In the San Francisco area more gasoline is produced than is consumed, yet gas prices are among the highest in the country

November 23, 1999
Web posted at: 1:09 a.m. EST (0609 GMT)

SAN FRANCISCO (CNN) -- California motorists want to know why they pay more for gasoline than drivers in practically every other state except Hawaii and Nevada.

But even after an investigation of several months, the state attorney general's office has not been able to figure out what's behind the high price of gassing up.

"It's ridiculous," said one motorist. "To fill my truck, it costs $30-$34."

Here's how gasoline prices compare nationwide:

• San Francisco: $1.55 a gallon
• Los Angeles: $1.33
• Chicago: $1.31
• New York: $1.27
• Indianapolis: $1.08
• Atlanta: $0.97

Drivers across California paid an average of $1.31 per gallon from January through September.

That's 21 cents more than the national average -- and more than Californians would pay in a truly competitive market, according to the state's top law enforcer, who said the lack of competition allowed oil companies to charge an additional $1.3 billion during the first nine months of 1999.

"It looks like the supply is manipulated in a way that produces the highest possible prices," said California Attorney General Bill Lockyer. "Now that may just be businesses trying to make the most money they can, and that of course, is the American way."

Lockyer said so far he's found nothing illegal.

Lockyer: "It looks like the supply is manipulated in a way that produces the highest possible prices"

The oil industry claims two major refinery fires in California crimped already limited production, caused in part by the state's strict formulation standards for cleaner automobile emissions.

Just six oil companies control 92 percent of all gasoline production in the state. And that number could shrink to four after proposed mergers.

"And according to the Air Resources Board, demand is rising for gasoline and refining capacity is remaining constant," said Dave Fogarty of the Western States Petroleum Association.

But the numbers just don't add up for one economist.

"What a puzzle we have," said economist Keith Leffler. "Here we have an area, San Francisco, that produces more gasoline than is consumed -- in fact takes some of that excess and sends it to Los Angeles -- and yet the price here is substantially higher, making no sense in a model of supply and demand."

The attorney general wants another $1 million to continue investigating the mysteriously high gas prices. He says the money should not be a problem because Californians have already paid an extra $100 million in sales taxes on high-priced gasoline.