CALIFORNIA FOCUS
FOR RELEASE: FRIDAY, JANUARY 5, 2024, OR THEREAFTER
BY THOMAS D. ELIAS
“WHY A
NEWSOM VETO MAY HELP DRIVERS”
One
Gavin Newsom veto of a seemingly obscure, last-second effort to help boost oil
company profits even beyond their prior high levels stands out as possibly the
best thing he did for consumers in all of 2023.
That was his nixing a last-minute
gut-and-amend bill that would have made it harder for the state to act on its
new law that aims to stop the oil companies from artificially and deliberately
staging events that raise the pump price of gasoline – and thereby pump up
their already massive profits.
The
bill was SB 842 by Democratic state Sen. Steven Bradford of southwestern Los
Angeles County, an area that’s home to several large oil refineries.
Bradford
in late summer used an often abused legislative tactic to gut the contents of a
bill that had already stalled and substitute a completely different text of his
own. His measure could have hamstrung a new state Energy Commission power that
allows it to prevent unneeded, unscheduled refinery “maintenance” shutdowns
often used to excuse sudden and very large gasoline price increases.
Those increases
last year saw oil company profits leap high above normal levels in winter, when
gas prices jumped more than $2 in just two February days. Newsom charged that
price hike “fleeced” California drivers and families.
Companies like
Valero, Chevron and Conoco-Phillips later reported record profits for the first
quarter of 2023, but most did not break out California results from the rest of
their balance sheets.
One result was
that state legislators passed and Newsom
quickly signed a unique bill called SBX1-2
that forces oil companies to report maintenance shutdowns in advance. It will
also allow the Energy Commission to limit gasoline profits once it determines
where mere profit ends and price gouging begins.
Refiners also must
provide monthly financial reports.
Bradford’s bill
sought to slow down this new process by
forcing the Energy Commission to consult
with labor and industry stakeholders and aim to avoid any adverse effects to
safety and “other market impacts.”
Newsom said this
“would be imprudent” before that commission “has fully contemplated” the safety
aspects of SBX1-2. And he called Bradford’s effort a potential “barrier to the
commission’s ability to protect consumers.”
But don’t pity the
oil companies. Where the profit margin
on gasoline stood at about 6.7 percent per
gallon in pre-COVID 2019, it was close to 12 percent nationally last fall, and
even higher here, although most companies did not report California profits
separately. Not a bad rate of return.
One company that
does give some California figures is Texas-based Valero, whose Wilmington
refinery serves Southern California while another in Benicia serves the north
state.
Valero reported
last fall that its profits in California were
about 70 percent higher than in any other
American region.
SBX1-2 allows the
Energy Commission’s new Division of Petroleum Market Oversight to impose
penalties for price gouging, and the Consumer Watchdog advocacy group called
for it to use those powers to bring down Valero’s California profits.
“It is time for
the …commission to…set a price gouging
penalty on big refiners ripping us off at
the pump,” said the group’s consumer advocate, Liza Tucker. “It is time to
prevent refiners from using us as one big ATM.”
While oil
companies have gouged before, often using supposed refinery breakdowns and
maintenance shutdowns as excuses, the average gross refining margin reported by
oil companies under SBX1-2 for August was $1.29 per gallon, twice their January
margins. Profits topped $1 per gallon in February and never receded.
When an already
profitable industry’s profits almost double over a few months, with no
discernible changes in market conditions, that’s pretty obvious price gouging.
The new Energy
Commission oversight division now needs to act, first by determining what is a
fair price and a fair profit for gasoline in California and then by enforcing
that standard via price gouging penalties.
If this does not
happen, it will be an open invitation to the refiners to raise prices even
higher than today’s $5-plus levels.
-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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