Gas Gouging Returned In Spring, Will Be Back Again

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Gas Gouging

The days when oil companies could credibly deny they gouge California drivers in fairly regular cycles should now be over. Just three years ago, reports from the Consumer Watchdog advocacy group thoroughly documented how record profits for gasoline refiners like Chevron and Valero coincided with record-high pump prices throughout this state.

The quarterly profit statements for this spring are not in for the same firms and other, smaller refiners, but it’s almost certain they will once again be near or above past records. That’s because gas pump prices jumped this spring into ranges well above $4 per gallon for unleaded regular, without much visible causation.Even after prices subsided slightly in late May and early June, money continued to roll into oil company coffers.

All this still remains a mystery to some. Governor Gavin Newsom ordered the state Energy Commission to investigate why California gas prices rose to levels more than $1 dollar a gallon higher than averages elsewhere in America except isolated Hawaii, where oil and
gas arrives by ocean-going tankers rather than pipelines. The preliminary conclusion: market manipulation may have played a role. You don’t say.

Some politicians regularly blame the state’s high gas taxes, which rose almost two years ago by 12 cents per gallon to help pay for highway, environmental and greenhouse-gas-related improvements. But that 12 cents doesn’t even begin to account for the far larger differential between California prices and those almost everywhere else.

Newsom’s complaint somehow makes this seem like a new problem. It’s not, but the fact of a governor investigating is new. In fact, two years ago, the state’s Petroleum Market advisory Committee found California has had a “continuous and significant unexplained differential compared to the rest of the country.” Oh, but it’s not unexplained at all. Reality is this is purely the result of price gouging by an industry that has long had California in a difficult spot.

Never mind that some so-called experts at UC Berkeley have called the entire scene a “mystery,” noting that California’s higher taxes account for no more than 70 percent of its gas price differential.

Consolidation of the refining industry into essentially three corporate hands – Chevron, Valero and Phillips 66 – has allowed the companies to keep this state’s reserve stocks lower than anywhere else in the lower 48 states.

As far back as six years ago, Consumer Watchdog reported that the rest of the continental U.S. has about 24 days supply of gasoline on hand at any given time, while California averages between 10 days and 13 days. Shorter reserves mean that anytime there’s even a slight glitch, the refiners can claim an impending shortage and raise their prices. A refinery fire that’s put out quickly, with repairs made within a few days, can therefore cause price increases to reverberate for months.

Said Consumer Watchdog, “It’s happened before and will happen again and again because the California refinery owners can make more money by making less gasoline.”

How long do these things last? In 2015, a refinery blaze in a Torrance refinery sent prices upward. They never reverted to pre-fire levels, despite reconstruction and repairs.

Now Newsom has ordered the Energy Commission to investigate possible “inappropriate industry practices.” That’s a very appropriate demand of that commission. The question: Will Newsom let his order be either ignored or procrastinated on, with inaction the result?

Yes, whenever gas prices skyrocket, the Western States Petroleum Association invariably says it’s a one-off event and that “dynamics of supply and demand are responsible…” That last part is certainly true… but it leaves out the fact that the refiners control gasoline supply, while demand is very predictable, seasonal travel habits a major part of the picture.

At UC Berkeley, they call the extra money collected during gasoline price surges an “unexplained surcharge.” But the explanation has been clear for years, even if state authorities are just beginning to realize it: This is the result of oil company manipulation and profiteering.

One thing California plainly needs: a new law forcing disclosure of all California refiners’ profits, with complete transparency the goal. If the Legislature won’t create such a law, the people should, via a ballot initiative.

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