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California refiners are treating the state like a gigantic ATM. File photo
California FocusOpinion

Elias: After price gouging, limit gas prices next

For many years, California drivers and Republican politicians have blamed Democrats and high gas taxes for the huge difference in the price of gasoline here compared to other states.

It turns out they’ve been wrong, some of them just plain self-serving.

We know this with certainty now for the first time because of a year-old state law with the odd designation of SBX1-2, passed in an emergency legislative session after extreme gasoline price increases during last February. 

In that month, pump prices leaped more than $2 per gallon over just two days, oil refiners explaining that they had some “unexpected” shutdowns.

Gov. Gavin Newsom called this a “fleecing” of California drivers, and oil company profits in this state jumped to levels 70% above what they were elsewhere. 

They’ve dropped a little since then.

So we got a new law forcing refiners in the state to report their per-gallon profit margins to a new division of the state Energy Commission, which must publish them and then decide whether they constitute price gouging. If the commission makes that ruling, it can then impose price limits.

The first reports came in late last year and received virtually no media coverage. 

It turned out big California refiners like Valero, Chevron, Conoco-Phillips, Marathon and PBF raked in an average of $1.49 per gallon in gross refining profits during the fairly typical month of September, almost three times their 66-cent margins in January 2023. 

That’s after the costs of crude oil, taxes, environmental fees and transportation are subtracted.

Of course, the 66-cent January 2023 margins were already unusually high, about one-third more than the previously normal margins of about 50 cents the refiners historically reaped here.

Said Jamie Court, president of the Consumer Watchdog advocacy group, “This data proves California oil refiners profited wildly from California gas price spikes… It is precisely why California needs to implement a strong price gouging penalty as soon as possible.”

He’s right. The figures prove that while government causes some gas price inflation here, refiners actually cause most of the price differential of more than a dollar a gallon between California and other states.

Essentially, they are treating California like a gigantic ATM with unlimited reserves. 

This all demonstrates that even though prices are down somewhat since last February, they remain much higher than previously, with refiners not being the least bit bashful about upping their profits whenever they please.

September brought such a moment, as they raised margins from $1.29 per gallon in August. 

This was a 13% increase in a single month, when no extraordinary events occurred.

Court suggests the Energy Commission, which now ought to exercise for the first time its option of setting a “reasonable maximum” profit, should limit margins to 60 cents per gallon, just below the levels of January 2023. 

That would amount to a 10% penalty to the refiners for their gouging of the last year.

For consumers, this could mean a quick price drop of almost a dollar a gallon, a welcome relief in the state with America’s second highest average cost of living.

But so far, the Energy Commission has not acted on its mandate, saying it is still determining whether any of this constituted price gouging. That decision is due by June at the latest.

But the September numbers leave no doubt of what the finding will need to be: It’s eminently clear the refiners have gouged and are deserving of the penalty SBX1-2 calls for.

Yes, there would be bleating from oil companies about how the state is wrecking its business environment — an environment they have exploited to the tune of billions of dollars over the last year.

If they don’t pay a price for their unfair business practices now, it’s hard to see when one would ever be justified or imposed on any price-gouging business or industry.  

Email Thomas Elias at [email protected]. 

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