Drivers are heading into the Fourth of July weekend with national gas prices at their highest level for the holiday in four years. In California, where prices remain well above the national average, the state’s petroleum watchdog has flagged a separate problem — one that goes beyond the state’s shrinking refinery capacity and isolated fuel market.
The last week of May was the Memorial Day holiday, when the Iran-war price spike was near its peak. Chevron stations in California charged an average of $6.34 a gallon that week — the highest of any brand tracked in the state, and 44 cents above the average unbranded station, those that sell gas without a major oil-company logo.
The finding came from California’s gasoline watchdog, a unit inside the state Energy Commission called the Division of Petroleum Market Oversight, which delivered a presentation to a state Senate committee on June 3.
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The presentation showed branded stations charged more than unbranded ones in California – a bigger gap than in the rest of the country – and identified major brands’ grip on the retail market as a driver.
California can now see into its gasoline market as never before. But its laws may be fighting the wrong problem.
The state’s existing gas-price oversight laws, pushed by Gov. Gavin Newsom earlier in his term, centered on emergency price hikes, refinery outages and California-specific supply disruptions. Newsom backed away from some of the most aggressive measures last year after two California refineries announced closures. Economists say the harder target is a retail market where prices can be shaped by algorithms, supplier contracts and the buying power of the biggest brands.
As another holiday weekend approaches, and the worst of the Iran-war price spike appears to be subsiding, the debate has moved into court and the Legislature.
A federal class-action lawsuit filed last week in Sacramento accuses Kalibrate, a fuel-pricing software company, and several major gasoline retailers of using algorithms and competitor data to keep California pump prices artificially high, citing a state law that took effect this year barring algorithmic price coordination. Kalibrate has denied the allegations.
The lawsuit names several major retailers, including Marathon, which operates ARCO stations; 7-Eleven; WalMart, including Sam’s Club; Circle K and Albertson’s.
The complaint alleges that even small increases in California’s gas market can make huge differences, with every one cent increase costing drivers $134 million a year. It also cites research that using the software can increase prices by 6 cents per gallon, and up to 30 cents per gallon when many stations in an area are using the software.
The suit taps into a longstanding theory: Severin Borenstein, an energy economist at UC Berkeley, has pointed to what he calls a “mystery gasoline surcharge” — the part of California’s high prices left unexplained after taxes, environmental programs and production costs are accounted for — that shows up after gas leaves the refinery.
“The real question is, do they have evidence that the company or the gas stations are using the company to coordinate their activities?” Borenstein said of the suit. “That would be a major antitrust problem.”
