California governor wants investigation into state’s high gasoline prices

It is no secret that fuel prices in California are significantly higher than the rest of the country. In a letter to Attorney General Xavier Becerra, Gov. Gavin Newsom wants an investigation into a “mystery surcharge” on gasoline imposed on the state.

On Monday, Oct. 21,  Newsom instructed  Becerra to “open an investigation into whether false advertising or price fixing are occurring and contributing to the mystery surcharge imposed on Californians.” Newsom’s request came on the same day the California Energy Commission released a report regarding increased gasoline prices in the state.

According to the commission’s report, California is paying up to 30 cents per gallon more than other states. Newsom’s letter states that “big oil” is “misleading and overcharging” Californians. Albert Lundeen, California Energy Commission spokesman, confirmed to Land Line that the report is about gasoline prices only and does not look into diesel.

California Energy Commission’s gasoline price report

In April, Newsom requested that the commission compile an in-depth analysis regarding an increasing differential between national gasoline prices and California gasoline prices. The differential reached as high as $1 per gallon in April.

The report concluded that in 2018, Californians paid an average of 30 cents more per gallon of gasoline at higher-priced retail outlets such as 76, Chevron and Shell.

“Although name-brand retail gasoline outlets represent that they sell higher-quality gasoline than lower-priced outlets, given the high standards of all gasoline in California there is no apparent difference in the quality of gasoline at retail outlets in the state,” the commission states. “The name-brand stations, therefore, are charging higher prices for what appears to be the same product.”

According to the report, the commission accounted for numerous “readily explainable factors.” Even after factoring those in, the commission found an unexplainable residual price increase over the last five years.

So why did Californians not go to lower-priced retailers?

In the report, the commission cites station location, credit card acceptance and brand loyalty as possible reasons. Higher prices may lead consumers to believe that the gasoline is of higher quality. However, the report also considers the possibility of price fixing and false advertising.

The report states that none of the name-brand retailers responded to requests for information. The commission suggested the California Department of Justice is more equipped to investigate the issue.

Newsom’s investigation request

In light of the commission’s report, Newsom took the commission’s suggestion and asked the attorney general to look into the matter.

“Simply stated, name-brand gasoline retail outlets in California are charging more for a gallon of gasoline compared to their unbranded, hypermart competitors,” the letter states. “And gasoline retail outlets in California are charging more than in other states. A significant portion of the higher prices is attributable to charges by name brands – this far exceeds national trends.”

Newsom claims there is no evidence to justify the increased prices nor is there evidence that cheaper gasoline is of lower quality. On the other hand, there is no evidence of the suspected false advertising or price fixing. Essentially, that is what Newsom is asking Becerra to investigate.

If Becerra discovers enough evidence, Newsom suggests that the state pursues legal action “to protect the public.”