BILL ANALYSIS                                                                                                                                                                                                              1
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                SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
                               DEBRA BOWEN, CHAIRWOMAN
          

          AB 1340 -  Kehoe                                  Hearing Date:   
          June 24, 2003              A
          As Amended:         June 17, 2003            FISCAL       B

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                                      DESCRIPTION
           
           Current law  requires oil producers, refiners, pipeline  
          operators, transporters, storage facilities and marketers, to  
          submit monthly  information on petroleum supplies to the  
          California Energy Commission (CEC).

           Under current regulations  , the CEC requires those entities noted  
          above to provide information including:

           Receipts and inventory levels of crude oil and petroleum  
            products at each refinery and terminal location.

           The amount of gasoline, diesel, jet fuel, blending components,  
            and other petroleum products imported and exported. 

           The amount of gasoline, diesel, jet fuel, blending components,  
            and other petroleum products transported intrastate by marine  
            vessel. 

           The amount of crude oil imported, including information  
            identifying the source of the crude oil. 

           Dealer tank wagon prices, also called net dealer buying  
            prices.

           This bill  statutorily requires those same entities to submit the  
          information noted above on a  weekly  instead of a  monthly  basis. 

                                      BACKGROUND
           











          While being home to a number of oil refineries, California is  
          also home to high gasoline prices.   In 1996, California  
          gasoline prices spiked from $1.15/gal to $1.47/gal.  In 1999,  
          gasoline prices spiked again, rising as much as $0.50/gal higher  
          than the rest of the nation.  In March 2003, gas prices jumped  
          from $1.57/gal to $2.15/gal.  Each of these price spikes  
          prompted public outcries, legislative responses, and, in 1999,  
          an investigation by the Attorney General.  

          The concerns over gasoline prices prompted the Governor to order  
          an investigation by the California Energy Commission (CEC).   
          That investigation noted gasoline prices climbed 36% from the  
          beginning of the year through March 17.  The cause of the price  
          increases was attributed to large increases in the price of oil  
          due to uncertainty about the U.S.-Iraq war, an oil strike in  
          Venezuela, and a cold winter in the eastern U.S.  Refiners also  
          switched from a winter gas formula to a summer formula, which is  
          typically more expensive to produce and, during the switchover,  
          temporarily tightens supplies.  Additional gasoline demand in  
          Phoenix reduced California supplies further, as did the move to  
          phase-out the use of MTBE.

          While prices are lower than they were in March, there are now  
          new reports that refinery production problems have caused  
          wholesale prices to jump about 30 cents a gallon since early  
          June, and the effects are already starting to be felt at the  
          pump.  On June 18, the Sacramento Bee reported retail prices in  
          San Francisco and Santa Barbara rose three cents to average  
          $1.90/gal, in Los Angeles and Sacramento prices rose 4 cents to  
          $1.78/gal and $1.80/gal, respectively, and in Chico prices rose  
          eight cents to $1.81/gal.

           Attorney General Report
           
          In 1999, the Attorney General opened an investigation into the  
          activities of the refiners to determine whether they were  
          operating in a non-competitive manner in violation of California  
          and/or federal law.  This investigation is ongoing, but has yet  
          to result in any prosecutions.

          The Attorney General also convened a Task Force on gasoline  
          pricing.  A summary of the Task Force discussion was published  
          in May 2000 in a report entitled "Report on Gasoline Pricing in  
          California."   A preliminary report provided to the Attorney  










          General noted three contributing factors to California's  
          relatively high gas prices:

           A relative lack of competition in California's gasoline  
            refining and marketing industry;
           Supply constraints related to California's unique cleaner  
            burning gasoline requirement;
           Somewhat higher state taxes.

          In a recent update, the Attorney General suggested considering  
          the following proposals:

           Creating a strategic fuel reserve;
           Increasing fuel economy standards and encouraging non-gasoline  
            based technology;
           Enabling gas dealers to shop for the best wholesale prices;
           Examining ways to import more fuel into the state.

                                       COMMENTS
                                           
           1.An Apple A Week . . .  .  In its March 28, 2003, report on  
            gasoline and diesel price spikes, the CEC concluded it needs  
            the information it's now getting on a monthly basis on a  
            weekly basis instead.  It believes the information is  
            necessary to more accurately track inventories, imports, and  
            exports - all of which will help the CEC more precisely  
            determine the causes of price spikes.  The CEC recommended  
            that the petroleum industry change its current practice of  
            submitting information on a monthly basis and begin  
            voluntarily submitting reports to the CEC weekly.  This bill  
            turns that recommendation into a requirement. 

           2.The CEC May Be On The Case  . The CEC is currently conducting  
            regulatory proceedings to modify reporting requirements for  
            the petroleum industry and is considering requiring weekly  
            reporting from the industry as part of those proceedings.  
           
                                   ASSEMBLY VOTES
           
          Assembly Floor                     (74-0)
          Assembly Appropriations Committee  (24-0)
          Assembly Utilities and Commerce Committee                       
          (11-0)











                                       POSITIONS
           
           Sponsor:
           
          Author

           Support:
           
          California Service Station and Automotive Repair Association
          Utility Consumers' Action Network

           Oppose:
           
          None on file

          

















          Jennie Bretschneider 
          AB 1340 Analysis
          Hearing Date:  June 24, 2003