Nothing like micromanaging and overregulation to help a good ole’ free market breathe and operate vibrantly.
California, already home to the highest gasoline prices in the U.S., is now bracing for another seasonal surge. The state’s energy regulator has cautioned gasoline traders that it is monitoring the market closely as refinery maintenance squeezes supplies.
In a letter to Governor Gavin Newsom last week, the Division of Petroleum Market Oversight pointed to both planned and unexpected refinery outages, noting that such disruptions are common in autumn—and that sharp price increases also hit in 2022 and 2023, Bloomberg reported this week.
Average prices at California pumps reached $4.66 per gallon on Tuesday, $1.48 above the national average. The state’s unique fuel blends, required under strict environmental rules, make it harder to secure alternative supplies when local refineries shut down. Over time, the industry has also reduced capacity in California, further tightening the market.
So concerned are policymakers about another shortage that they’ve shifted their approach to oil refiners. Newsom, typically a critic of the industry, delayed implementation of a law he championed to cap refining profits. Legislators even debated offering hundreds of millions of dollars to keep a refinery from closing—once an unthinkable step.
Bloomberg writes that while state leaders ease pressure on refiners, traders face heightened scrutiny. Oversight division director Tai Milder reminded them last week that the state “monitors the spot market daily for misconduct.” He warned that “anyone making purchases that drive fuel prices up, while also holding long positions they subsequently cash in on, will face scrutiny.”
California’s fuel market is thinly traded and heavily reliant on voluntary price reporting, making it vulnerable to manipulation. The state has also shown it is willing to act: in 2020, the attorney general sued Vitol Inc. and SK Energy Americas Inc. for manipulating the gasoline market during a 2015 spike. That case ended with a $50 million settlement last year.
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