CALIFORNIA FOCUS
FOR RELEASE: TUESDAY, MARCH 19, 2013 OR THEREAFTER
FOR RELEASE: TUESDAY, MARCH 19, 2013 OR THEREAFTER
BY THOMAS D. ELIAS
“GASOLINE PRICE GOING UP; ARCO SALE COULD LIFT IT MORE”
Are you ready for $6-per-gallon
gasoline? Then $7 a little later?
Premium grades of gasoline already go
for more than $5 per gallon in some parts of California; regular has been above
$4.50 for a month at hundreds of service stations.
There is no promise these near-record
price levels will drop anytime soon, especially with summer approaching and
refiners making more expensive California-specific blends for the next few
months.
But consumer advocates warn that a
proposed purchase of BP’s Arco gasoline refinery and its company-owned stations
by Texas-based Tesoro Corp. may cause prices to rise much more in the
not-so-distant future.
As February ended, the state’s
tax-regulating Board of Equalization took the first step toward raising gas
prices above even today’s levels, voting 3-2 to up gasoline excise taxes 3.5
cents, from 36 cents to 39.5 cents per gallon. This assures that even if prices
come down in the near term, they will not drop to where they were before the
latest big bump took regular over an average of $4.30, even at “cheap”
non-branded stations. The vote was strictly party-line, with the board’s two
Republicans voting no and three Democrats saying yes.
The bump was the result of a 2010 law
signed by then-Gov. Arnold Schwarzenegger (who promised, among other things,
never to raise taxes), which cut the sales tax on gas from 8.25 percent to 2.25
percent, while more than doubling the excise tax to 35.3 cents (raised to 36
cents a year ago). The total tax on each gallon of gas bought here will now
average just over 70 cents.
That 2010 change
allowed some gas tax money to flow to the state’s general fund, easing a budget
crunch. But – combined with reduced gasoline sales due to the increasing
efficiency of many new cars – it also caused a $157 million shortfall in
road-maintenance money. Hence the latest excise tax increase.
But the impending purchase of Arco
from the former British Petroleum by refining giant Tesoro could pose a far
larger potential threat to drivers’ pocketbooks.
Tesoro proposes to pay $1.175 billion
for Arco’s refinery, stations, pipelines and other equipment, with payment for
Arco’s inventory of gasoline, diesel and other items (like the merchandise in
its AM-PM convenience stores in California, Oregon and Washington) probably
lifting the full payment to well over $2.5 billion at current gasoline price
levels. It would leave the Arco name on most stations that now carry it.
BP is not explaining the sale this
way, but it would net a couple of billion dollars or more, likely to be used
for lawsuit settlements from the huge 2010 Gulf of Mexico oil spill.
The sale poses a threat to California
prices, consumer groups contend, because it would leave Tesoro in a commanding
position in the California market, even if Tesoro were to sell off its current
refinery in Carson, smaller than and adjacent to the Arco facility, to appease
anti-trust regulators.
Tesoro, on the other hand, said in its
press release announcing the purchase agreement that the move will have
“competitive advantages” for California drivers. A company spokeswoman refused
to say what those advantages might be, saying the firm can’t comment until the
deal goes through.
Tesoro currently sells in California
under the USA Gasoline and Shell labels, as well as supplying hundreds of
unbranded stations. The company now owns the former Ultramar/Beacon refinery in
Martinez, the former Shell refinery in Carson and others in Hawaii, Washington
and Texas. If this deal goes through, Tesoro and Chevron together would produce
well over 50 percent of all California gasoline.
“Who would want two companies to
control more than half California’s gasoline market?” asks Jamie Court,
president of the Consumer Watchdog advocacy group, which has asked both the
Federal Trade Commission and state Attorney General Kamala Harris to nix the
deal.
Since 1980, the number of gasoline
refineries in California has shrunk from 27 to 14. Meanwhile, California gas
prices (even before the nation’s highest gas taxes) have consistently remained
10 to 20 cents above those in the rest of America.
“Our market is geared to shortages and
scarcity,” said Court, noting that a fire or other outage in a single refinery
can make prices skyrocket.
Historically, when price spikes occur,
they later come down, but almost never back to previous levels. So the next
spike begins at a higher level than the last one, driving prices ever upward.
If that pattern continues, it has to lead to $6-per-gallon gasoline prices and
higher.
All of which means that if BP sells
Arco, the FTC or Harris should insist that Tesoro not be the buyer. Maybe
Exxon-Mobil, Valero or Pilot Flying J, all of which also have refineries here.
But concentrating production of vital necessities in just a few hands is rarely
a recipe for competitive pricing and it doesn’t figure to be this time, either.
-30-
Email Thomas Elias at tdelias@aol.com. His book, "The
Burzynski Breakthrough: The Most Promising Cancer Treatment and the
Government’s Campaign to Squelch It," is now available in a soft cover
fourth edition. For more Elias columns, visit www.californiafocus.net
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