CALIFORNIA FOCUS
FOR RELEASE: TUESDAY, SEPTEMBER 1, 2015, OR THEREAFTER
BY THOMAS D. ELIAS
“HUGE OIL COMPANY GAINS A SIGN OF GAS PRICE GOUGING”
The days when oil companies could deny
they’ve gouged California motorists through much of this year should have ended
with the second-quarter financial reports of Valero Energy Corp. and Tesoro
Corp., which together control about 40 percent of the California gasoline
market.
But their denials won’t end despite
the humongous windfall financial gains they and other gasoline refiners reaped
from a spring of obviously excessive gasoline prices. When the same companies
unveil their third-quarter financial reports, the refiners’ take will likely be
even higher.
Valero saw California gasoline profits
rise from $24 million last year to $294 million in the April-through-June
period this year. Per-barrel profits rose from 99 cents in 2014 to $11.23 this
year.
Tesoro, meanwhile, reported a record
profit of $668 million in the same time period, far outstripping its previous
record of $415 million, set in 2007. Tesoro gasoline is sold under brand names
like Arco, Shell and USA.
Valero and Tesoro are the only oil
companies specifically breaking out California refining profits in their
corporate reports. Chevron, with large refineries in Richmond and El Segundo,
does not distinguish California profits from other operations. But 54 percent
of that firm’s refining is done here, and its company-wide refining profits rose
$214 million in this year’s second quarter, the lion’s share no doubt coming
from the pockets of California drivers.
And yet, the oil industry’s regional
umbrella organization, the Western States Petroleum Assn., continues to insist
that oil companies did nothing out of the ordinary to create those record
profits.
It was all because of supply and
demand issues beyond the control of the oil companies, insisted WSPA President
Catherine Reheis-Boyd, in a response to a previous column alleging gas price
gouging. She did not dispute that refiners exported gasoline to Mexico and
Central and South America sufficient to supply California for three full days,
or 10 percent of a month’s supply for the entire state, just before prices rose
by more than $1 per gallon in many places on and immediately after July 1.
In a blog post, Reheis-Boyd called
those exports a “tiny volume” of fuel.
And Valero Vice President Bill Day
claimed in a telephone interview his company made more money because it made
more gasoline – 88 percent more this spring than last. This left unexplained
the higher prices and an 1,150 percent profit increase. Said Day, “Ask the
dealers why prices were higher.” Three station owners told this column they
charged more because Valero raised wholesale prices.
Profits from the July price spike
won’t appear in company reports until after Oct. 1; the second-quarter results
reflecting earlier hikes imposed on motorists.
Oil company executives admit the
supply shortages to which they frequently expose California are highly
profitable. In a conference call with stockholders, Chevron investor relations
general manager Frank Mount said “Tight product supply, primarily on the West
Coast, boosted refining and marketing margins and increased earnings by $165
million between quarters.”
Chevron helped create that tight
supply by shipping more than 400,000 barrels of California-refined gasoline to
other countries just before the latest price spike. If tight supply means huge
new profits, why would companies increase their stockpiles?
All this angers the Silicon
Valley-based billionaire Tom Steyer, who has funded several state ballot
measures. In a press conference, Steyer asked that state legislators pass new
laws forcing disclosure of oil refiners’ California profits. He would also
require advance notice of planned outages and increased penalties for illegally
conspiring to raise prices. “Oil refiners are getting rich at our expense,”
Steyer said.
If lawmakers don’t act by
mid-September, he said, he might next year fund and run a ballot initiative
imposing those rules, working with the Consumer Watchdog advocacy group. “Lack
of transparency keeps prices artificially high,” Steyer added. “Normally, when
profits and margins increase this much, a competitor steps in with lower
prices. Why doesn’t the California gasoline market operate that way?”
Whether by coincidence or not,
gasoline prices dropped a bit the day of Steyer’s remarks. WSPA executives
offered no explanation.
Steyer’s comments suggest the California
gas price gouging story is far from over, especially since he doesn’t deny he
might run for governor in 2018. A highly visible record of fighting the oil
companies could give him a strong campaign calling card.
-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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