE OF THE TOTAL
AMOUNT OF THOSE TAX CUTS WENT TO
CONSUMERS IN THE FORM OF LOWER
RETAIL PRICES. THAT RANGE IS A
BIT LOWER THAN OUR FEBRUARY
ESTIMATE. BUT THE BOTTOM LINE IS
BROADLY SIMILAR, WHICH IS THAT
SUBSTANTIALLY MORE THAN HALF OF
THE BENEFITS OF A GAS TAX CUT
LIKELY WOULD BE PASSED THROUGH
TO CONSUMERS. SO THAT CONCLUDES
MY BRIEF OPENING REMARKS, BUT
HAPPY TO TAKE QUESTIONS IF YOU
HAVE WE HAVE. RIGHT. SO, UM. THE
WORK THAT THE LAO DID, UH,
YOU'VE DONE YOU'RE PROBABLY
CONSTANTLY TASKED WITH LOOKING
AT, UH, GAS PRICES. I WOULD
IMAGINE THAT YOU'VE RESEARCHED
THIS OVER THE YEARS. OR IS THIS
OR IS THE RESEARCH HE DID
SPECIFICALLY ON HOW MUCH OF THE
GAS TAX WOULD BE PASSED ON TO
CONSUMERS? THAT'S UM, THAT
THAT'S SORT OF THE SCOPE OF THE
WORK WE'VE DONE RECENTLY. I
WOULD SAY AS FAR AS WORKING ON
GAS PRICES, IT COMES AND GOES.
IT'S NOT REALLY SOMETHING THAT
THERE'S CONSTANT INTEREST IN
NECESSARILY. SO DO YOU HAVE ANY
EXPLANATION FOR THE WHEN YOU
LOOK AT IT? THE PRICE IS NOT
BEING 100% PASSED THROUGH TO THE
CONSUMERS WHERE THE REST MIGHT
BE GOING. VARIANT THANK YOU,
MADAM. SURE, IT'S A VERY NATURAL
FOLLOW UP QUESTION. I WOULD SAY
IT'S NOT CLEARLY WELL, SO
THERE'S A BROAD SORT OF GENERIC
ANSWER THAT I CAN GIVE, WHICH IS
THOSE BENEFITS ARE CAPTURED BY
THE SUPPLY SIDE OF THE MARKET.
UM THAT EXTRA 10 TO 40% THAT'S
NOT PASSED THROUGH TO CONSUMERS.
KNOW WHO WHO SPECIFICALLY ON THE
SUPPLY SIDE OF THE MARKET. THAT
IS NOT SOMETHING THAT THIS
RESEARCH CAN SPEAK TO, BECAUSE
REALLY, THE ONLY DATA AND
OUTCOMES THAT ARE ARE AVAILABLE
IN STUDIED IN THIS RESEARCH IS
REALLY JUST THOSE RETAIL PRICES.
TO THE EXTENT THAT THERE'S THAT
GAP. THAT YOU'RE REFERRING TO
THAT OTHER 10 TO 40% WHERE IS IT
GOING? UM WELL, I MEAN, THERE
ARE A VARIETY OF POSSIBILITIES
IN TERMS OF THE PLAYERS ON THE
SUPPLY SIDE OF THE MARKET, I
THINK, SAID ONE RELATIVELY
OBVIOUS ONE IS OWNERS OF THE
VARIOUS BUSINESSES IN THE IN THE
GASOLINE SUPPLY CHAIN, SO THAT'S
CERTAINLY A POSSIBILITY. UM
DEPENDING ON HOW LONG A SORT OF
THE DURATION OF A GAS TAX CUTTER
SUSPENSION WERE TO BE, BUT THERE
ARE OTHER POSSIBILITY IS A
NAMELY THE VARIOUS, UM GROUPS
AND PEOPLE WHO SELL THINGS TO
THOSE BUSINESSES THAT COULD
INCLUDE EMPLOYEES. IT COULD
INCLUDE SORT OF LANDLORDS OR
EVEN LIKE A MANUFACTURERS OF
TANKER TRUCKS OR FOLKS LIKE THAT
, BUT YOU KNOW, SORT OF THE IT'S
REALLY JUST BASED ON THE
RESEARCH WE'VE SEEN. IT'S MOSTLY
SPECULATIVE BEYOND SOME SORT OF
BROADLY SPEAKING, THE SUPPLY
SIDE OF THE MARKET IS RECEIVING
THOSE BENEFITS. OKAY. AND THEN,
UH IF YOU WERE IN CHARGE OF THIS
COMMITTEE, AND WE ARE LOOKING AT
, UH WHY THE PRICES ARE SO HIGH
AND WHAT THE DIFFERENT
COMPONENTS ARE. IS THERE ANY
AREA THAT YOU WOULD, AND I'M NOT
EVEN SURE IF IT'S APPROPRIATE
FOR YOU TO ANSWER BUT CENTRIST
SITTING HERE. IS THERE ANY AREA
THAT YOU THINK WE SHOULD DELVE
MORE DEEPLY INTO APPRECIATE THE
QUESTION, MADAM CHAIR? YEAH I
THINK THAT DOES GO. UH,
CERTAINLY, YOU KNOW, BEYOND
BEYOND THE SCOPE OF WHAT I'VE
PREPARED TODAY, BUT I WILL SAY,
YOU KNOW, WE'VE CERTAINLY WE'VE
RECEIVED RECEIVED YOUR LETTER
AND APPRECIATE THAT. THERE'S A
VARIETY OF ISSUES YOU'RE
INTERESTED IN LOOKING INTO AND
JUST HAPPY TO BE IN TOUCH WITH
YOUR STAFF TO PROVIDE WHATEVER
ASSISTANCE IS NEEDED. GREAT
THANK YOU. IS THERE ANY ARE
THERE ANY OTHER QUESTIONS FROM
THE COMMITTEE? MISS DAVIS. THANK
YOU, KENNETH. FOLLOWING UP ON
YOU AND AGAIN, THIS IS, UH WITH
LEGISLATION CONSIDERING
LEGISLATION. IS THERE ANYTHING
THAT YOU THINK WHEN IT COMES TO
LEGISLATION THAT WE COULD
REQUEST FROM THE C E? C. UM OH.
YOU MEAN IN TERMS OF THEIR THEIR
, YOU KNOW, POLICY
RECOMMENDATIONS OR SOMETHING OF
THAT NATURE. UM, THERE'S
SOMETHING WE'RE MISSING THAT
WOULD HELP. I HAVE TO HAVE TO
THINK ABOUT IT. MAYBE CONFER
WITH SOME MY COLLEAGUES BACK TO
THE OFFICE AND GET BACK TO YOU.
I AM I DO COVER GAS TAXES, BUT
BUT I'M NOT A DEEPLY FAMILIAR
WITH C C AS AN INSTITUTION, SO
I'M AFRAID MAYBE MAYBE I CAN
FOLLOW UP WITH YOU AND YOUR
STAFF WOULD BE GREAT. THANK YOU.
THANKS WE APPRECIATE YOU COMING
AND WE'RE LOOKING FORWARD TO
WORKING COLLABORATIVELY WITH YOU
ON THIS COMMITTEE. THANK YOU.
THANK YOU SO MUCH, AND THEN WE
HAVE OUR. THE LAST SPEAKER IS
HOPEFULLY, UH, MISS FOOT. WILL
BEYOND AND, UM. KATHLEEN IS THE
SENIOR ASSISTANT ATTORNEY
GENERAL WITH THE CALIFORNIA
DEPARTMENT OF JUSTICE. IS MISS
PUT ON. OKAY GOOD. GOOD
AFTERNOON AFTERNOON. I MEAN, I
TAKE IT FROM THAT YOU CAN HEAR
ME. YES, WE CAN HEAR YOU. BUT
OKAY, GOOD. UH WELL, THANK YOU
FOR THE OPPORTUNITY TO JOIN THIS
VERY INTERESTING DISCUSSION. UM
AH. LET ME JUST BEGIN WITH A
BRIEF DESCRIPTION OF THE
ATTORNEY GENERAL'S HISTORIC ROLE
WITH REGARD TO GAS PRICES. OR AT
LEAST THE ROLE OF THE ANTITRUST
SECTION IN THE A G S OFFICE.
I'VE BEEN WITH THE ANTITRUST
SECTION FOR SEVERAL DECADES,
I'VE SERVED AS ITS CHAIR FOR ITS
CHIEF FOR UITE A WHILE, UH,
LIKE AS PROFESSOR BORNSTEIN
MENTIONED I WAS ALSO A MEMBER OF
THE PETROLEUM MARKET ADVISORY
COMMITTEE THAT HE CHAIRED. UM
THE JURISDICTION. HISTORY OF
ENFORCEMENT. UH THE OIL INDUSTRY
AND GAS PRICES HAVE BEEN A FOCUS
OF OUR SECTION FOR A GREAT MANY
YEARS. AND THE SUBJECT OF QUITE
A NUMBER OF INVESTIGATIONS AND
SEVERAL LAWSUITS. I WOULD.
PEOPLE USED TO ASK ME COULD I
PREDICT WHAT WE WOULD BE LOOKING
AT IN THE FUTURE? UH ALWAYS A
DANGEROUS QUESTION. I WAS ALWAYS
ABLE TO SAY, WELL, THERE'S TWO
THINGS THAT I KNOW WE'RE GOING
TO BE LOOKING AT. ONE IS HEALTH
CARE, AND THE OTHER IS GASOLINE.
UM SO, UH, ANYWAY, HEALTHCARE IS
NOW IN A I IN A SEPARATE UNIT,
BUT GASOLINE IS STILL DEFINITELY
HOURS. UM, OUR PRINCIPAL PARTNER
, AND A LOT OF WHAT WE HAVE
LOOKED AT HAS BEEN THE FEDERAL
TRADE COMMISSION, WHICH HAS A
DEDICATED UNIT, VIRTUALLY,
INCLUDING BOTH THE NUMBER OF
LAWYERS AND A GROUP OF
ECONOMISTS THAT HAVE MADE IT UH,
CERTAINLY, UH, MUCH EASIER FOR
US TO WORK ON ON MATTERS WITH
THEM THERE. AH, THANK YOU FOLLOW
EVENTS ALL OVER THE COUNTRY, BUT
THEY HAVE A PARTICULAR FOCUS ON
CALIFORNIA. UH AND THEY SHARE A
LOT OF THE KIND OF BACKGROUND
THAT THAT YOU'VE BEEN GETTING.
FROM FROM THE ENERGY COMMISSION
, AS WELL AS FROM PROFESSOR
BORNSTEIN. THE ENERGY COMMISSION
IS AN IMPORTANT RESOURCE FOR US
AS WELL IN UNDERSTANDING MARKET
CONDITIONS, TRENDS AND SO FORTH.
AND CERTAINLY VERY MUCH
APPRECIATE THE FACT THAT THEY
EXIST AND THAT THEY ARE AS
CAPABLE AS THEY ARE, UH IN
GATHERING DATA AND INTERPRETING
IT. UM AND I TRUST HIM FORCE
MINT, WHICH WE DO IS GENERALLY
DIRECTED IT TWO THINGS. ONE IS
OVERALL MARKET CONSOLIDATION. UH
MERGERS AND ACQUISITIONS. THAT
CAN LEAD TO MONOPOLY PRICING. UH
AND THE OTHER IS ANTICOMPETITIVE
COLLUSION AS TO EITHER PRICE OR
SUPPLY. SINCE REALLY SINCE 2000
. WE'VE INVESTIGATED EIGHT OIL
COMPANY MERGERS OR ACQUISITIONS
RANGING FROM A WHOLE BATTERY OF
THEM AROUND 4000 AND ONE UH, BP
AMOCO, ARCO CHEVRONTEXACO. AH
AND THOSE PERIODS AND THEN MOST
RECENTLY, JUST LAST YEAR, UH,
MARATHON ACQUIRED 7 11 GAS
STATIONS, INCLUDING A NUMBER OF
THEM IN CALIFORNIA. UM IN IN
MANY OF THOSE CASES, THE MERGING
PARTIES WERE REQUIRED TO, UH,
SPIN OFF A NUMBER OF ASSETS AND
SELL THEM TO COMPETITORS SO THAT
THAT WOULD BRING NEWCOMERS INTO
THE CALIFORNIA MARKET. AH AND
REPLACE THE COMPETITION THAT HAD
BEEN LOST. VALERO CAME IN THAT
WAY TO ZERO, WHICH IS NOW
MARATHON. I BELIEVE CAME IN THAT
WAY. AH! IN IN 2017, THEN THEN
ATTORNEY GENERAL BEZERRA, UH,
WENT TO COURT OR SENT US TO
COURT TO BLOCK VALERO'S
ACQUISITION OF A MAJOR PRODUCT
STORAGE AND BLENDING. OH, YOU
JUST. WE JUST LOST THE, UH.
SORRY CAN YOU HEAR ME? NOW WE
CAN HEAR YOU NOW. OKAY. GOOD.
SORRY. UM UH, IN 2017 ATTORNEY
GENERAL, BEZERRA WENT TO COURT
TO BLOCK VALERO'S ACQUISITION OF
, UH, THE LAST MAJOR REFINED
PRODUCT STORAGE AND MIXING
FACILITY IN NORTHERN CALIFORNIA.
IT WAS EXTREMELY IMPORTANT IN
OUR VIEW TO DO THAT TO BLOCK IT
, BECAUSE THAT WAS THE ONE AREA
WHERE, UH, WHERE INDEPENDENT
TRADERS OTHERS COULD BRING
PRODUCT INTO CALIFORNIA. AND UH
, AND IN SO DOING, THEY COULD,
UH, THEY COULD TMPER TO SOME
EXTENT THE ABILITY OF THE LOCAL
REFINERS TO JUST KEEP ON RAISING
PRICE. UM WE WERE SUCCESSFUL IN
THAT VENTURE AND OUR SUCCESS IN
BLOCKING IT WAS, AH MAY NOT HAVE
BEEN TALKED ABOUT ON EVERY
STREET CORNER, BUT IT WAS HAILED
WITH IN THE END, I TRUST
COMMUNITY. AS A GROUNDBREAKING
EXAMPLE OF BOTH OF INDIVIDUAL
STATE ENFORCEMENT OF FEDERAL
WHAT'S FEDERAL MERGER LAW? WE
DON'T HAVE OUR OWN LAWN,
CALIFORNIA UH AND THEN ALSO THE
FACT THAT IT INVOLVED A VERTICAL
ACQUISITION THAT IS A REFINER
ATTEMPTING TO ACQUIRE A. UH
BLENDING STORAGE FACILITY RATHER
THAN A REFINER TO REFINE HER
HEAD TO HEAD, UH, COMPETITIVE
MERGER, AS HAS BEEN DONE IN THE
PAST. UH AND THAT PARTICULAR
THAT THE VERTICAL RELATIONSHIPS
WITHIN THE INDUSTRY OR CERTAINLY
ONES THAT ARE UH, ARE VERY
INTERESTING AND AH AND ARE MORE
AND MORE GETTING THE ATTENTION,
NOT JUST IN THE IN IN THE
PETROLEUM INDUSTRY, BUT IN
OTHERS AS WELL AS HAVING MORE
POTENTIAL FOR ANTICOMPETITIVE
EFFECT AND AH, THEN PEOPLE USED
TO THINK, UM BUT LET ME JUST
SHIFT AS I'M GOING THROUGH THE
HISTORY. WE CAN MAYBE TALK ABOUT
THAT A LITTLE BIT MORE LATER. UH
DURING THE LAST 25 YEARS, THE
SECTION HAS CONDUCTED SEVERAL
INVESTIGATION INTO SORT OF THE
CONDUCT SIDE. BAD BEHAVIOR PRICE
FIXING BY CALIFORNIA REFINERS.
UH THESE GENERALLY HAPPENED WHEN
THERE WAS A PRICE SPIKE, UH,
MOST NOTABLY THE PRICE BIKE
FOLLOWING HURRICANE KATRINA IN
2000 AND FIVE UM, THE MOST
RECENT INVESTIGATION, UH, LEAD
TO AN ANTITRUST LAWSUIT, WHICH
WE FILED IN 2020, NOT AGAINST
THE REFINERS, BUT AGAINST TO
GLOBAL TRADING ENTITIES. I THINK
PROFESSOR BORENSTEIN MENTIONED
THAT. AH THE LAWSUIT CONCERNED
COLLUSIVE TRADING PRACTICES THAT
OCCURRED DURING THIS PERIOD, UH
, IN WHICH THEY IN WHICH THE
EXPLOSION AT THE TORRANCE
REFINERY TOOK PLACE. UM YEAH,
THE IT IS. THE CASE IS SCHEDULED
TO GO TO TRIAL IN JUNE OF NEXT
YEAR. AH IT'S FILED IN SAN
FRANCISCO, UH, THERE HAVE BEEN
ALL KINDS OF DIFFERENT PHASES OF
IT. MOTION PRACTICE AND SO ON,
UH, CHALLENGE TO THE EVEN THE
COURT'S JURISDICTION OVER THE
KOREAN PARENT GRANDPARENT
COMPANY WAS REBUFFED. UH
FORTUNATELY, FIRST BY THE TRIAL
COURT AND THEN AGAIN BY THE
COURT OF APPEAL. THERE'S A
PETITION FOR REVIEW IN THE
CALIFORNIA SUPREME COURT ON
THAT. AH THE CASE IS ASIDE FROM
THAT PARTICULAR ASPECT, THE
CASES IN VERY ACTIVE AND QUITE
ADVERSARIAL LITIGATION. SO MY
REMARKS ABOUT THAT CASE IN
PARTICULAR IN RESPONSE TO ANY
QUESTIONS IS ARE ARE NECESSARILY
GOING TO BE PRETTY LIMITED. UM
THAT IS, UH, SORT OF MY
INTRODUCTION IN TERMS OF THE
HISTORY. I KNOW YOU DO HAVE
QUESTIONS, WHICH WERE WRITTEN.
I'M SOME OF THEM PERHAPS ALREADY
BEEN ANSWERED. TO YOUR
SATISFACTION BY THE ENERGY
COMMISSION, AND, UH, BY THE
OTHER WITNESSES, BUT I'M
CERTAINLY MORE THAN READY TO
OKAY. OKAY. A ANSWER WHAT I CAN
AH, WE CERTAINLY APPRECIATE YOU
JOINING US AND COMPLETELY
UNDERSTAND THAT SOME OF THE
TOPICS ON THE COURT CASE ARE OFF
LIMITS. SO UM, THANK YOU. DO WE
HAVE QUESTIONS FROM THE
COMMITTEE? I JUST HAVE, UM, I
HAVE A FEW, UH IN YOUR OPINION.
DOES THE AIG HAVE ADEQUATE
AUTHORITY AND RESOURCES TO
INVESTIGATE THE RETAIL SECTOR?
UM I WOULD SAY THAT WE HAVE, UH
, WELL, ADEQUATE AUTHORITY. WE
HAVE, UHYEAH, UM. WE HAVE
AUTHORITY TO PROSECUTE. UM.
PRICE FIXING AND SUPPLY PRICE
MANIPULATION AND SUPPLY
MANIPULATION. THOSE KINDS OF
THINGS WE HAVE THAT UNDER BOTH
FEDERAL ANTITRUST LAW, AND WE
HAVEN'T UNDERSTATE ANTITRUST
LAW. UNDER STATE ANTI TRUST LAW.
WE DO NOT HAVE THE AUTHORITY TO
PROSECUTE MONOPOLIES. UM AND
ALTHOUGH IF THERE'S A CONSPIRACY
TO MONOPOLIZE, WE CAN WE CAN DO
THAT. UM THOSE ARE THE THAT'S
THE SORT OF BASIC AUTHORITY. UM
WE HAVE, UH OVER OVER A PERIOD
OF A NUMBER OF YEARS. AH WE HAVE
WE HAVE SOUGHT ADDITIONAL
AUTHORITY UNDER THE STATED
ANTITRUST LAW. THAT CARTWRIGHT
ACT. UM UH TO, UH, TO GO AFTER A
SINGLE FIRM CONDUCT BUT AWFUL
IZATION. AH ABUSE OF DOMINANCE
AND SO FORTH. AND I THINK
SOMETHING LIKE THREE TIMES THAT
HAS BEEN THEN PROPOSED AND NOT
ACTED ON. THERE IS NOTHING
PENDING AT THE MOMENT THAT I'M
AWARE OF. UH BUT IT IS CERTAINLY
SOMETHING FOR YOU TO BE AWARE
OF, AND IT AND IT COULD
CONCEIVABLY BE A FACTOR IN THE
SECTOR, ALTHOUGH AT TIMES IT HAS
BEEN OTHER AREAS THAT WERE THE
THERE'S BEEN MORE OF A FOCUS.
WHEN THOSE THINGS HAVE COME UP.
A SORT OF FOLLOW UP. DOES
CALIFORNIA LACK ANY STATUTES
RELATED TO PRICE FIXING OR
ANTITRUST? UM THAT OTHER
JURISDICTIONS HAVE THAT COULD BE
ENACTED BY LEGISLATORS TO
PREVENT SCENARIOS THAT LEAD TO,
UH, HIGHER GASOLINE PRICES. UM.
I WOULD. I WOULD SAY THAT WE
WOULD CERTAINLY LIKE THE
FLEXIBILITY TO BRING
MONOPOLIZATION TYPE SINGLE FIRM
CASES. UH, IN STATE COURT UNDER
STATE LAW. WE DO NOT HAVE THAT
THERE ARE OTHER STATES THAT DO
HAVE THAT. UH, THE FACT THAT THE
FEDERAL GOVERNMENT HAS THAT
MEANS THAT THAT MY OFFICE IS
ABLE TO BRING CASES OF THAT KIND
IN FEDERAL COURT UNDER FEDERAL
LAW. UM THAT WOULD NOT BE AS
ADVANTAGEOUS POTENTIALLY AS
DOING IT IN STATE COURT UNDER
STATE LAW, BUT WE'RE NOT WITHOUT
WE'RE NOT WITHOUT THE ABILITY TO
ADDRESS IT TO SOME DEGREE. HAS
THERE BEEN AN EFFORT IN THE
LEGISLATURE TO ADDRESS THAT? AH
WELL, THERE HAVE BEEN SEVERAL,
UH ONE THAT I RECALL,
PARTICULARLY WAS A NUMBER OF
YEARS AGO. UH IT WAS A MEASURE.
I THINK TWICE, SENATOR DONE.
PROPOSED MEASURES OF THAT KIND.
UH AND I CAN'T REMEMBER EXACTLY
WHEN THE LAST ONE BUT AH! THE
THOSE ARE THAT THEY HAVE COME UP
AND CERTAINLY WITH A LITTLE
ENCOURAGEMENT. MY GUESS IS, UH
UH, MY OFFICE WOULD, UH,
CERTAINLY THE SECTION WOULD
ENCOURAGE THE ATTORNEY GENERAL
TO STEP FORWARD WITH THAT. AS
WELL. UH IT WOULD NOT BE
SPECIFIC TO THIS INDUSTRY. I
THINK IT'S IMPORTANT. IT'S
IMPORTANT TO A NUMBER OF
DIFFERENT AREAS. IT WOULD BE
IMPORTANT TO TECHNOLOGY OR IS IT
WOULD PROBABLY BE IMPORTANT IN
HEALTHCARE. UM AND SO ON. I MEAN
, THAT'S A MUCH BROADER QUESTION
. I THINK THEN, UH, AH, WE COULD
REALLY PRODUCTIVELY GO INTO
TODAY, BUT IT'S CERTAINLY ONE
THAT I'D BE MORE THAN HAPPY TO
TALK ABOUT IT SOME AT SOME TIME.
RIGHT UH, MR WARD. THANK YOU.
THANK YOU FOR BEING HERE WITH US
TODAY. I'M WONDERING FROM THE
RESPONSE LETTER FROM THE ENERGY
COMMISSION, WHICH I'M GRATEFUL
THAT THEY RESPONDED TO OUR
DELEGATION LETTER SO QUICKLY
THAT THEY CONCLUDED FROM THEIR
2019 REPORT. THAT ADDITIONAL
INVESTIGATION WAS NECESSARY TO
LOOK INTO ANY ISSUES OR EVIDENCE
THAT THAT THERE MIGHT BE PRICE
FIXING OR FALSE ADVERTISING. AND
I ALSO AM SENSITIVE ON TWO
THINGS ONE. YOU MIGHT NOT BE
ABLE TO COMMENT ON THINGS THAT
MIGHT BE ACTIVELY UNDER
INVESTIGATION TO THAT WE ASK SO
MUCH OF YOU AND THE ATTORNEY
GENERAL'S OFFICE AND A VARIETY
OF ISSUE AREAS. BUT ARE YOU ABLE
TO COMMENT TODAY? IS THERE HAS
THERE BEEN, UM FURTHER WORK DONE
BY THE ATTORNEY GENERAL'S OFFICE
SINCE THE 2019 REPORT WAS
CONCLUDED, OR IS THEIR RESOURCES
THAT YOU MIGHT NEED FROM THE
LEGISLATURE TO PUT THIS ON THE
FRONT BURNER. AH YES. UH I GUESS
A IN GENERAL. YES. AH. WE HAVE
NOT. WE HAVE HAVE NOT HAD
RESOURCES TO PURSUE. WELL LET ME
PUT IT THIS WAY. THE MYSTERY
SURCHARGE. IT WAS SOMETHING THAT
FIRST SURFACED DURING THE P MAC
AS A DISCUSSION. AS A DISCUSSION
AREA AND WE DID INITIATE AN
INVESTIGATION THAT ULTIMATELY
LED TO THE CASE THAT WE FILED IN
2020. I THINK, AS AS PROFESSOR
BORNSTEIN INDICATED THAT IS NOT
AH, THEY WHAT? WHAT THAT CASE
REPRESENTS, DOES NOT COVER THE
COVER THE MAP IN TERMS OF THE
POSSIBLE CAUSES OF THE MYSTERY
SURCHARGE. AH AND THERE ARE
CERTAINLY OTHER THINGS THAT ARE
POSSIBLE TO INVESTIGATE. UH
INCLUDING THE POSSIBILITY
THEY'RE BOTH SOME OF THAT ARE
ITEMS THAT HE REFERRED TO THAT
ARE NOT UNLAWFUL. UH AND THEN
THERE'S ALWAYS THE POSSIBILITY
OF UNLAWFUL. PRICE FIXING OR
SOMETHING OF THAT KIND OF, UM WE
DON'T HAVE THE RESOURCES TO DO
THAT. THAT'S PARTLY BECAUSE A
LARGE CHUNK OF WHAT WE HAVE THE
RESOURCES WE DO HAVE ARE FOCUSED
ON ON THE CASE THAT'S GOING ON
RIGHT NOW. UM IT'S IMPORTANT TO
UNDERSTAND THAT TRUST
INVESTIGATION OF THAT, UH,
REQUIRES ENORMOUS RESOURCES. IT
REQUIRES. UM CERTAINLY, AT LEAST
IF THEY WHAT, WHAT WE'VE GOT
INVESTED NOW IS, UH, A GOOD ONE
THIRD OF THE ATTORNEYS WITHIN
OUR SECTION ARE ARE WORKING ON
THE EXISTING CASE. IT REQUIRES
EXTERNAL ECONOMISTS AND PROBABLY
INDUSTRY EXPERTS. UH WHO WOULD
NEED TO, UH FIRST DIG BEYOND
THIS. THE SURCHARGE AVERAGES WE
HAVE NOW, UH, GET A MORE
GRANULAR VIEW AND SPECIFIC
LOCATIONS AND VARIOUS LEVELS OF
THE MARKET. UH THEN, OF COURSE,
THERE'S A WHOLE PROCESS OF
OBTAINING COMPANY RECORDS
REVIEWING THEM. INTERVIEWING
INDIVIDUALS BOTH INFORMALLY AND
UNDER OATH. THAT KIND OF PROCESS
TAKES MANY MONTHS, SOMETIMES
MORE THAN A YEAR BEFORE YOU EVEN
GET TO THE POINT OF FILING A
CASE. UM IT IS. IT'S EXCEEDINGLY
EXPENSIVE, PARTICULARLY BRINGING
IN THE KIND OF OUTSIDE MHM. UH
THE OUTSIDE EXPERTISE THAT, UH,
THAT WOULD BE REQUIRED. UM MANY
MILLIONS OF DOLLARS. UH
SOMETIMES, UH, TENS OF MILLIONS
OF DOLLARS. AND THE AND THE
UPSHOT, UH, WOULD BE, UH,
UNCERTAIN, UH, WITH THAT MUCH
INVESTMENT UP FRONT AND
SOMETHING WITH AN UNCERTAIN ENDS
POINT OR CONCLUSION, UH, IS THAT
THAT WOULD BE SOMETHING THAT
WOULD HAVE TO BE LOOKED AT. I
THINK VERY CAREFULLY, UM, NOT
ONLY BY OUR OFFICE BUT ALSO BY
THE LEGISLATURE. I IN TERMS OF,
UH UM, OPPORTUNITY COST IF YOU
WILL, UH, BECAUSE THAT KIND OF
INVESTIGATION WOULD TAKE SEVERAL
YEARS BEFORE YOU WOULD ACTUALLY
GET AN ANSWER IF YOU GOT AN
ANSWER. UM DURING THAT TIME, OF
COURSE, AS A AS A PREVIOUS
WITNESSES HAVE SAID. THERE ARE
LIKELY TO BE FURTHER CHANGES IN
THE MARKET. UM UH, SOME OF WHICH
MAY BE, UH, MORE TANGIBLE. UH
AND IN TERMS OF SOMETHING THAT
CAN BE GONE AFTER AS AS A
PROSECUTION AS OPPOSED TO GONE
AFTER THROUGH SOME OF THE MORE
REGULATORY APPROACHES THAT HAVE
ALSO BEEN RAISED IN THIS
HEARING. OKAY? WELL, WE REALLY
APPRECIATE YOUR TIME WITH US
TODAY, AND I HOPE WE WILL BE
ABLE TO CONTINUE OUR GOOD
RELATIONSHIP WITH THE A G S
OFFICE AS WE MOVE FORWARD. THANK
YOU. THANK YOU VERY MUCH. THANK
YOU. ALRIGHT UM, BEFORE WE GET
MR GIBSON. SO WHAT? WHAT I'D
LIKE TO TALK ABOUT NOW THAT
WE'VE HEARD SORT OF WHAT HAS
HAPPENED. WHAT WHAT IS GOING ON
IS, UM, A DISCUSSION ON THE NEXT
STEPS FOR THIS COMMITTEE AND SO
TOO GUIDE THE DISCUSSION. I
WOULD SUGGEST THE FOLLOWING
FRAMEWORK I THINK WE SAW WHEN
THIS COMMITTEE WAS ANNOUNCED
THERE WAS A LOT OF SKEPTICISM
THAT WE'RE GONNA BE DRAGGING
OUT. DRAGGING THIS OUT OVER A
LONG PERIOD OF TIME. OBVIOUSLY
WE SET THIS MEETING UP IN RECORD
TIME. THANK YOU TO MY ASSEMBLY.
CASSANDRA WHO DID AN INCREDIBLE
AMOUNT OF WORK, BUT MUCH FASTER
THAN SELECT COMMITTEES. UM
USUALLY MEET, BUT WE WANTED TO
MAKE SURE THAT WE HAD OUR FIRST
MEETING DURING BEFORE THE SUMMER
BREAK STARTED, SO I WOULD
SUGGEST AS A FRAMEWORK A SERIES
OF MEETINGS OVER THE NEXT THREE
OR FOUR MONTHS WHERE WE MEET
WITH INDUSTRY INDUSTRY
REPRESENTATIVES. SO AH, OIL
PRODUCERS AND TRANSPORTERS,
REFINERIES AND GASOLINE,
TRANSPORT AND RETAIL GAS
STATIONS. I THINK IT WOULD BE
GREAT. ALSO FROM THIS DISCUSSION
TO LOOK AT. UH UM THE KIND OF
STAR BRANDS AND THE OFF BRAND
GAS STATIONS BECAUSE I THINK
THERE'S DEFINITELY SOMETHING TO
LOOK AT IN THAT AREA AND THEN,
UH, LOOK AT CONSUMER TALK TO
CONSUMER ORGANIZATIONS AND
REGULATORS. AND THEN A FINAL
MEETING TO PRESENT OUR
CONCLUSIONS. SO, UM WE HAVE, UH. WE HAVE A SORT OF BASIC
OUTLINE THAT WE COULD, UH, SEND
TO THE COMMITTEE. OBVIOUSLY NOT
ARE NOT ALL OF OUR COMMITTEE MET
MEMBERS ARE HERE, SO WE WOULD
CERTAINLY LIKE TO HAVE INPUT
FROM THEM. BUT WOULD LOVE TO
AFTER THE THOROUGH PRESENTATION
THAT WE'VE HAD TO HEAR. ANYBODY
THAT MIGHT HAVE SOME SUGGESTIONS
BEYOND WHAT WE'VE DISCUSSED.
THINK, MADAM CHAIR. I THINK THAT
WAS AN INCREDIBLY INFORMATIVE
AND USEFUL FIRST HEARING AND
JUST AGAIN. THANK YOU TO ALL OF
THE PRESENTERS WHO JOINED US
TODAY AND I THINK THE FRAMEWORK
THAT YOU'VE OUTLINED MOVING
FORWARD MAKES IT A LOT OF SENSE
AND LOOK FORWARD TO THE
CONTINUED DISCUSSION. AND I WILL
SAY WE DID WE HAVE ALL OUR STAFF
MEMBERS THAT HAVE BEEN MAKING
NOTES OF ALL THE COMMITTEE
COMMENTS, SO WE'LL MAKE SURE
THAT THAT'S ALL INCORPORATED. MR
GIBSON. THANK YOU VERY MUCH.
MANAGER UM MY APOLOGIES. THEY'RE
STILL BUSY. EVEN THOUGH WE'RE IN
RECESS WITH A NUMBER OF
COMMITTEES ARE BEING A HEARING
BILLS. NONETHELESS I THINK THAT
THAT'S A GOOD STORY, I THINK,
WANT TO ALSO WANT TO ADD AND TO
SEE BECAUSE I KNOW THAT PEOPLE
THINK THAT WE HAVE AUTHORITY AND
CONTROL IN TERMS OF GASOLINE
PRICE, BUT I THINK WE NEED TO
LOOK AT WHAT AUTHORITIES DO WE
ACTUALLY HAVE AS POLICYMAKERS
AROUND CONTROL, CONTROLLING THE
PRICES JUST AS A NARRATIVES OF
PEOPLE KNOW THAT WE CAN'T JUST
WE DON'T HAVE THE IMPACT THAT
PEOPLE THINK WE DO IN TERMS OF
GASOLINE PRICES. SO I'M
SUGGESTING THAT WE ALSO PUT THAT
AS PART OF THE CONVERSATION
MOVING FORWARD SO THAT THE
PUBLIC KNOWS THAT AGAI THAT WE
DON'T HAVE THE KIND OF AUTHORITY
THAT THEY THINK THAT WE HAVE, AS
RELATES TO OVERSEEING THE
GASOLINE PRICES AND ALSO WHO HAS
THE AUTHORITY OVER GASOLINE
PRICES. I THINK THAT'S A GREAT
SUGGESTION. AND I THINK EVEN
MORE BROADLY, UM, PART OF THE
GOAL OF THIS COMMITTEE WILL BE
EDUCATION BECAUSE I KNOW A LOT
OF TIMES, THERE'S FRUSTRATION
POINTED AT THE LEGISLATURE AND
REGULATORS. BUT IF WE REALLY ARE
CLEAR ON ON WHAT GOES INTO THE
PRICE OF GAS. AND WHERE WHERE WE
HAVE THE CONTROL TO CHANGE THAT.
THAT WOULD BE, UH, I THINK IT
WOULD BE VERY GOOD FOR THE
PUBLIC TO HEAR. THANK YOU. MR
WARD. THANK YOU, MADAM CHAIR AND
THANK YOU FOR ALSO ARRANGING
THIS SO QUICKLY. UM, AND A
SPECIAL SHOUT OUT OUR ASSEMBLY
FELLOW THAT IT'S A SPECIAL
PLACE, I THINK TO BE ABLE TO
TAKE ON SOMETHING OF THIS
MAGNITUDE. UM BUT BE ABLE TO DO
SOMETHING SO QUICKLY. IT'S A
SPECIAL ROLE TO HAVE YOU HERE.
SO THANK YOU FOR ALL YOUR HARD
STAFF WORK GOING INTO THIS. UM I
WOULD ALSO, YOU KNOW, RECOGNIZE
THAT WE HEARD A LOT OF REALLY
INFORMATIVE FEEDBACK HERE TODAY.
THAT THINK ALREADY STARTING TO
KIND OF HELP US, UM, ENTERTAIN
SOME OF THE QUESTIONS THAT WE
CAN DIG INTO A LITTLE BIT
DEEPER, POSSIBLE OUTCOMES THAT
WE CAN HAVE IN THE FORM OF
LEGISLATION OR OTHER
ADMINISTRATION ENGAGEMENT. TO
TRY TO DO THE BEST THAT WE CAN
DO. THIS REALLY CAME FROM A
PLACE WHERE WE WANTED TO MAKE
SURE THAT WE WERE RESPONDING TO
OUR CONSTITUENTS IS STRESSORS
AND THAT WE ARE, YOU KNOW,
EXPEDITIOUSLY MOVING TO DO
EVERYTHING THAT WE POSSIBLY CAN
DO. AND SO PART OF THAT IS
UNDERSTANDING. WHAT ARE
LIMITATIONS ARE AND WHAT OUR
SCOPE IS. BUT THEN ALSO ACTING
ON THAT. AND NOT JUST, YOU KNOW,
ISSUING A REPORT BUT REALLY
TAKING THAT AS FULLY AS WE
POSSIBLY CAN. UM THROUGH THAT
CONVERSATION OVER THE LAST
COUPLE OF WEEKS, I WAS ALSO
REMINDED THAT IT'S IMPORTANT AND
CONVENIENT THAT WE'RE MEETING
HERE IN THE CAPITAL AND THAT
THAT'S EASY TO ORGANIZE, BUT
THAT WE MIGHT WANT TO THINK
ABOUT GETTING OUT THERE TO
DURING THE FALL RECESS PERIOD IF
WE VISITED A REFINERY IF WE
ACTUALLY TALKED TO SOME OF THESE
COMMUNITIES THAT ARE AROUND
THERE TO MAYBE THAT'S A LITTLE
BIT CLOSER TO THE EMPLOYEES OR
OTHERS THAT ARE ALSO A PART OF
THE LARGER CONVERSATION AS WELL.
I WOULD CERTAINLY WELCOME THAT
AND LOOK FORWARD TO SEEING, UH,
COMMUNITIES ACROSS OUR STATE
THAT HAVE A CLOSER STAKE IN THIS
CONVERSATION. AND THAT'S A GREAT
SUGGESTION. IT HAPPENS THAT WE
HAD TENTATIVELY LOOKED AT JULY
28TH IN L, A AND PERHAPS AT A
REFINERY OR CLOSE TO A REFINERY,
SO THINK WE'RE THINKING THE SAME
THING. THAT'S EXCELLENT. ANY
ANYTHING ELSE? I JUST WANT TO
KIND OF PIGGYBACK ON THE
COMMENTS. FIRST OF ALL, THANK
YOU SO MUCH FOR TAKING THE SUN
AND I THINK THAT CALIFORNIANS A
REALLY HAPPY TO BE ABLE TO SEE
THAT WE'RE TRYING TO FIND OUT.
REALLY UM YOU KNOW WHY? WHAT
COST? YOU KNOW THE AVERAGE
PERSON INCLUDING MYSELF.
LEARNING THIS IS REALLY WHAT
MAKES UP THE COST OF A GALLON
GASOLINE. AND A LOT OF TIMES WE
JUST THINK IT ALL GOES ONE WAY
OR THE OTHER. WE REALIZED GOING.
OH, OKAY. NOW I UNDERSTAND, AND
THAT'S THE COST THE COST OF WHAT
WATER IS EVERYTHING THAT THE
INGREDIENTS THAT COME IN THERE,
SO I APPRECIATE THAT, AND I WANT
TO THANK YOUR STAFF TO FOR
JUMPING ON THE SO QUICK AND I
THINK THAT WE CAN MOVE FAST ON
THIS AND I'M EXCITED BECAUSE I
BELIEVE THAT WE CAN COME UP WITH
LONG TERM SOLUTIONS. AND YOU
KNOW, THE MORE WE LEARN. I THINK
THE BETTER IDEAS WE CAN COME UP
WITH. SO THANK YOU. I THANK MY
COLLEAGUES BEING HERE AS WELL.
AND I WISH EVERYBODY GOOD MONTH
AFTER ALL RIGHT. AND WITH THAT
WE ARE GOING TO NOW TAKE PUBLIC
COMMENTS AND, UM WE ARE GOING TO
LIMIT THOSE PUBLIC COMMENTS TO
TWO MINUTES PER SPEAKER, OR IF
THERE'S VERY FEW SPEAKERS, YOU
KNOW, AND YOU GO A LITTLE OVER.
AH BUT I DO. I DON'T KNOW. WE
HAVE SOME INDUSTRY FOLKS HERE
AND, UM WE WILL ABSOLUTELY, UH,
BE IN INVITING YOU THE NEXT TIME
TO BE ABLE TO GO MUCH MORE IN
DEPTH ON AND ON YOUR ISSUES AND
THE WAY YOU SEE THINGS, THANKS.
GREAT. THANK YOU, MADAM CHAIR
AND MEMBERS ZACH LARRY ON BEHALF
OF THE WESTERN STATES PETROLEUM
ASSOCIATION REALLY APPRECIATE
THE CONVERSATION HERE TODAY.
ESTABLISHING THE FOUNDATIONAL,
UH, UNDERSTANDING OF THE
COMPLEXITIES OF THE FUEL MARKET.
I THINK CALIFORNIA IS UNIQUE IN
ITS NATURE AND STRUCTURE. AND I
THINK YOU GOT TO GET A GLIMPSE
OF THAT TODAY FROM THE NUMBER OF
THE C E C. A G S OFFICE THE L A.
OH, AND SEVEN BORNSTEIN, WHO
TALKED ABOUT MANY OF THESE
ISSUES, I THINK WHAT WAS VERY
CLEAR TODAY WAS POLICY ISSUES
AND POLICIES IN CALIFORNIA. DO
YOU HAVE AN IMPACT ON CONSUMERS?
TO YOUR CONSTITUENTS TO FAMILIES
AND BUSINESSES IN CALIFORNIA. I
THINK THERE'S CURRENT
LEGISLATION. EXECUTIVE ORDERS
REGULATIONS THAT ARE GOING TO
CONTINUE TO HAVE AND IT WILL
HAVE AN IMPACT ON THE COST OF
FUEL IN CALIFORNIA TO YOUR
CONSTITUENTS. DOES INCLUDE
BANNING THE INTERNAL COMBUSTION
ENGINE, WHICH IS BEING
IMPLEMENTED THROUGH THE ADVANCED
CLEAN CAR TO RULE RIGHT NOW AT
THE AIR RESOURCES BOARD. IT
INCLUDES THE CURRENT SCOPING
PLAN THAT IS BEING DRAFTED BY
THE AIR RESOURCES BOARD. IT
INCLUDES ELIMINATING IN STATE
PRODUCTION, INCREASING CAP AND
TRADE IN LOW CARBON FUEL
STANDARD COSTS AND LIMITING
RETAIL FUEL SITES. I WOULD
ENCOURAGE THIS COMMITTEE TO
MAYBE LOOK AT THE PENDING
REGULATIONS. THE SCOPING PLAN
LOOK AT THE FORWARD NATURE THAT
THOSE ARE GOING TO HAVE ON THE
COST OF FUEL IN CALIFORNIA LOOK
FORWARD TO PARTICIPATING IN
FUTURE HEARINGS AND THANK YOU
FOR TODAY. HI MY NAME IS SAM
BAYLESS. I'M THE DIRECTOR OF
POLICY FOR THE CALIFORNIA FIELDS
INCONVENIENCE ALLIANCE
REPRESENTS THE MAJORITY OF THE
GAS STATIONS AND CONVENIENCE
STORES IN THE STATE OF
CALIFORNIA, WHICH PRIMARILY
SMALL FAMILY MINORITY OWNED
BUSINESSES. WE APPRECIATE THE
COMMITTEE HOLDING THE HEARING
TODAY AND GIVING US THE
OPPORTUNITY TO PROVIDE OUR
PERSPECTIVE THROUGHOUT THIS
PROCESS. WELCOME ROBUST
CONVERSATION AROUND THE PRICE OF
FUEL IN THE CHALLENGES WE FACE
IN THE STATE OF CALIFORNIA. WE
DO HAVE SOME CONCERN. EXCUSE ME
WHEN LOOKING AT THE PRICE F
FUEL CALIFORNIANS RIGHT OFF THE
BAT OR PAYING APPROXIMATELY A
DOLLAR 30 INDIRECT TAXES AND
FEES ON A GALLON OF GAS ON JULY
1ST, CALIFORNIA'S GAS TAX WILL
GO UP YET AGAIN. IT'S ONLY A FEW
CENTS IS A COMMON RESPONSE WHEN
WE'RE TALKING ABOUT POLICIES IN
CALIFORNIA, BUT THESE DO ADD UP
AND THEY DO HURT CONSUMERS AT
THE PUMP. BEYOND THOSE DIRECT
COSTS. THE REALITY IS THAT OUR
MEMBERS PAY COUNTLESS FEES AND
PERMIT FEES AND LICENSING FEES
TO MEET THE OVERWHELMING
OVERWHELMING COMPLIANCE BURDENS
THAT ARE UNIQUE TO OUR INDUSTRY
AND OUR STATE. THIS IS ALL IN
ADDITION TO THE HIGH COST OF
EQUIPMENT THAT OUR MEMBERSHIP,
UM MUST PURCHASE TO OPERATE
HERE. WHEN 40 SOME ODD DIFFERENT
AGENCIES HERE ARE REGULATING OUR
MEMBERS. THESE COSTS DO BEGIN TO
ADD UP VERY QUICKLY. AS
CALIFORNIA'S POPULATION HAS
GROWN. THE SUPPLY OF GASOLINE
RETAILERS HAS GONE DOWN.
CONSTRUCTION OF NEW GAS STATIONS
HAS BEEN DECLINING AND
INCREASING MORE INCREASINGLY
DIFFICULT AS THE DECADES HAVE
GONE ALONG. DUE TO RESTRICTIVE
ZONING AND NOW CLEAR BANS ON THE
NEW CONSTRUCTION OF FUELING
SITES. FINALLY JUST LIKE EVERY
OTHER STATE OR EVERY OTHER
BUSINESS IN THE STATE ARE
INDUSTRIES SUBJECT TO A NUMBER
OF HIGHER COSTS THAN OTHER
STATES. HIGHER LABOR COSTS,
HIGHER PAYROLL TAXES AND
FRANCHISE EAST FRANCHISE TAXES.
ULTIMATELY IF THE LEGISLATURE
WISHES TO IDENTIFY THE TRUE COST
OF GASOLINE, WE NEED TO LOOK
BACK AT THE POLICIES OVER THE
LAST 40 YEARS THAT HAVE MADE IT
MORE AND MORE DIFFICULT TO SELL
FUEL AT A LOWER COST TO THE
CONSUMERS OF THE STATE OF
CALIFORNIA. ONCE AGAIN. WE
REALLY APPRECIATE YOU HAVING US
HERE TODAY AND LOOK FORWARD TO
CONTINUED CONVERSATIONS AND HOPE
WE CAN WORK TOGETHER AND FIND
SOME BETTER SOLUTIONS. THANK YOU
. THANK YOU VERY MUCH. DO WE
HAVE ANY OTHER SPEAKERS? RIGHT
AND THE FINAL WORDS FROM THE
COMMITTEE. WITH THAT. WE ARE
ADJOURNING.