Tom Elias’ recent Op-Ed (“Newsom veto may help drivers”) was noticeable for its lack of perspective regarding the business of refining fuel products used every day by California residents.
Elias decries the “record” profits of refining companies. Of course, we have “record” tax receipts, “record” federal debt and a “record” California budget deficit, so I’ll ascribe his use of “record” to rhetorical flourish.
Elias goes on to ponder where “profits end and price gouging begins.” It’s a great question worth unpacking a bit.
Refining is a business with huge fixed costs whose profits are determined primarily by raw materials costs over which the refiner has zero control. Elias specifically cites Valero as an example. In fact, Valero’s average net profit margin over the last 10 years is about 3.2%. By way of comparison, that’s about one-third of Starbucks’ net margin and 1/10 of Meta’s net profit. Indeed, where do profits end and price gouging begin?”
So, who is to blame for California’s high energy prices? The average U.S. state gasoline tax is 32 cents/gallon, but California is 51 cents.
Gasoline itself costs today $3.21/gallon nationwide but $4.71 in the Golden State. California is mandating conversion to electricity, but our electric grid is incapable of supporting this transition, and EV owners are cautioned not to charge their vehicles during certain times of day.
Expect “record” fuel prices in the future, including California’s nation-leading electricity prices for your mandated EV.
Due to our litigious environment, refining is migrating overseas. If you have complaints in the future about price gouging, feel free to direct them to the Chinese Communist Party.
To paraphrase Elias, where does the competence end and the incompetence begin?
Cardiff by the Sea