For many years, California drivers and Republican politicians have blamed Democrats and high gas taxes for the huge difference in the price of gasoline here compared to other states. It turns out they’ve been wrong, some of them just plain self-serving.
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We know this with certainty now for the first time because of a year-old state law with the odd designation of SBX1-2, passed in an emergency legislative session after extreme gasoline price increases in February 2023. In that month, pump prices leaped more than $2 per gallon over just two days, with oil refiners explaining that they had some “unexpected” shutdowns.
Gov. Gavin Newsom called this a “fleecing” of California drivers, and oil company profits in this state jumped to levels 70% higher than what they were elsewhere. They’ve dropped a little since then.
So we got a new law forcing refiners in the state to report their per-gallon profit margins to a new division of the state Energy Commission, which must publish them and then decide whether they constitute price gouging. If the commission makes that ruling, it can then impose price limits.
The first reports came in late last year and received virtually no media coverage. It turned out big California refiners like Valero, Chevron, Conoco-Phillips, Marathon and PBF raked in an average of $1.49 per gallon in gross refining profits during the fairly typical month of September, more than twice their 66-cent margins in January 2023. That’s after the costs of crude oil, taxes, environmental fees and transportation are subtracted.
Of course, the 66-cent January 2023 margins were already unusually high, about a third more than the previously normal margins of about 50 cents per gallon that the refiners historically reaped here.
“This data proves California oil refiners profited wildly from California gas price spikes,” said Jamie Court, the advocacy group Consumer Watchdog’s president. “It is precisely why California needs to implement a strong price-gouging penalty as soon as possible.”
He’s right. The figures prove that while government causes some gas price inflation here, refiners cause most of the price difference of more than a dollar a gallon between California and other states. Essentially, refiners are treating California like a gigantic ATM with unlimited reserves.
This all demonstrates that even though prices are down somewhat since February 2023, they remain much higher than previously, with refiners not being the least bit bashful about upping their profits whenever they please. September brought such a moment, as they raised margins from $1.29 per gallon in August. This was a 13% increase in a single month, when no extraordinary events occurred.
Court suggests that the Energy Commission, which now for the first time should exercise its option of setting a “reasonable maximum” profit, should also limit margins to 60 cents a gallon, just below the levels of January 2023. That would amount to a 10% penalty to the refiners for their gouging of the last year.
For consumers, this could mean a quick price drop of almost a dollar a gallon, a welcome relief in the state with America’s second highest average cost of living. So far, though, the Energy Commission has not acted on its mandate, saying it is still determining whether any of this constituted price gouging.
That decision is due by June at the latest, but the September numbers leave no doubt of what the finding will need to be: That the refiners have gouged customers and deserve the penalty SBX1-2 calls for is eminently clear.
Yes, oil companies would bleat about how the state is wrecking its business environment — an environment they have exploited to the tune of billions of dollars over the last year. If they don’t pay a price for their unfair business practices now, when one would ever be justified or imposed on any price-gouging business or industry is hard to see.
Email Thomas Elias at [email protected], and read more of his columns online at californiafocus.net.
