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California gas prices take a dip, amid calls to investigate the spike

Californians are still reeling from the unprecedented spike in gas prices last week – for no apparent reason. Lawmakers call for a federal investigation of whether foul play sent prices soaring.

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In fact, the California Energy Commission often sees requests like this when price spikes happen, says spokesman Rob Schlichting. While the 2001 scandal over manipulation of the energy market by Enron was a dramatic confirmation that such deceptive strategies have occurred, “most of these investigations come up empty,” he says.

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Moreover,  “if suppliers were manipulating prices, it begs the questions: Why now? Why not always?” adds  Peter Zaleski, an economist at Villanova University in Radnor, Pa.

The FTC has yet to publicly comment on the request.

While the claim that gas price hikes are produced by manipulation or deceptive practices is appealing to politicians and the gas-buying public, there are other factors that could account for high gas prices, say analysts close to the industry.

Gas is one of the few traded commodities that have continually done well over the past few years, says Michael Gonzales, a marketing consultant for the oil and gas industry in Fort Worth, Texas. “Because it's traded highly, the prices follow. But more than that, because gas has a high demand [the] world around, companies have discovered they can charge a premium and people will still pay.”

In such a context, Californians have an added burden: The reason gas prices in California are so high is because taxes are so high, says Jeremy Anwyl, vice chairman of the automotive website, Edmunds.com., in Santa Monica, Calif.

“Consumers absorb higher gas prices,” he adds via e-mail, “so there is initial distress when gas prices jump, but we learn to live with it.”

For for many Californians, the strain of sky-high gas prices is wearing. Berkeley businessman Trygve Mikkelsen, whose offices are in Stockton, some 70 miles from his home, says with weary resignation, “It costs me $100 to fill up my truck,” in a business that relies on face-to-face relations with clients.

Beyond the additional costs for his own travel – not to mention his team of four sales representatives – there's also higher delivery expenses, such as the clients who ordered one of the storage systems he sells back in May, are taking deliveries now, and “don’t want to pay the actual increase in costs.” To recoup his losses due to higher freight prices, he would have to charge as much as 30 percent more. “But I can’t do that,” he says, adding, “the most I do is an increase of about 8 percent."

"So yes, the higher gas prices are hurting all around,” he adds.

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