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Sen. Feinstein Calls Record Gas Prices an 'Illegal Short Squeeze'

The senator also asked the Federal Trade Commission to monitor energy price and production data.

California's senior senator Sunday charged that California's record gasoline prices may be the "results of an illegal short squeeze" engineered by the handful of companies that refine gas here.

In a letter to the Federal Trade Commission, Sen. Dianne Feinstein, cited news reports that said Tesoro Corporation—whose refinery near San Pedro went down for maintenance—was taken advantage of by other gas suppliers "either through collusion or the use of market power."

"Publicly-available data appears to confirm that market fundamnetals are not to blame for rising gas prices in California," the California democrat wrote in a letter to FTC chairman Jon Leibowitz.

Feinstein also called on the FTC to monitor energy price and production data gathered by other government agencies, to watch for "fraud, manipulation or other malicious trading practices."

She also urged the FTC to establish a permanent gas and oil oversight market committee, similar to the Federal Energy Regulatory Commission's oversight of the natural gas and electricity markets.

Feinstein said "California consumers are all-too-familiar with energy price spikes which cannot be explained by market fundamentals, and which turn out years later to have been the result of malicious and manipulative trading activity.

She reminded the FTC of past frauds, like the 2000-2001 electrical crisis, which turned out to have been caused by market manipulation by Enron and other traders. That fraud cost the state an estimated $40 billion, caused rolling blackouts, and is cited by some historians as having cost Gov. Gray Davis his political career.

-City News Service

Jay Berman October 8, 2012 at 01:56 pm
Has nothing to do with conservation ... it has everything to do with making money. In most things if you raise prices, cosumption will go sown, not so much with gasoline .. I'm all for profits, not like this though .. the gas stations get a raw deal .. the refineries make out ... we need to start importing gasoline to give our instate refiners some competition ..
Komfort October 8, 2012 at 02:47 pm
Alex, you have chosen both evil and incompetent by picking "government":
" A bankrupt Longmont-based company that received $68 million in stimulus money is under investigation by the Weld County district attorney’s office. … 7NEWS obtained internal documents from 2012 that show orders for tens of thousands of replacement solar panels. The orders cite different reasons for the replacements including, “low performance,” “under performance” and “catastrophic failures.” The orders are for replacements requested after the Department of Energy stopped stimulus money payments to Abound. “These are solar panels we are now seeing reports that said they worked as long as you didn’t put them in the sun,” said Rep. Cory Gardner, R-Colo. “Now the question is did the (Department of Energy) —did they know something that the rest of should have known? Did Abound not tell the DOE something? These are questions that need to be answered.”" http://www.thedenverchannel.com/news/local-news/abound-solar-under-investigation-by-weld-county-district-attorney-received-68-million-stimulus
Scott O October 8, 2012 at 02:54 pm
Jay-- Gasoline is no different from other goods: the higher the price, the less is consumed. That's conservation. The price elasticity of gasoline is low, so it takes large increases in price to reduce consumption significantly. If prices stay high long enough, consumers will take additional measures, buying smaller cars, carpooling, etc. Basic economics.
But I agree with the need for getting more gasoline into the state from the outside. There's probably no prohibition on that, they just have to make the California blends, and it may not be worth their while for them to do it because there is adequate capacity here most of the time. Also, let's not forget that making these special blends costs 10 or 20 cents more a gallon (I don't have an exact figure). And the state takes 50 or 60 cents a gallon in taxes (and they charge sales tax on top of the excise taxes!). Compare all that to the few cents the refiner makes. Who's the real villain in raising gasoline prices?
Komfort October 8, 2012 at 03:01 pm
They must be trying beer "conservation" at professional sporting events, and Octoberfests. Or does that defy your "basic economics" and get deemed as gouging?
Jay Berman October 8, 2012 at 03:05 pm
Scott - my point is that in the short term, motor fuels need to be purchased, goods have to get to market, planes need to fly and so on ... people still need to take to the roads to do business or get to work. You may jack up prices like what just happened but did it really curb demand ? I doubt it as commerce must continue.
The California blends may just be obsolete as moder pumps have new vapor capture technologies, modern cars also burn gas very clean with no vapor escape from the tanks ... I thnink maybe we should look at that.
Scott O October 8, 2012 at 03:32 pm
Jay-- Again, I'm in agreement on the blends. Maybe they're not needed any more. How would we know? These things take on a life of their own.
If the supply of gasoline decreased, as we are told it did, and there no shortages, meaning no people who want to buy but can't find a seller at any price, then that's proof that the price increases curbed demand! Okay, I'll backtrack a bit on that--maybe just the news of the smaller supplies caused some drivers to postpone vacations or other trips. But I'll bet that effect is not large enough to account for the reduction in demand.
Jay Berman October 8, 2012 at 03:40 pm
Scott - The supply is there ... price went up because it may not be there in the future ... it is because there is no competition for refined products in this state, only a few refiners ... when you keep the supply tight and have few players - you can control the price ... I am a capitalist .. I believe in the free market system, the only thing that works. You need competition .. in this case, short term demand does not decrease, refiners make a short term windfall ... the demand can't come down in the short term as commerce needs to continue .. There are no gas lines ... I remember the 70's when we did have shortages of crude .... that was entirely different than this ... this is mainly manipulation .. just like our electric markets, you can't store or hold electricity so how do they have a supply and demand market ?
Scott O October 8, 2012 at 03:40 pm
Komfort-- They are monopoly sellers at pro sporting, Octoberfests, and other events inside closed venues. Monopolists general price to maximize revenue, and in the absence of competition, that price is necessarily higher than a competitive price, often by quite a bit. I usually sneak in my own refreshments if possible (popcorn from my pocket, anyone?). Or just regard it as part of the price of admission. Sometimes the only profit made on events is what they make on food and drink. And they are competing in a larger arena for your business since you have plenty of other entertainment possibilities. So it's not totally a monopoly. But that's probably more economics than you really wanted to hear about.
Jay Berman October 8, 2012 at 03:44 pm
Scott - are you aware that the concessions in venues that belong to the city must pay their employees $13.75 an hour ? Petco, Sports Arena, Qualcomm .... $13.75 an hour plus workers comp, payroll taxes ... You can bring your own food into Petco, no drinks ... I bring in Subway sandwiches ... $13.75 to pour beer .. pretty sick ..
Scott O October 8, 2012 at 03:50 pm
Jay-- Even if what you say is true about it only being a concern about (near) future supply, then there still needs to be conservation today to avoid a potential problem in the near future. Refiners and middlemen may be holding back some supplies now to prepare for that eventuality. Entirely rational, not only from their point of view, but from ours as consumers also. If we don't reduce our consumption now, we could REALLY be hurting in a few weeks or months. If you can find numbers, you will see that the short-term price elasticity of gasoline is not zero; the amount consumed is lower than it would be with a lower price. In economics this is called the "Law of Demand".
Some good news is that if the refineries are brought back online faster than anticipated, there will something of glut of gasoline and prices will be pushed lower for a while. For those who have to keep driving through it all, it may come near balancing out.
John Galt October 8, 2012 at 04:37 pm
alexpinca; again loosers like you make personal attacks. Why? Because you have no thought process. You are a mindless idiot.
My statement of PROVING IT is fair. We hear lots from political hacks, it want Feinstein, Brown, YOU, et al put up or shut up. If a crime has been committed, lock up the criminals.
John Galt October 8, 2012 at 04:39 pm
Jay: "We need to repeal the 17th amendment so senators are once again appointed by states assemblies and represnt their states instead of having 6 years to raise money to win the next election ..."
I agree. Never happen.
Jay Berman October 8, 2012 at 04:49 pm
Of course it will never happen, these senators are on a gravy train ... the only way it can happen is with an article 5 constitutional convention http://en.wikipedia.org/wiki/Article_Five_of_the_United_States_Constitution I can actually see that happening ...
Lynn Marr October 8, 2012 at 05:02 pm
Personally, I appreciate the suggestion of an oversight committee. I'm grateful that gas and electric utilities are regulated. If they weren't; my opinion is that prices would be much higher. A regulatory agency needs to have independence to be effective. One regulatory agency that is NOT doing its job, as I see it, is the SEC. The Securities and Exchange Commission is composed, primarily, of bankers and ex stock market players. There is no real separation, no balance, and no true oversight. So, no, we don't need an oversight committee composed of individuals connected with, or "in bed with" oil companies. However, we do know the prices can be manipulated.
Sen. Dianne Feinstein keeps getting reelected because the majority of voters in California support her and appreciate what she's done over the years. The way the Senate works, she does have seniority, which gives our state an advantage in that she will chair more committees, etc. I'm glad she's challenging the oil company executives to "play fair," not to further manipulate gas prices through pretense and fraud.
Scott O October 8, 2012 at 05:03 pm
Jay- Now you're getting off topic, but...I like it. I think you're implying that the city requiring vendors to pay above-market wages and benefits causes higher food and drink prices. Not so. Vendors will still set prices to maximize revenue. Their costs do not figure into it, unless those costs are so high that there is no profit in the operation. Then they will just close up shop.
Outside food okay at Petco? Now if I only liked baseball. Let's talk about the economics of using taxpayer money to build that stadium, and many others...Nah, some other time.
Tase Lagwe October 8, 2012 at 05:07 pm
Dianne Feinstein is an 'Illegal Short Squeeze'
Jay Berman October 8, 2012 at 05:18 pm
Scott .. seriously now, costs don't figure into the prices ??? LOL ... I have clients in these places ... when you have to pay your employees an obscene wage, you have to charge obscene prices ... man ... Scott .. econ 101 .... Did you go to the Obama School of Economics ? LOL ...
TAXPAYER MONEY SHOULD NEVER be used to build a stadium ... It shouldn't even be legal ... the MOST the city should do is assist in assembling the land - not eminent domain and not buying it - just coordinate between the owners ..
Jay Berman October 8, 2012 at 05:20 pm
I have been in business for many years, I have my BistroView cameras custom built for me overseas .. What I charge my customers is absolutely based on the cost of my materials and other costs ... my costs go up, my prices go up ... econ 101 ..
Scott O October 8, 2012 at 05:30 pm
Yes!...oops, sorry, let's keep this dignified...
In confirmation of what I said, Bloomberg reports (http://www.bloomberg.com/news/2012-10-08/california-facing-5-gasoline-stirs-brown-to-relax-rules.html): California is dependent on its own refineries for gasoline because the state is mostly cut off from oil-products pipelines spanning the rest of the country. Refiners outside California are generally not equipped to supply the cleaner-burning gasoline required in the state. and “This is probably going to continue to recur because California has just enough refining capacity to supply its demand, but only if everything is running well,” said John R. Auers, senior vice president at Dallas-based Turner Mason & Co., which advises energy companies. The state’s refining industry “operates on a knife’s edge,” he said.
Komfort October 8, 2012 at 05:39 pm
"Sneaking" products into an event, to defeat the only profit mechanism the hosts have, while claiming monopolies are to blame, probably is a little more economics than I care to hear about.
Maybe you need to sneak some Pemex north of the border to complete your foray into econ.
Jay Berman October 8, 2012 at 06:09 pm
Komfort - Don't have to sneak ... you can bring outside food into Petco .. no drinks .. $25 for a couple hotdgs, a beer and a soda .. lousy hot dogs at that .. $5 footlong much better ..
Nebraska Jones October 8, 2012 at 07:30 pm
Hey guess what? It is in the Government's best interest that gas prices rise. The higher the price the more revenue they take in via. sales tax and a per gallon tax. So the angry voices are just a roose to drown out the "cha-ching" noise.
Libi Uremovic October 9, 2012 at 07:47 am
state senators should be allocated based on money instead of every state getting two representatives......as it is there is no incentive for a state to generate revenue...
alexpinca October 9, 2012 at 11:05 am
Komfort, one anecdotal event tells you nothing...IN THEORY, we are the government and if we're not, then that is what we have to change...;but you never support becoming a corporate milk cow.
alexpinca October 9, 2012 at 11:11 am
Yes, that's what we need, oil refineries up and down the coast...then I wonder what will be the pretext to gouge the consumer.
alexpinca October 9, 2012 at 11:12 am
Representation based on money...well I guess it won't be that big a change.
alexpinca October 9, 2012 at 11:17 am
The problem stems from corporate lemmings being too willing, too quickly to support corporate interests regardless of how many times we've been told to grab our ankles ...I am shocked how willing Americans are to hitch their destiny to the almighty dollar.
Komfort October 9, 2012 at 11:33 am
I am not sure what you mean, Alex.
Diddy c October 10, 2012 at 11:22 am
Kathy, it's not that we "give in" as you would have it. Very few people are taking vacations and road trips. This is not the 1970s. Fact is, during late 80s early 90s the housing boom started to plateau, and "drive till' you qualify" became the mantra of many first time home buyers. As buyers moved inland and into rural areas, prices and rates for housing would drop. Enter the housing bubble of the mid 90s and now you have a problem. Lots of people living in rural areas to avoid high costs for housing are now faced with commuting and increasing gas prices. You have to go to work to eat, and keep your home. Suddenly there was no option. The trend continued and now you see mass amounts of Californian's being taken advantage of by high gas prices. People aren't driving for "fun" Kathy. We drive because we need to. Until my car runs on diarrhea we will be screwed. Especially as so called "eco cars" cost $30k +
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Dr. Michele Drake June 19, 2013 at 11:50 am
The benefit garage and bake sale is this Saturday, June 22 from 7 a.m. to noon at 1463 Golden SunsetRead More Drive in San Marcos (San Elijo Hills). Here's the link to the event: http://encinitas.patch.com/groups/events/p/drake-center-garage-sale-to-benefit-autism-therapy-dog_3a2145e8
Dr. Michele Drake June 19, 2013 at 11:50 am
All donated items can be dropped off at The Drake Center, located at 195 N. El Camino Real inRead More Encinitas.
Mary E June 19, 2013 at 04:01 pm
do you get a donation receipt for tax purposes?
Vicki Campbell June 17, 2013 at 04:42 pm
Prop A will help residents and stop greedy developers from buying city council. Vote YES
Rick Moore June 18, 2013 at 09:27 am
I wholeheartedly agree with the recommendation that folks read the initiative. When you readRead More sections 6 and 9, you will see that Prop A sets a 30-foot or 2-story ceiling across the entire city, overriding lower height limits in many areas. The Downtown Specific Plan limits residences to 22-26 feet, as detailed on the DEMA website, so Prop A would actually allow the building of taller homes. It makes no exemptions or allowances for historic buildings like La Paloma, church towers or other structures over 30 feet high; the only exceptions are medical complexes and public high schools (see clause 6.2). Rebuilding or renovating (more than 50%) would require expensive public votes. Should the SRF be required to pay for an election to rebuild the Lotus Tower? Such contingencies are allowed for in our Historic Overlay Zone, which would clearly be overridden by Prop A. So is the Encinitas Preservation Association's plan to convert one of the boathouses to a museum. Again, Prop A would require an election (see section 4.1, clause e), which the EPA cannot afford. Prop A would thus favor large developers who have the money, time, lawyers and other resources to campaign for their project. How many nonprofits and small businessmen can afford to spend a minimum $30,000 just to get their project on a general election ballot (upwards of $300,000 for a special election like this one)? Yes, folks, please read the initiative, especially Section 9, which lays waste to anything that conflicts with it. That's why this has been dubbed Propzilla. I trust that most Encinitas citizens are smart enough to see that this meausre is deeply flawed, problematic and counter-productive. We can find much better ways to limit growth and preserve community character.
BlueAngel2 June 18, 2013 at 10:20 am
SAVE ENCINITAS FROM RANCID DEVELOPERS. VOTE YES ON PROP A!
BlueAngel2 June 15, 2013 at 09:47 pm
It would NOT surprise me. I thought we dumped Stocks. Why is he still around?
Encinitas YES on A June 16, 2013 at 02:44 pm
My YES on Prop. A sign was stolen yesterday. Other YES on Prop. A signs are disappearing. YetRead More another deceptive and untruthful mailer from the opponents of Prop. A was in my mail box. There's a shrillness and desperation in their opposition. They can't rely on facts and fair play. Polling data not looking good?
BlueAngel2 June 16, 2013 at 03:17 pm
YES ON PROP A will be victorious!
BlueAngel2 June 8, 2013 at 11:20 am
It just goes to show if Stocks or any of his puppets are involved, you will not hear the truth aboutRead More this proposition. They continue to confuse the issue. Please do not throw your vote away to ruin our city and enhance the developer's pockets who do not care what they do to our beautiful Encinitas. Vote YES on PROP A!
Status Quo June 19, 2013 at 11:53 am
Looks very much like your Prop A will pass, though 'BA2's tactic seems to be part of the problemRead More also.
TB-ENC June 7, 2013 at 02:01 pm
How is this not a racist group with Hispanics in California at 14 million second behind whites atRead More 14.8 million. We only need one chamber to represent all Californians.
BlueAngel2 June 8, 2013 at 02:09 pm
So any group other than white is a racist group?
Miranda Klassen June 5, 2013 at 10:39 am
Congrats to all on the groundbreaking. Reesey has done an incredible job with making Lux what it isRead More today!
BlueAngel2 June 4, 2013 at 10:40 am
Vote YES on PROP A! The City Council is not experienced in real estate, zoning, construction orRead More development to make decisions for us.
CardiffCreature June 4, 2013 at 10:44 am
Prop A will not control growth. It will make sure that BOTH the council and the public get toRead More directly weigh in on the deals being brokered between big developers and the city. This won't end the indirect developer subsidies, but it sure will help.
Lynn Marr June 6, 2013 at 02:26 am
Yes, it will help to slow growth, by making sure that the public approves raising height limits orRead More upzoning, for developments over the parameters of a MAXIMUM of 30 ft. and two stories. Lower set height limits will not be repealed, because they are not in conflict with the initiative or the General Plan. David Ahlgren's fear and speculation is not backed up by one single fact. He just raises the usual building industry "mantra" of alleged risks created by unnamed "unintended consequences." Council's attempt at a preemptive ordinance does NOT guarantee that will be placed on the ballot in 2014, and does NOT eliminate other loopholes such as the "less-than-5-acre" exception, the "categorization of intensity of use" exception, and the height limit exception. The only loophole that Council's drafted ordinance affects is Council's ability to vote by a 4/5 supermajority on upzoing if it is done with respect to a "significant public benefit." Not only is Council's recently drafted ordinance NOT guaranteed, in that a future Council could reverse it, if it is not enacted through a public vote, but also Council's attempt at preempting the "right to vote on upzoning and raising height limits initiative" DOESN"T eliminate the other loopholes that still exist in our General Plan, Policy 3.12., which exceptions I've spelled out, here.