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Russian oil accounts for barely 3% of local supply, so why should its absence raise prices by 30%? File photo
California FocusOpinion

Elias: Gas gouge deja vu — Don’t blame the war

For anyone who’s lived more than a few months in California, the current gasoline price spike to as much as $8 per gallon probably seems like déjà vu all over again.

You might, in fact, call this “gas gouging 10.0” because it is the 10th time in the last 12 years that gasoline prices have risen suddenly and far more than external circumstances can justify.

It’s too early to class this episode as pure gasoline price gouging, because we are months away from getting the quarterly financial statements of the oil companies that dominate the California market: Valero, Marathon, Chevron, PBF Energy and Phillips 66.

Together, these firms control about 95% of  California gasoline supplies.

Do the math: The average price per gallon of regular gasoline in California stood at $5.99 in late March, up about $1.45 over the previous month.

That’s an increase of more than 25%.

The oil industry blames the rise, which most sharply skewered motorists immediately after President Biden embargoed Russian oil, on the war in Ukraine.

But Russian oil accounts for barely 3% of local supply, so why should its absence raise prices by 30%? Right, it should not, even if international oil prices rose somewhat after the ban started.

What’s more, when worldwide prices dropped $30 per barrel during the spike, pump prices actually rose a bit more.

When he imposed the embargo, Biden said the federal government would tolerate no gas price gouging. But the government has been helpless to stop what is apparently just that.

California has seen this many times. It was almost as dramatic in 2016, when prices also rose sharply, topping $4 per gallon for the first time in many places.

Then, as now, the oil companies denied any gouging.

Crude oil prices were lower than they’d been in half a generation, mostly because of large supplies from fracking in much of the American West and in Pennsylvania and the Dakotas.

At that time, the former Texas-based Tesoro Corp. took $423 million in profits from California drivers alone during the fourth quarter of 2016.

Former Tesoro facilities, now part of Marathon Oil, make about 27% of California gasoline, sold under the Shell, ExxonMobil and USA labels, plus a few others.

Valero, meanwhile, quadrupled its usual quarterly profits from California while the 2016 spike lasted, making $882 million in that period.

We don’t yet have figures covering the time-span of the present price hikes, nor do we know how long they will last.

But there’s a sheep-like quality to most California politicians as they propose government rebate checks and tinkering with gas taxes rather than attacking the real problem — oil company greed.

One exception to this pattern is Democratic state Sen. Ben Allen of western Los Angeles County, who proposes that oil refiners be forced to disclose once a month their per-gallon gasoline profit margins and what they pay for crude oil.

He says this would allow Californians to know at last just how much the oil companies profit from their gasoline gouging.

Said Allen, “We ask the oil companies: Let’s end the … smoke and mirrors. Open your books and show the public your true costs of doing business.”

Good luck, Ben. As far back as the 1970s, former Democratic Assemblyman Walter Karabian of eastern Los Angeles County proposed a very similar measure and was quickly voted down.

When he pushed the same ideas during a run for secretary of state, he was easily beaten in a primary by a rival funded in large part by the oil industry.

Allen cannot reasonably expect his new measure to do much better this spring in a Legislature where the oil industry remains a major campaign donor.

That does not make it any less necessary than it was in Karabian’s heyday, a time when gas first surpassed the dreaded level of $1 per gallon.

Also, oil companies should be forced to break out their California profits from other locales in their financial statements.

Otherwise, their denials of gas price gouging will always ring as hollow as they have for most of the last 50 years.

Email Thomas Elias at [email protected].

1 comment

canyon March 26, 2022 at 7:46 am

Price gouging is a slanderous and libelous term. When you own something, you can sell it for whatever price you choose. The prospective buyer can accept the price, look elsewhere, or do without.

As to fossil fuel pricing in California, get the various government entities to stop trying to push them out of business through regularly pillorying them as “killing the planet”, regulating them severely, and then open up free market competition for fuels and energy from any source that wants to compete here.

Give government action against fossil fuel companies and sellers, I am amazed any capitalist puts anything more than the bare minimum investment needed to earn whatever profit remains possible.

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