Calif. Demands Answers On Oil Prices

State Atty. General Asks CEOs To Explain Prices & Profit Margins

(CBS)  California's Attorney General has begun hauling the CEOs of major oil companies into his office - demanding, in closed door sessions, that those executives tell him, under oath, why gas prices are higher in California than almost anywhere else in the nation.

"This is legal thievery in my view," California State Attorney General Bill Lockyer told CBS News correspondent Sandra Hughes. "It's because it's an oligopoly: it's when you have a handful of companies, seven exactly, that control almost the entire California market."

Those companies insist they're operating within the law, and not trying to gouge their customers. California drivers pay an average of $3.31 a gallon, up more than a dollar since early January, when they were shelling out an average of $2.25 a gallon.

The attorney general is also taking a hard look at refiners' profit margins, which soared by 130 percent at a time when the price of crude oil increased by 14 percent.

"Their claim is 'Oh, we're just passing along the world crude oil increase.' That's clearly not true," says Lockyer.

What is true, according to the California Energy Commission, is that estimated profits have risen from around 30 cents a gallon at the start of the year to about 94 cents per gallon now.

"They intentionally short the market using exporting or control of the refinery production," says Tim Hamilton, a petroleum industry consultant hired by a consumer group to investigate why California's gasoline stockpiles run so much lower than the rest of the country, another factor driving high prices.

"Our tanks are constantly on empty," says Hamilton, "and it causes us to have price spikes."

Joe Sparano, of the Western States Petroleum Association, responds to that allegation.

"Our industry has demonstrated in investigation after investigation that it operates well within the law and operates in a manner that does its best to provide an ample supply," says Sparano.

Critics still contend new laws are needed to regulate the supply of gasoline, so prices don't spike over fears that the pump could run dry.