CALIFORNIA FOCUS
FOR RELEASE: TUESDAY, DECEMBER 13, 2022, OR THEREAFTER
BY THOMAS D. ELIAS
“GAS
GOUGING QUESTION: HOW MUCH TO DUN THE REFINERS?”
For
many months, there has been little or no doubt that California's five big
gasoline refiners were gouging most of this state’s drivers. The question now
is how much of a windfall profit tax to assess and whether to send that money
directly back to people who fill their tanks regularly.
Electric
car drivers, for one example, probably don’t deserve any of the projected
return of cash contemplated in a special session of the Legislature called by
Gov. Gavin Newsom.
Newsom’s
move marks the first time any California governor has actually tried to stop
the refiners from cheating Californians at the pump.
Sure,
there are still folks who take the side of the oil companies, claiming things
like California’s high gas taxes, old and decrepit refineries that need
frequent repairs and special seasonal smog-busting gas formulations are the
reason for the sudden price increases that still afflict the state 10 months
after February’s sudden $2-plus price increases.
Here’s
the problem with that thinking: All those factors existed long before February
and were already factored for years into the prices that prevailed before, so
they could not have played a role in this year’s huge price increase, no matter
what refiners might say.
This
realization is the why the Legislature last fall overwhelmingly passed a new
law that will force refiners to report their per-gallon gasoline profits
starting at the end of January.
For
now, though, it is not all that difficult to calculate the likely profit
margins for the big refiners that make 97 percent of California gas: Marathon,
Valero, Phillips 66, Chevron and PBF.
“The
proof of the gouging always comes out in the companies’ profit reports,” said
Jamie Court, president of Consumer Watchdog, which has emerged as this state’s
most active consumer advocacy organization.
The
group’s analyses have rarely proven wrong over the more than 30 years since it
made big headlines for writing and then running the campaign for the 1988
Proposition 103, which lowered California insurance rates, made the insurance
commissioner an elected official and has so far saved consumers several billion
dollars.
Over
the last 20 years, says the group’s analysis of the most recent profit
statements from the big refiners and their parent oil companies, California
refiners averaged about 30 cents per gallon in profits and rarely cleared more
than 50 cents per gallon, or about $21 per barrel. “Now,” says Court, “they are
raking in more than $1 per gallon in profit. These windfall profits must be
rebated to California drivers to stop oil refiners’ price gouging.
“The
reason California have paid $2.50 per gallon more for their gasoline is clearly
price gouging.”
Valero’s
third quarter report revealed a lot about this. The Texas company’s net income
was $2.8 billion for the third quarter of this year, ending Sept. 30. This more
than quintupled the $463 million reported for the same quarter last year.
Valero’s California profits were also higher than in any of its other regions
around the nation and the world.
“The
oil companies must again treat Californians like customers rather than ATMs,”
said Court.
Now
it’s up to state legislators to decide how much of the refiners’ new income is
ordinary profit and how much is in the windfall category, the result of
corporate collusion or taking advantage of artificially created shortages.
Consumer
Watchdog analysts suggest that if a 50 cent per gallon windfall profit tax were
applied to the four in-state refiners that report results quarterly (Chevron
does it annually), those four would owe motorists more than $930 million for
excess profits in the first half of this year.
Add
in Chevron, which makes 29 percent of California gas, and the return to buyers
would be well over $1 billion. Returning that would be one way to fight the
inflation that has been fueled to a large degree by refiners.
But
until they passed the law demanding monthly per-gallon profit reports,
legislators had always handled the oil companies with kid gloves. Now those
gloves are off. We will know soon if the legislators really were serious, or
whether they will quickly revert to being oil company lapdogs.
-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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