BILL ANALYSIS 1 1 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 1 3 4 0 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