BILL ANALYSIS �
SENATE TRANSPORTATION & HOUSING COMMITTEE BILL NO: sb 448
SENATOR MARK DESAULNIER, CHAIRMAN AUTHOR: Leno
VERSION: 4/23/13
Analysis by: Carrie Cornwell FISCAL: yes
Hearing date: April 30, 2013
SUBJECT:
Motor vehicle fuel pricing and supply
DESCRIPTION:
This bill requires, upon legislative appropriation of funds for
this purpose, the California Energy Commission (CEC) to
investigate suspected motor vehicle fuel price manipulation and
make recommendations to the Legislature on how to limit motor
vehicle fuel price volatility.
ANALYSIS:
Federal law prohibits market manipulation of crude oil,
gasoline, petroleum, or natural gas.
Existing state law, known as the Petroleum Industry Information
Reporting Act of 1980 (PIIRA), declares that information and
data concerning all aspects of the petroleum industry are
essential for the state to develop and administer energy
policies that are in the interest of the state's economy and the
public's well-being. To this end, state law requires oil
refiners and marketers each month to report to CEC a great deal
of specified information regarding their refinery inputs and
outputs as well as their petroleum product receipts,
inventories, and distributions. The CEC must analyze this
information with regard to the nature of any fuel shortages and
price changes.
The CEC must report each quarter to the Legislature and governor
a summary, an analysis, and an interpretation of this
information. In addition, the CEC must prepare a biennial
assessment of the information it receives from oil refiners and
marketers and include that information in the Integrated Energy
Policy Report (IEPR), a statutorily-required document that
forecasts energy supply and demand and evaluates current energy
issues facing the state.
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This bill :
1.Requires the CEC to build on the analysis it must perform
pursuant to PIIRA by:
Establishing a definition for "motor vehicle fuel market
manipulation."
Identifying data necessary to determine whether such
manipulation is occurring, including data on production,
emissions, operations, sales volumes, and price for individual
producers, as well as market wide pricing data.
Establishing an analytical methodology to evaluate whether
price manipulation is occurring at the producer level and
market wide.
Analyzing the data and investigating for suspected price
manipulation at both the producer and market wide levels.
1.Directs the CEC to work with the Air Resources Board and other
agencies to include in its biennial assessment required under
PIIRA a report on further legislative recommendations to limit
the amount of price volatility and comparative price increase
in the California motor vehicle fuel market. The report must
include an evaluation of strategies that increase fuel
storage, leverage the state's purchasing power relative to its
own fleet, and increase timely imports of fuels during price
swings.
2.Allows the CEC to implement its provisions upon appropriation
by the Legislature from moneys collected as royalty payments
from specified oil and gas leases on public lands.
COMMENTS:
1.Purpose . The author introduced this bill to give California
the tools to ensure that major oil companies are not violating
the law through concentration of market power and fuel market
price manipulation. In addition, the bill provides the
California Legislature a detailed accounting of strategies
that can be pursued to limit market power consolidation, price
volatility, and price increases in the California fuel market.
Although it is illegal to monopolize and manipulate the
market for gasoline, sufficient standards or definitions do
not exist by which to evaluate a particular company's behavior
for conformance with the law. Also, the author asserts that
California has a number of measures in place that will reduce
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fuel price volatility over time, but no current measure that
is focused on long-term fuel price reduction. The author
introduced this bill to take on both of these issues.
Supporters stress the importance of providing on-going,
California-specific monitoring of the motor vehicle fuel
market in California, which receives a vast majority of these
fuels from just a handful of producers and importers. They
note that rather than relying on the federal government, this
bill directs the state to take an independent look at its fuel
market to protect its consumers and note in particular that
gasoline prices here are both more variable and on average
higher than the rest of the country.
2.Background . Last year media reports attributed gasoline
price spikes to events at west coast oil refineries that
occurred prior to the spikes. The BP Cherry Point refinery in
Washington had a fire on February 17, 2012. Subsequently, in
May 2012, gasoline prices rose by about
15 cents per gallon. The Chevron Richmond refinery
experienced a fire on August 6, 2012. That fire and an
electrical outage at Exxon's Torrance refinery on October 1,
2012, helped precipitate a 50-cent per gallon price spike in
October 2012. To alleviate costs to consumers, Governor Brown
issued an order allowing retailers to sell California's winter
blend of gasoline earlier than usual. In the wake of these
events, the Select Committee on Bay Area Transportation, which
the author chairs, held an informational hearing on California
oil refineries, gasoline supply, market power, and gas price
volatility. This bill grew out of that hearing.
3.Opposition . The Western States Petroleum Association (WSPA)
opposes this bill in part because it is duplicative and could
lead to conflicts with federal law and federal monitoring of
the gasoline market. This bill directs CEC to establish a
definition of motor vehicle fuel market manipulation, collect
related data, and analyze that data to discern market
manipulation. WSPA asserts that CEC's resulting definition
could be inconsistent with the existing federal definition and
that the Federal Trade Commission provides regular monitoring
of the wholesale and retail gasoline prices to detect
anti-competitive behavior. WSPA further notes if the
Legislature is going to direct CEC to look at the comparative
market difference of the California fuels market, then its
reports must include a full review of the fuels policies that
are unique to California, including our gasoline blend, the
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Low-Carbon Fuel Standard, and the AB 32 cap and trade program.
4.Motor vehicle fuels . Supporters, the author, and the existing
law that the bill amends focus on petroleum derived gasoline
and diesel fuels. The bill itself, however, uses the term
"motor vehicle fuel," which in state law generally refers to
gasoline only but could in this context mean other fuels used
in motor vehicles, including natural gas, electricity,
ethanol, and biodiesel. The committee may wish to amend the
bill to clarify that it applies solely to petroleum gasoline
and diesel fuels.
5.Technical amendment . On page 2, line 9, after "commission"
insert "shall"
6.Committee of second referral . The Rules Committee referred
this bill to the Energy, Utilities, and Communications
Committee and to the Transportation and Housing Committee.
This bill passed the Energy, Utilities and Communications
Committee on April 16 by a 6 to 4 vote.
POSITIONS: (Communicated to the committee before noon on
Wednesday, April 24,
2013.)
SUPPORT: Asian Pacific Environmental Networks
Consumer Action
Consumer Federation of California
Consumers Union
Environmental Defense Fund
Greenlining Institute
Sierra Club California
United Steel Workers
OPPOSED: Western States Petroleum Association
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