State Capitol Building

Sacramento, CA  95814

April 22, 2004

Dear Governor Schwarzenegger:

My name is Dennis DeCota and I am the Executive Director of the California Service Station and Automotive Repair Association (CSSARA).  My members own and operate some 700 retail service stations and automotive shops throughout the state of California. We want to take a moment to thank you for your diligence and efforts in bringing all parties together and passing what appears to be a very reasonable workers’ comp package. Without your leadership this would never have happened. We, the small businesses here in the state of California, thank you for all of your efforts on this issue.

I recently read a lengthy front-page article in the San Francisco Business Times (Vol. 18, April 9 – 15, 2004) titled “Businesses Crack The Code – Bay Area’s Biggest Companies Lining Up for Huge Tax Breaks.” As I read through this and thought about how much small business contribute in the form of collecting and paying taxes, I felt that the pendulum has swung way too far in a direction benefiting major corporations. As a petroleum retailer who represents other petroleum retailers, I find it revolting that ChevronTexaco, one of the largest companies in the United States, is able, through legal loopholes, to duck its responsibility to pay its fair share of state taxes. I know that the problems that you have so far faced, early in your term, have focused on our state’s budget deficit.  It seems only fair and reasonable that a corporation like ChevronTexaco should be paying its fair share. The oil industry in California is nothing less than an oligopoly. While I do not believe that the oil companies sit down and collude regarding pricing, I do believe that they act in unison with regards to their marketing policies. 

Another recent article in the St. Louis Business Journal (April 13, 2004) was titled “Open Supply Legislation in Illinois.”  I feel this would make great sense in the state of California. One reason our gasoline prices are so high is because of a completely legal program, which has been implemented by the major oil companies, called “zone pricing.”  Under zone pricing the oil companies actually set the price in a given market through demographic studies that show what type of competition is in that market area, how many vehicles are owned by the average household, what the average household income is, and the average number of miles driven. This has allowed the major oil companies to manipulate the gasoline prices throughout our state for their own betterment and has a tremendously adverse effect on seniors who are on fixed incomes, students and those looking for work. California gasoline prices are ridiculously high.  If you look at just the simple economic issues, you would find that scales of economy are not applied at all in our state.  As a petroleum retailer, I can retail 150,000 a month at 10-cents or 200,000 gallons a month at 8-cents, and make much more money at the 8-cents. California has historically been the highest priced gasoline in the nation.  This is because of a lack of competition, as reported in the Attorney General’s May 2000 Gasoline Report.  Governor Blagojevich of Illinois has seen how the major oil companies in his state manipulate the zone pricing and also realizes that the contracts of adhesion, which franchisees are forced into signing, limit their ability to shop for the lowest price of that brand of gasoline. I believe that California consumers would find it of great importance toward reducing California’s budget deficit if, at the very least, you appointed a study group that would give you insight on how best to manage the ability of these huge conglomerates to control the marketplace. 

I would be very willing to assist in any way that I can.  I have worked with Governors Wilson and Davis and would be honored to work with you on how best to retail gasoline in the state of California.  Please do not hesitate to contact me.

Sincerely,

Dennis DeCota

Executive Director