Rep. Mike Levin Leads Letter to Federal Trade Commission Chair to Investigate Gas Price Hikes

Washington, D.C. – Today, Rep. Mike Levin (CA-49) led a letter signed by Democratic Members of the California Congressional Delegation to Federal Trade Commission (FTC) Chair Lina M. Khan urging the FTC to investigate gas price hikes and anti-consumer business practices from gas companies. The California Members sent the letter as average gas prices in the state have reached $6.08 – $2.25 above the national average.

“The DPMO notes that on Friday, September 15, 2023, an unusual transaction took place, which caused the price of gasoline to increase by nearly 50 cents per gallon on the California spot market. Since many gasoline supply transactions are pegged to the most recent prices reported to the Oil Price Information Service (OPIS), and there were no other trades reported to the OPIS over the next two trading days, that single trade led to price increases into the following week. These elevated costs have been passed onto California drivers, likely costing them millions of dollars at the pump,” wrote members of the House California delegation.

“We appreciate the FTC’s commitment to close oversight of fuel markets in California and across the country. This work is critical to ensuring that market participants are not acting unlawfully at the expense of the American people,” the letter continues. “We urge the FTC to continue to investigate and monitor the business practices of traders and refiners to ensure that these companies do not engage in any anti-consumer behavior.”

Click here or see below for the full letter:

Dear Chair Khan:

We write to express our concerns regarding the significant rise in gasoline prices across California over recent weeks. Given these gas price increases, which far exceed increases in other states, we urge you to investigate potential market-distorting behavior between traders and refiners, as well how the current market structure may spur volatility to the detriment of California consumers.

According to the U.S. Energy Information Administration, as of September 25, 2023, the gasoline prices in California were $5.699 per gallon, which is $1.862 above the U.S. average.[1] The gas prices in some areas of California have now surpassed $6.00 per gallon, having risen quickly over the past week, and significantly over the past month.[2] This spike follows a period of relative stability from March 1 through August 1, 2023.[3]

We are pleased that Governor Newsom and the California State Legislature have taken a number of actions throughout the past year to reduce pain at the pump for Californians, including by creating the new Division of Petroleum Market Oversight (DPMO). The DPMO is an independent agency within the California Energy Commission that monitors petroleum markets, increases transparency, and highlights potential market manipulation.

On September 22, 2023, the DPMO released an interim update in their independent market oversight capacity regarding these price increases. The DPMO found that the recent price spike is attributable to three main factors: an increase in global crude oil prices, refinery maintenance events over the summer, and an unusual spot market transaction.[4] We write today with particular concern about the third factor.

The DPMO notes that on Friday, September 15, 2023, an unusual transaction took place, which caused the price of gasoline to increase by nearly 50 cents per gallon on the California spot market.[5] Since many gasoline supply transactions are pegged to the most recent prices reported to the Oil Price Information Service (OPIS), and there were no other trades reported to the OPIS over the next two trading days, that single trade led to price increases into the following week. These elevated costs have been passed onto California drivers, likely costing them millions of dollars at the pump.

We are concerned that this spot market transaction may represent market-distorting behavior between traders and refiners under the Federal Trade Commission’s (FTC) “Prohibition of Energy Market Manipulation Rule.”[6] We urge you to work with the California DPMO to investigate this transaction further. 

Additionally, we appreciate the FTC’s commitment to close oversight of fuel markets in California and across the country. This work is critical to ensuring that market participants are not acting unlawfully at the expense of the American people. This transaction and its outsized impact have highlighted the continued need for federal oversight over these markets. They also elicit concerns about how the current market structure has allowed for a single trade in a volatile and illiquid spot market to increase costs for Californians. We urge the FTC to continue to investigate and monitor the business practices of traders and refiners to ensure that these companies do not engage in any anti-consumer behavior.

We thank you for your consideration of this request.

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