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California Needs More Competition, Supply to Ease Gas Prices

March 15, 2004

More refined gasoline is needed in the state to ease the conditions that have driven prices up in recent months, state Attorney General Bill Lockyer said, according to an Associated Press report on March 12.

Oil companies don't keep large enough inventories on hand to weather short-term supply problems that can arise, Lockyer said during a hearing on gas pricing. That triggers shortages that drive prices higher. "More supply would mean lower prices," the attorney general said during a two-hour panel discussion with state economists, consumer advocates, and oil company executives.

In the last two weeks of February, the price for a gallon of gas rose an average of 6.9 cents for a national average per-gallon price of $1.75, according to analyst Trilby Lundberg. But many California cities saw 20-cent increases in the same period, driving the average price of a gallon of gasoline well above the $2 mark. Prices are projected to peak in April, Lundberg said.

The price spikes have caught the attention of the Federal Trade Commission, which is looking into what might be causing the anomalies, an agency official said on March 12, according to the Associated Press.

The state's environmental standards, higher taxes, and too few refineries to handle demand, which are operating at near-capacity, also drive up prices, state officials said. A round of scheduled maintenance at several refineries earlier this year took longer than expected, forcing the companies to buy oil at higher prices to meet the demands of their customers in California.

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