Sacramento, CA – Consumer Watchdog President Jamie Court will offer testimony in favor of enacting a price gouging penalty and windfall profits cap on oil refiners at the California Senate Energy, Utilities and Communications Committee today.
His presentation, linked here, documents the gouging of Californians in 2022 by analyzing data reported by refiners to their investors and makes the case for a windfall profits cap to lower Californians’ gas prices and deter the price gouging in the future.
“Californians paid unprecedented prices and California oil refiners made unprecedented profits in 2022,” said Jamie Court, president of Consumer Watchdog. “The price spikes at the pump during the Spring, Summer and Fall in California resulted in huge profit spikes. Only a windfall profits cap will deter this profiteering, create price consistency and prevent oil refiners from using their pricing power to undermine environmental laws.”
Court makes the following points in his testimony:
California gas prices were as much as $2.60 greater than US gas prices — despite taxes and environmental rules adding only about 69 cents per gallon. The added costs from taxes and environmental regulation: state taxes = 25 cents (average state tax is 29 cents/ CA taxes are 54 cents); low carbon fuel standard = 16 cents; cap and trade = 26 cents; underground storage = 2 cents.
When gas prices spike, low-income workers feel it the most – At $4 per gallon, 9% of an annual minimum wage salary is spent on gas. At $5 per gallon, 11% of an annual minimum wage salary is spent on gas. At $6 per gallon, 13% of an annual minimum wage salary is spent on gas.
California’s Big 5 oil refiners posted profits of $67.6 billion in the first nine months of 2022 — nearly quadruple the $17.6 billion posted for the same period in 2021.
Oil Refiners made 30% more profit from West Coast/California than any other region in the country or world.
Data reported by refiners to their investors shows California oil refiners more than doubled their California profit margins in 2022. The average profit margin 2001 – 2021: 32 cents per gallon. The 2022 profit margin: 66 cents per gallon
If a windfall profits cap had been in place at 50 cents per gallon in 2022, California’s five oil refiners would have had to pay a penalty of $3.1 Billion back to the public. (Penalties: Chevron $1.4 billion, Marathon $764 million, PBF $555 million, Phillips $246.7 million, Valero $212 million). In twenty years, refiners have only crossed the 50 cent per gallon profit line three times (Chevron each time), until 2022 when they all exceeded it.
The price gouging penalty has already had an impact. After Governor Newsom announced a special session on price gouging, Valero and PBF’s refining margins nose-dived, returning to historical norms in CA. Chevron, Marathon and Phillips moderated their profit taking.
Insurance reform Prop 103, enacted in 1988, offers an important precedent for a windfall profits penalty by imposing a reasonable rate of return standard on the property casualty insurance industry. Insurers threatened to leave the state after passage, but instead California now has the second most competitive auto insurance market in the nation. Cost of liability insurance decreased by 5.7% in California while increasing by 58.5% nationwide, according to the Consumer Federation of America.
