RESOLVING THE CONTRADICTION BETWEEN GAS PRICES AND REFINERY CLOSURES

 

CALIFORNIA FOCUS
FOR RELEASE: FRIDAY, JULY 4, 2025 OR THEREAFTER

BY THOMAS D. ELIAS
“RESOLVING THE CONTRADICTION BETWEEN GAS PRICES AND REFINERY CLOSURES”

 

It’s an apparent contradiction: on one hand, state regulators reported in May that California gasoline pump prices since 2015 average 41 cents per gallon higher than in other states, after accounting for taxes, fees and environmental costs.

 

On the other hand, two of California’s large refineries now plan to close soon, one by the end of this year and the other within the first half of 2026. They say they can’t afford to stay open, even though together they make 17 percent of the state’s gasoline.

 

How can gasoline refiners be making the highest profits in the lower 48 states, but still not enough to keep their plants open?

 

To understand this, it’s important to know the average net profit for oil companies varies, with the biggest refiners – the ones supplying branded stations like Chevron and Shell – making more money because of their retail marketing networks, while smaller refiners often supply lower-priced independent brands that pay (and charge) less.

 

State regulation of gas refining is a pretty new thing, dating from a 2023 law signed by Gov. Gavin Newsom that allows a wing of the state Energy Commission to order that refiners keep higher stocks on hand than previously at times when they’ve recently been caught at price gouging. One such time came in February 2022, when pump prices jumped more than $2.50 per gallon within two days of an outage at one refinery near Los Angeles.

 

When Newsom signed the law allowing this kind of regulation, he accused oil companies of “gouging” and “screwing Californians.”

 

In fact, the state reported this spring that per-gallon excess profits by the oil companies peaked at $2.36 during a fall 2022 price spike.

 

There have been no similar-sized spikes since the new law took effect.

 

So how to explain the scheduled closures of a Phillips 66 refinery near Los Angeles and a Valero plant in Benicia?

 

Even with these refineries charging prices and posting profits consistently well above national averages – but without sudden windfall profits due to occasional outages for maintenance and mechanical problems – that’s what they plan.

 

Says one expert, “The two refineries are closing because they are old and expensive to run and the state’s planned transition to electric vehicles promised a drop in demand.”

 

Also, these refineries serve more unbranded gas stations than the biggest-in-California Marathon refinery near Los Angeles and the two big Chevron facilities at Richmond and El Segundo. So they make less profit than their competitors that supply large networks of branded stations. Maybe they needed to gouge customers once in awhile just to stay open.

 

Pollution also plays a role. Valero Benicia last October was forced to pay an $82 million fine. The state Air Resources Board and the Bay Area Air Quality Management District (BAAQMD) imposed the penalty for violations involving unreported emissions of harmful organic compounds, including benzene. An investigation showed the violations had been occurring for about 20 years.

 

To fix up both the refineries aiming to shut down would cost in the hundreds of millions of dollars, an amount they believed they were unlikely to make up soon in the new no-price-spikes era. This situation is not unique: Several refineries in Texas are also closing in response to competition from new foreign “super refineries,” mostly in the Middle East.

 

The closing California plants will likely replace their production with gasoline shipped in from those and other foreign sources, including Indonesia. Chances are, there will be no major shortages, but there may be price increases, which could provide drivers with new reasons to buy EVs.

 

Of course, now that President Trump has eliminated federal EV price incentives and tax refunds, one or both of the outfits that have resolved to shut down may reconsider, as their potential economic futures look better than they did a few months ago.

 

Meanwhile, the remaining large refineries, which may soon be producing as much as 98 percent of California fuel, have no reason to stage a similar shutdown, which promises a long period of stability in this industry after the inevitable adjustment period that would accompany the two scheduled closures.

 

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    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

BIG BOXES WILL JOIN CONVERSION PARADE

 

CALIFORNIA FOCUS
FOR RELEASE: TUESDAY, JULY 4, 2023 OR THEREAFTER

BY THOMAS D. ELIAS

        “BIG BOXES WILL JOIN CONVERSION PARADE”

 

        Remember Fry’s Electronics, the warehouse-style stores that shut down completely in 2021? Those stores joined 41 California Bed, Bath & Beyond locations, 17 Disney stores in the state and more than a dozen Best Buys that shuttered just in the last year.

 

        They joined hundreds of locations once occupied by Borders Books & Music, KMarts, K-B Toy stores, Linens-N-Things warehouse-style stores, Mervyn’s stores, Circuit Cities, Radio Shacks, Sport Chalets and Blockbuster Video outlets.

 

        No one has tracked just how many of those store locations have been reoccupied by other retailers, but anyone driving around California cities can readily see that many have not.

 

        Big box stores and their parking lots often sit empty. So do scores of mini-malls.

 

        But probably not for long. Tens of millions of square feet of office space vacated during the depth of the coronavirus pandemic remain empty today, as law firms, insurance companies, stockbrokers and many other types of white collar businesses reduced their rental footprints and allowed millions of workers to keep working from home, wherever they make it.

 

        Fears of contagion were also part of the reason for the many store closings around the state during the last three years, as shoppers avoided crowded spaces and ordered merchandise of almost all kinds online from home instead.

 

        Many jilted properties are about to be reassessed at far lower tax rates than today’s, as rent reductions reduce the market value of both office towers and other types of commercial property.

 

        It was plain from the beginning of the pandemic that the eventual answer would have to be conversions, as all those vacancies coincided with a declared housing shortage, one variously estimated by the state’s Department of Housing and Community Development at anywhere from 1.2 million to 3.5 million dwelling units. The vast differences in official state estimates of need are likely due to the sort of incompetence noted in a state auditor’s report on that department in 2021.

 

        It took years for legislators to realize they must remove obstacles to building conversions, making residential properties out of structures originally designed as commercial.

 

        But they finally acted last year, passing two measures that greatly ease conversions, which are already taking off in significant numbers, with more than 10,000 such permits issued by the end of last year. Latest example: an eight-story tower in Emeryville soon to be redeveloped near the eastern foot of the San Francisco Bay Bridge, 

 

        Expect the 10,000 figure to grow exponentially by the end of this year, especially if the first redesigned units sell easily and quickly.

 

        One new law that took effect Jan. 1 makes new zoning unnecessary for remaking commercial properties. That was one big previous obstacle to conversions, as some cities took purist attitudes toward separation of residential and commercial property.

 

        Cities and counties will still have authority to inspect newly redesigned structures during reconstruction, just as they do with any building. But unless they find flaws that can’t be fixed, projects will proceed and new housing will result, in big numbers. New units can be of all price levels, from lower-floor apartments and condominiums exposed to street noise to penthouse units 30-plus floors above the racket.

 

        Emptied big box stores and their parking lots will also morph into housing, with parking lots a place where homes are built from scratch. Even excess property owned but little used by religious institutions will be available for new residences.

 

        Some estimates from legislative aides predict as many as 1.2 million new units to appear where formerly there were offices and stores. Two positives here are that under the new laws, not only will most projects be immune from lawsuits under the California Environmental Quality Act (CEQA), but conversions will leave existing neighborhoods largely undisturbed, while avoiding most changes in the footprints of large buildings.

 

        In some ways, this promises to be the best of all housing worlds, letting building owners recoup their investments via rents and sales proceeds and giving neighbors little reason to be annoyed, let alone angry.

 

        The bottom line: The solution to some of California’s housing woes is at hand, about to become a very visible reality.

 

    -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.

MONEY-SAVING PROP. 103 BEATS BACK ANOTHER CHALLENGE

CALIFORNIA FOCUS
FOR RELEASE: TUESDAY, JULY 4, 2017, OR THEREAFTER


BY THOMAS D. ELIAS
          “MONEY-SAVING PROP. 103 BEATS BACK ANOTHER CHALLENGE”

          The 1988 Proposition 103 has saved California consumers more than $100 billion in excessive auto insurance premiums since voters passed it by a slim 51-49 percent margin, probably the reason for an unrelenting legal onslaught by the insurance industry.

 No one has calculated the accompanying savings in prices for homeowners insurance and other property coverage, but they’ve also been substantial.

          The brainchild of longtime consumer advocate Ralph Nader and his onetime California protégé Harvey Rosenfield, Prop. 103 is the rare initiative that keeps living up to its original promise – saving consumers and businesses about 20 percent of what they would otherwise spend on car insurance and property coverage.

          It consistently makes reality of the pledge that spurred insurance companies to spend $63 million trying to beat it at the polls.

          The latest corporate challenge to this most money-saving of all ballot

initiatives ever passed anywhere in America was beaten back the other day

by Rosenfield and a three-judge panel of Sacramento’s Third District state

Court of Appeals and the state Supreme Court.

          In this latest case, the state’s high court let stand a Court of Appeals

decision rebuffing the latest legal assault by industry kingpins including State Farm, Mercury, Allstate, Farmers and other insurance companies seeking to raise rates significantly above what Insurance Commissioner Dave Jones had ruled justifiable.

          So laughable did judges find the industry arguments for their putative

price increases that the three-judge appeals court panel considering the case called it “hocus pocus” and “smoke and mirrors – nothing more.” The companies sought about $250 million more than Jones allowed. His authority to oversee such rate increases also comes entirely from Proposition 103.

          “This latest challenge to 103 came after the state Supreme Court two

other times upheld 103 and its rules for rate approvals,” said Rosenfield,

who continues to fight the challenges every time they arise. The

decisions, he noted, were unanimous, some issued at times when Republicans held the court majority.

               But the industry never seems to give up its thus-far forlorn hope of going back to the higher-premium days before passage of 103. Before then, too, insurance commissioners were appointed by the governor, not elected.

          The latest case actually began in 2009, when Mercury Casualty tried

to raise rates by 8 percent. That increase would have included

compensation to the company for both non-insurance related advertising

expenses and reimbursement for almost $1 million in political contributions

and lobbying expenses. These are categories regulated companies 

almost always must pay from their profits.

          Instead of getting an increase, the case resulted in Jones imposing a

5.4 percent decrease in Mercury homeowner’s rates. Furious, Mercury

sued in a Sacramento County court, arguing it should be allowed to charge

whatever its executives say it needs. The firm claimed 103 deprives it both

 of the right to free speech and the right to make whatever profit it deems

fair.

          So far, those contentions have not flown in any court. But even as the

state’s high court was dismissing those claims for at least the third time,

Mercury’s allies in the Association of California Insurance Companies and

three other industry groups were filing a similar case in San Diego.

          Mercury also seeks in an Orange County case to avoid a $27

million fine for overcharging customers.

          “The insurance industry is inundating the courts with a continuous

barrage of frivolous lawsuits,” said Rosenfield. “They’re trying to win from

the courts what they lost at the ballot box almost 30 years ago.”

          He added that “Prop. 103 was a populist revolt that worked. It has

delivered much more money back to people than anyone could have

predicted back in 1988.”

          Along with the 1978 Prop. 13 and its limits on property tax

increases, Prop. 103 is a strong factor making California affordable when

its income, sales and business taxes are among the nation’s highest.

That’s why preserving this law against insurance company attacks is vital to the lifestyles of millions of people in this state, even if many of them have never heard of it.

         

     -30-       
Elias is author of the current book “The Burzynski Breakthrough: The Most Promising Cancer Treatment and the Government's Campaign to Squelch It,” now available in an updated third edition. His email address is tdelias@aol.com

WILL POWER COMPANIES START “ROBBING THE ‘HOOD’?

CALIFORNIA FOCUS
FOR RELEASE: FRIDAY, JULY 4, 2014 OR THEREAFTER

BY THOMAS D. ELIAS
     “WILL POWER COMPANIES START “ROBBING THE ‘HOOD’?”

          For decades, Californians who use the most electricity have paid extra for that privilege, on the theory that high prices might provide an incentive for them to use less.

          This system is designed to allow all ratepayers enough power for basic needs at very low prices, with the extra energy needed to run things like Jacuzzis and charge items like Tesla sedans coming at a premium price.

One typical Southern California Edison bill for the month of February showed up to 314 kilowatt hours costing just over 12 cents each, for a total of $40.06, while the top tier of that same bill had 135 kilowatt hours priced at almost 30 cents each, for a total of just over $50, about 25 percent more for only about 40 percent as much power included in the bottom tier.

Transmission costs for all rate categories were about 8.5 cents per kilowatt hour, meaning the difference in the cost of the energy itself was 17 cents between the first power used and the last, a difference of about 400 percent from the bottom tier to the top one.

This may be about to change, as the state Public Utilities Commission considers a proposal by Pacific Gas & Electric Co. to cut the number of payment tiers from four to two, a move that would likely raise the rates of low-usage customers. Yes, that’s the same PG&E indicted for criminal negligence in its fatal mismanagement of natural gas pipelines.

A further change, added to switches in raw pricing, would see discounts available to low-usage (read: poor) customers cut by as much as 20 percent from today’s levels. That’s one reason the current proposals are the very opposite of a Robin Hood plan that would take more from the rich, but rather have been called “robbing the hood.”

          If approved for PG&E, it’s almost certain the same rate structure would be imposed soon after in the vast territories of Edison and San Diego Gas & Electric. Typically, systemic changes in utility regulation begin with PG&E and spread to the other companies less than a year later.

          Some of this switch is prompted by complaints from electric users in the Central Valley and other high summer heat areas where air conditioning runs up electric bills. The current rate structure sees utilities charge high-use customers more for power than low users, regardless of where they live.

          But it’s also quite likely driven by a 2012 legislative conference on Maui, where some lawmakers saw their expenses paid by corporations and/or labor unions.

          Rate restructure was pushed there by meeting sponsors, who had great access to legislators of both major parties, including some members of both parties’ leadership. Disclosure documents showed lobbyists there discussed energy rate changes with Assembly Republican leader Connie Conway of Tulare and Republican Fresno area state Sen. Tom Berryhill, for two examples.

          Editorialized one newspaper during the conference, “The elected officials…receive the free trips because of…their capacity to affect public policy.”

          If the businesses and their union workers, users on average of far more power than almost any household, had even a slight influence on passage of last year’s AB 327, which enables some of the changes now being considered, a few plane tickets will have proven a superb investment for them.

          PG&E, in pushing for the rate restructure, says it wants to make prices more sensitive to time of use, with power employed at night or in early morning hours cheaper than kilowatts used in the hottest, highest-use hours of the day.

          That’s laudable, and has often been combined into the existing rate structure, which gives preference to small users. But it also could doom many poor, elderly Californians to heatstroke and worse if they can’t afford air conditioning.

          If the PUC approves rates favoring big users over small ones, the folks calling this robbing the hood will be proven right. For it would be a classic reverse Robin Hood tactic, robbing the poor and rewarding the rich.

-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