State Officials Provide Update on Gas Prices, Unusual Petroleum Market Transaction

For Immediate Release: September 22, 2023

SACRAMENTO — Today, the Division of Petroleum Market Oversight (DPMO) sent a letter to Governor Gavin Newsom and state legislative leaders providing an update on a recent increase in gasoline prices, which appears to have been driven by an unusual transaction on the gasoline spot market, refinery maintenance that refiners did not adequately prepare for, and global crude oil prices that have risen.

Unlike during last fall’s price spike, the state has greater visibility into market conditions because of the newly-created DPMO and oversight authority created by the California Gas Price Gouging & Transparency Law.

“Although our analysis is ongoing, we are shining light where we see potential flaws in the petroleum market, and we will continue seeking answers for Californians who are paying more at the pump,” said Tai Milder, Director of the Division of Petroleum Market Oversight. “The division is committed to ensuring accountability and transparency on behalf of California families and businesses.”

The letter describes how the current situation appears to highlight several market flaws that make the California gasoline prices vulnerable to price spikes, including:

• Spot market volatility and its outsized impacts on prices.
• Lack of spot market liquidity.
• Inadequate inventories of gasoline and blend stocks.
• Refinery undersupply during maintenance.

“The California Energy Commission is rapidly collecting and analyzing market data to implement the new law and support the Division of Petroleum Market Oversight’s efforts,” said California Energy Commission Vice Chair Siva Gunda. “Our new tools and additional access to critical information enhances the state’s ability to understand and respond to price spikes.”

The DPMO has already begun exercising its power to shine a light on the industry.

Unusual Market Transaction Increased Prices

An unusual transaction took place on the California spot market on Friday, September 15, that caused the market price of gasoline to increase by nearly $0.50 per gallon, which ultimately gets passed onto consumers. Following engagement with market participants, we observed spot market prices stabilize, fall briefly, and then increase again; the consequences of this volatility will be felt at the pump for some time. It is not an exaggeration to say that one trade likely cost California drivers many millions of dollars at the pump.

Refinery Maintenance, Lack Of Preparation And Undersupply

Refiners have not maintained adequate levels of inventory of refined gasoline and blend stocks, or import additional supplies to sufficiently backfill production shortfalls. DPMO contacted refineries to discuss plans for future maintenance and plans to backfill to maintain adequate statewide supply.

Global Crude Oil

The rising cost of crude oil that has driven up prices not just in California but across the world. For the last 18 months, Russia’s invasion of Ukraine has caused crude oil prices to climb and remain volatile. As of September 20, 2023, crude oil obtained by California refiners from a global market cost $2.27 per gallon, compared with $2.25 one week ago, $2.04 four weeks ago, and $2.18 one year ago.

About the California Energy Commission
The California Energy Commission is leading the state to a 100 percent clean energy future. It has seven core responsibilities: developing renewable energy, transforming transportation, increasing energy efficiency, investing in energy innovation, advancing state energy policy, certifying power plants and preparing for energy emergencies.

About the Division of Petroleum Market Oversight
The Division of Petroleum Market Oversight is an independent agency within the California Energy Commission (CEC) created to monitor petroleum markets and flag potential market manipulation.