California governor vetoes bill to investigate fuel price volatility

By Keith Goble, Land Line state legislative editor | 10/23/2013

A California bill turned back by the governor would have drawn the curtain on volatile fuel prices.

In the past 19 months, many places around the state have seen fuel prices at one point or another rise above $5 per gallon. The U.S. Energy Information Administration reported the average price of a gallon of on-highway diesel fuel in California this week is $4.129 – the highest in the nation.

During the 2012 price spikes in California, Sen. Mark Leno, D-San Francisco, said fuel producers indicated that unexpected refinery slowdowns created a gap in fuel supply. However, independent research found that fuel inventory levels in California had in fact increased during that time.

The research indicated that other market forces, possibly the withholding of supply, were likely at play. In the end, state investigations didn’t uncover any fuel-market manipulation.

To press the issue, state lawmakers approved a bill to create an office of fuel price investigation and manipulation prevention at the California Energy Commission. SB448 authorized the new office to investigate potential incidents of illegal activity and recommend how to reduce price volatility in the state.

Gov. Jerry Brown vetoed the bill, referring to it as “unnecessary.”

“The Energy Commission already has the authority to analyze and interpret changes in petroleum supply and market price,” Brown wrote in a letter to Senate lawmakers explaining his veto.

However, he asked the Energy Commission to work with the Attorney General’s office to evaluate market trends and ways to respond to price volatility.

The governor called for setting up a plan and a rapid response team that can respond when “sudden and untoward price fluctuations occur.”

Leno said he’s “deeply disappointed” by Brown’s action, but he pledged to continue to work with the governor on the issue.

To view other legislative activities of interest for California, click here.

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