CALIFORNIA FOCUS
FOR RELEASE: FRIDAY, JUNE 28, 2024, OR THEREAFTER
BY THOMAS D. ELIAS
“HIGH TIME
FOR ACTION ON GAS GOUGING”
The
gasoline price gouging that has plagued California periodically for decades
appears no longer to be merely sporadic. It’s now a steady phenomenon.
There was
shock and indignation about 18 months ago, when California’s Big 5 gasoline
refiners raised prices by more than $2 per gallon over a mere two days in
February 2023, and kept them near $7 for weeks, before letting them slide into
the $5-plus range where they mostly sit today.
That
resulted in windfall profits for those companies: Chevron, Marathon, PBF,
Phillips 66 and Valero all set records for profits over the next two quarters.
It also produced a special legislative session that created a new wing of the
state Energy Commission to assess financial penalties when companies are found
to be gouging their millions of customers.
The new
Division of Petroleum Market Oversight has so far not penalized anyone, even
though prices and refinery profit margins remain near the record levels set
during and just after the big price spike of early last year.
Now comes
the Consumer Watchdog advocacy group, which over the last 35 years has saved
California drivers more than $13 billion in car insurance premiums via the
rules set in the 1988 Proposition 103, authored primarily by the group’s
founder, lawyer Harvey Rosenfield.
The
industry, Gov. Gavin Newsom and the current state insurance commissioner,
Ricardo Lara, are feverishly trying now to decimate Prop. 103, and Consumer
Watchdog is contesting that attempt.
But the
group has also been agitating for action from the new Petroleum Oversight
divison. In comments filed the other day, Consumer Watchdog used state data
showing that refining profits reached record levels in both 2022 and 2023,
years when Big Oil claimed refinery maintenance and accidents caused shortages
that led to price increases.
The price
hikes plainly produced those record profits. For the rest of the last decade,
Consumer Watchdog noted, gasoline refining profits averaged 64 cents per
gallon. But in 2023, the average annual margin was $1.01. That was a 57 percent
increase in profits. Put another way, it was a strongly inflationary additional
cost of 37 cents per gallon for Californians already beset with higher food and
utility prices.
Said
Jamie Court, Consumer Watchdog’s president, “Every price spike during the last
decade has seen a corresponding margin/profit spike.” In short, the higher
gasoline prices go, the more profit reaped by oil companies that own the big
refineries.
This must
end if there’s ever to be a lid on the inflation plaguing all but the
wealthiest in this state.
Amazingly,
the price spikes and the current prices are almost identical among all the big
refineries. This, of course, suggests illegal collusion.
Court
told the Energy Commission that “Companies often defend against accusations of
illegal parallel actions by (citing) business reasons. Sustaining higher prices
and profits all year long (without) such reasons (like claims of supply
disruptions) would create great legal peril for the companies.” He added that
failing to impose a profit ceiling on the refiners, which the commission now
has the authority to do, would be “equivalent to giving in to terrorists when
we have laws that penalize terrorism.”
And yet,
the Energy Commission has not restrained prices, now nearly $2 per gallon
higher here than the $3.76 that has recently prevailed in the rest of the
continental United States.
Republican
politicians often claim this price differential comes because of California’s
gas taxes. But nearly one-third of the difference can be ascribed to gas
gouging revealed in the industry’s own monthly reports to the Energy
Commission, a new requirement of the same law that grants its Petroleum
Oversight division authority to limit profits.
So it’s
high time to put that now year-old law into use and limit refinery profits to
reasonable levels. Consumer Watchdog suggests a cap of 70 cents per gallon,
more than the industry averaged in the eight years before the 2023 spike.
By
itself, that action could cut the price differential between California and
other states by about one-third. Which would be an enormous benefit to millions
of California drivers.
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