Agencies tell Senate: inventories stable but refinery and retail margins, not taxes, are lifting pump prices

State energy and market officials told a California State Senate oversight hearing that the state currently has several weeks of fuel on hand but that recent rises in what refiners and retailers capture — not changes in environmental fees — are the main drivers of higher pump prices.

"Every time the gas — the crude oil prices go up by $10 it will be $0.25 at the pump," Siva Gunda, vice chair of the California Energy Commission, said in the hearing, summarizing how global crude moves translate to retail prices while also warning that industry margins have risen since the start of the Iran conflict and the market is increasingly dependent on imports.

Gunda said the commission’s "days of supply" metric, which factors demand, inventories, two‑week forward production and imports, currently shows liquidity in the system and that inventory levels remain roughly within the 10‑year range. He and other agency witnesses said current import capacity and surge supply have so far stabilized inventories, but they cautioned that distribution bottlenecks — including dock and pipeline constraints — could limit how quickly imported fuel reaches stations.

State Department of Tax and Fee Administration chief deputy Ghenty Drombonik told senators the widening retail margins suggest price setting at the station level is an important driver of what consumers pay. "The widening retail margins suggest that retail pricing behavior and business models are playing an increasingly important role on how much consumers pay at the pump," she said, citing analysis showing growing price dispersion between branded and unbranded outlets.

Ty Miller of the Division of Petroleum Market Oversight said data gathered under SB 13 22 and special‑session reporting is allowing investigators to probe concerning trading patterns and station pricing. "We have been able to proactively engage with a lot of those stations," Miller said, adding the agency has opened inquiries and used voluntary outreach and subpoenas in certain investigations.

Officials gave several concrete metrics during testimony: the CEC and partners estimate import dependency at roughly 165,000 to 200,000 barrels per day in recent months, and the Energy Commission has modeled that, in current scenarios, days of supply would not fall below typical 10‑year lows in the next several weeks. Agencies also reported that industry margins have risen — the Energy Commission estimated industry and retail margins increased roughly $0.75 since the start of the conflict — with a large share on the retail side during parts of the spike.

Speakers repeatedly differentiated permanent cost elements, such as California taxes and environmental fees, from the volatile and riseable elements of margin and crude cost. "California's taxes and environmental costs have not spiked — the increase is largely crude and margins," Gunda said.

Asked about options to increase resilience, Gunda and witnesses pointed to a proposed Gulf Coast‑to‑California pipeline (a private proposal that would rely on Gulf Coast shippers and could begin operations in the late 2020s), increased marine imports, and efforts to debottleneck distribution infrastructure and expand storage access. Agencies said those options come with trade‑offs and that the CEC, CARB and DPMO will present more detailed multi‑scenario modeling and policy trade‑offs later this year, including a Transportation Fuels Assessment and follow‑up regulatory workshops.

The hearing closed with agencies promising more granular scenario work for lawmakers — on how many refineries would be required under different long‑term demand trajectories, where additional storage and vessel capacity would be needed, and how to balance competition from imports with protecting in‑state refining capacity.

The committee recorded no votes; agencies said they expect to return to the legislature with integrated scenario modeling and regulatory recommendations this fall.