California’s Petroleum Watchdog Issues Market Update and Consumer Advisory Following Refinery Incident and Rising Gas Prices

For Immediate Release: February 14, 2025

SACRAMENTO – Today, the Division of Petroleum Market Oversight (DPMO) sent a letter to Governor Gavin Newsom and state legislative leadership providing an update on the gasoline market and issued a consumer advisory ahead of a potential gasoline price spike following a Feb. 1 fire at a gasoline refinery in Martinez.

The letter explains how perceived scarcity following the refinery incident is driving up wholesale and retail gas prices, even as crude oil costs and environmental program costs are stable. Planned and unplanned refinery events have been known to cause price spikes in California in previous years.

DPMO is working with the California Energy Commission (CEC), other state agencies, and members of the petroleum industry to limit the potential impacts that planned and unplanned refinery maintenance may have on consumers. 

DPMO and CEC are continuing to monitor additional variables that impact gasoline prices, including potential import tariffs, other planned and unplanned refinery outages, weather events, and trends in the national futures market.

“We’re all committed to working together to protect Californians,” said DPMO Director Tai Milder. “In previous years, these volatile market conditions have come at a huge cost for California consumers. We will be watching closely for any irresponsible or opportunistic behavior by refiners and market participants and will act on any potential misconduct.”

Since Jan. 31, the day before the refinery incident, retail gas prices have increased by $0.42 per gallon in Northern California and $0.27 per gallon in Southern California and may increase further. Prices on the spot market, where large quantities of gasoline are bought and sold, have increased even further.

As prices increase, Milder encourages Californians to shop around and compare prices between name brand and unbranded (or generic) gasoline. While retailers typically charge more for branded gasoline, all gasoline sold in California must meet the state’s high standards for emissions control and engine performance.

LEGISLATIVE ACTIONS AND MARKET OVERSIGHT
After consumers experienced some of the highest gasoline prices ever recorded in California in fall 2022, the State Legislature acted, and Governor Gavin Newsom signed two laws to help the state better understand and respond to gasoline price spikes. 

The laws, Senate Bill X1-2, and Assembly Bill X2-1, include transparency and oversight measures to increase accountability of the petroleum industry. They also provide additional resources to support long-term planning efforts.  

State officials can better understand supply, demand, and price trends in the petroleum market because of data and transparency tools provided under SB X1-2, which took effect in June 2023. 

The law requires refiners to notify the CEC of all planned and unplanned maintenance events. This information is considered confidential under the Petroleum Industry Information Reporting Act (PIIRA). Analysis of data collected under PIIRA is an important part of the CEC's responsibility to create a thorough understanding of the operations of the petroleum industry in California.   

DPMO, an independent division within the CEC that was created as part of SB X1-2, is responsible for independent oversight, investigations, economic analysis, and policy recommendations regarding the transportation fuels market. As such, DPMO provides input on the CEC’s implementation of both laws.

SB X1-2 also allowed state officials to understand the root causes of price spikes, including planned and unplanned refinery maintenance, low inventories, and inadequate resupply. 

CEC IMPLEMENTATION OF NEW LEGISLATION

AB X2-1, which took effect in January 2025, authorizes the CEC to require in-state refiners to plan for resupply during planned refiner maintenance outages to avoid supply shortages that create higher gasoline prices for consumers and higher profits for the industry. The legislation also allows the CEC to require oil refiners to maintain a minimum inventory of fuel. 

In light of new tools provided by AB X2-1, the CEC is taking a comprehensive approach by prioritizing developing refinery resupply and minimum inventory requirements in tandem with a potential maximum margin and penalty.  SB X1-2 authorizes the CEC to set a maximum gross gasoline refining margin and impose a penalty for refiners that exceed it.

CEC staff is looking at how resupply and minimum inventory rules could interact with a margin and penalty with plans to present a high-level framework this spring. Feedback from Commissioners, DPMO, stakeholders, and the public will inform the final proposals, which are being developed together. 

Details of the proposal will be discussed as part of a CEC formal pre-rulemaking process that is scheduled to start with two workshops planned for Feb. 25 and March 5. An open, transparent public process will inform draft rules that may ultimately be voted on by the full commission at a future business meeting.  

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About the Division of Petroleum Market Oversight 
The Division of Petroleum Market Oversight is an independent agency within the California Energy Commission (CEC) to monitor petroleum markets and flag potential market manipulation, market power abuse, or market design flaws. The watchdog agency is a key part of the California Gas Price Gouging and Transparency Law, Senate Bill X1-2, enacted in special session in 2023.