California’s Sen. Barbara Boxer and Sen. Dianne Feinstein joined with the other four Pacific Coast senators to ask the Justice Department to investigate the role of oil refineries in gas spikes that occurred in May and October — even as crude oil prices were declining.
The senators allege that market manipulation by West Coast oil refiners may have contributed to a price spike in May and October that sent California gas prices to soar to record highs above $5 a gallon.
Valero spokesman Bill Day maintains the allegations are unfounded.
"Prices went up because there were some refinery outages. There’s no way to bring in extra supplies to California when there’s an outage, because California mandates a unique blend of gasoline that isn’t made anywhere else. So we can’t just bring in extra supplies. And even if you could, there’s not really a lot of infrastructure to move gasoline within the state or from other parts of the country," Day said.
Day said if California considered using a more standardized blend of gasoline, or if lawmakers eased regulations such as AB 32, future price spikes could be prevented.
Analysts said a web of refinery problems were to blame for the prices. But the senators say a review of California refinery emissions data revealed inconsistencies between the time refineries were actually producing petroleum products and when maintenance shutdowns were publicly reported. They said misleading reports of shutdowns could create a perceived shortage of gasoline.
“According to this new analysis by McCullough Research, supply shortages following refinery fires and other unexpected outages at West Coast refineries did not cause the May and October gas price spikes,” the senators wrote in a letter to Attorney General Eric Holder.
“If these findings are accurate, which could only be confirmed through subpoenaed records, they would violate the FTC August 2009 Rule against ‘false or misleading public announcements of planned pricing our output decisions,’ and be subject to fines of up to $1 million a day per violation,” the letter reads.
"There will be an investigation. An investigation will find that there was no manipulation, no collusion, no wrongdoing by the refiner," Valero spokesman Day said.
The letter says that West Coast drivers may have had to pay $1.3 billion more for gas during the May 2012 price spike than they should have. They also cite information from the Federal Trade Commission that a one cent price increase costs California drivers roughly $150 million per year.
The senators also cited the gas price scams of Enron and others a decade ago, noting that the West Coast is already familiar with price inflation scams.
"California's problem with gasoline prices are self-inflicted," Valero spokesman Day said. "California's done this to itself. It could if it wanted to fix the problem. but instead what they're doing is adding more regulation and more cost on top of it."
The letter to Holder was sent by the senators from Washington, Oregon and California, who are also all Democrats.
This story has been updated.