Governor Moves to Reduce Gas Prices

Alarmed at the sudden double-digit price spikes of gas, Governor Jerry Brown called for emergency measures on Sunday to provide some relief to motorists.

Brown directed the California Air Resources Board to immediately allow refineries to make a winter blend gas—weeks earlier than usual, because the formulation would be expected to increase the state's fuel supply by up to 10 percent.

Winter-blend gasoline typically isn't sold until after October 31 and the state requires refineries to make a summer blend that is better for air quality during those months.

"Gas prices in California have risen to their highest levels ever, with unacceptable cost impacts on consumers and small businesses," said Governor Brown.

"I am directing the Air Resources Board to immediately take whatever steps are necessary to allow an early transition to winter-blend gasoline."

California refiners are required to produce a summer-blend gasoline through October in most areas of the state, Brown noted in a letter to Air Resources Board chairwoman Mary Nichols. Refiners can produce more of the winter-blend than the summer-blend because of the composition of the gasoline, he wrote.

Allowing refiners to make an early transition to winter-blend gasoline could quickly increase fuel supply and provide a much needed safety valve with negligible air quality impacts, Brown wrote, and made public on his website.

Gas prices in California have skyrocketed over the past week due to a tightening of fuel supplies caused by shutdowns at Tesoro and Exxon refineries. The Exxon refinery came back online Friday and Tesoro is scheduled to resume production early next week. Combined, these actions are expected to stabilize and reduce fuel prices.

Meanwhile, U.S. Sen. Dianne Feinstein called on the Federal Trade Commission to investigate the cause of the price spike. This was her second letter to the Chairman Jon Leibowitz, and she cited a Reuters report that an illegal "short squeeze" may have been employed. She called on the agency to "seek data sharing agreements that will allow it to monitor gasoline and oil markets actively and effectively." Thirdly, she asked that it establish a permanent gasoline and oil market oversight unit modeled on the Federal Energy Regulatory Commission’s (FERC) Division of Energy Market Analytics and Surveillance.

“California’s consumers are all too familiar with energy price spikes which cannot be explained by market fundamentals, and which turn out years later to have been the result of malicious and manipulative trading activity," Feinstein wrote.

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