In California "supply is manipulated in a way that produces the highest possible prices"

Californians paid $ 1.3 bn more for gasoline last year than they would have if they lived in states where there's a competitive market for oil, but oil companies are playing within the law in their pricing, state Attorney General Bill Lockyer said. Instead, the inflated prices that forced residents in some spots to pay upwards of $ 2 a gallon in April when Lockyer started his probe are the result of inadequate competition, California's stiff clean air laws and the state's slightly higher gasoline taxes.
"We don't have any evidence that they've done anything criminal or violated anything civil," Lockyer said. But, he said, "the supply is manipulated in a way that produces the highest possible prices, and that is business, that is the American way.

Californians typically spend more at the pump than motorists everywhere but water-locked Hawaii and Nevada, which gets most of its gasoline from California. Motorists in California paid an average of $ 1.32 per gallon in 1999 between January and August, compared to a high of $ 1.54 in Hawaii and a low of 89 a gallon cents in Georgia, the report found.
Proposed mergers between BP Amoco and Atlantic Richfield Co., and Mobil and Exxon, could further stifle competition, especially since 90 % of California's refining capacity and gasoline sold is controlled by six oil companies -- Chevron, Tosco, Equilon Enterprises, Arco, Mobil and Exxon, Lockyer said. Both consumer advocates and oil companies called the report a victory.
"The preliminary report's findings confirm what we've been telling the California Legislature for years," declared Dennis DeCota, executive director of the California Service Station and Automotive Repair Association. Chevron spokesman Fred Gorell said the company was pleased Lockyer had found no evidence of wrongdoing. "We believe that other ongoing governmental investigations will come to the same conclusions," he said.
Prices have dropped in California since Lockyer opened the investigation in April, and in some places gas costs less than $ 1.50 a gallon. Drivers in the San Francisco Bay area continue to pay about 22 cents a gallon more than those in the Los Angeles area -- a puzzling trend, Lockyer said, since much of the gasoline in California is distributed from area refineries. Nationally, the average price of a gallon of gas is $ 1.3287, according to a Lundberg Survey, a review of pump prices at 10,000 gas stations nation-wide.