Sacramento, CA — Leading consumer groups have written Governor Newsom to offer support for his plan to impose a windfall profits cap and price gouging penalty on oil refiners when their gas prices and refiner profits are abnormally high.
The groups – Public Citizen, CalPIRG, Consumer Attorneys of California, Consumers For Auto Reliability and Safety, Consumer Protection Policy Center, and Consumer Watchdog — wrote to support the Governor as the special session he convened on the topic begins today.
“We support a windfall profits cap that limits how much oil refiners can make in profits per gallon of gasoline they refine,” the public interest groups said. “California’s four big oil refiners more than doubled their average profit of the last 20 years from California during the recent gasoline price spikes.”
“Setting a windfall profits cap on refining gasoline at a reasonable upper limit, such as 50 cents per gallon, will save consumers billions of dollars in overcharges,” they wrote.
Read the letter.
The consumer groups join a coalition of more than 50 environmental groups who have already supported the Governor’s plan.
“Reports to investors show oil refiners in California made an average of 32 cents per gallon refining gasoline over the last two decades,” the groups noted. “This year they more than doubled that margin to make 69 cents per gallon in profit. The four refiners that report quarterly profits – Valero, PBF, Phillips 66, and Marathon – made an average of 86 cents per gallon in profit during the second quarter and 73 cents per gallon during the third quarter. Until this year, none of the four oil refiners have made profits that have exceeded 50 cents per gallon.”
“The ‘gouge gap’ between the average price per gallon at the pump in California and what consumers pay in the rest of the United States approached $3 this fall,” the groups continued. “This is not all a function of pent-up demand from the pandemic, the war in Ukraine, or OPEC decisions. It’s a consequence of five big oil refiners in California who make 97% of the gasoline and have intentionally restricted supply to artificially drive-up prices. Thus, a windfall profit cap is sorely needed to bring California gas prices under control.”
More than six in ten California voters support a proposal to impose a windfall profits cap and price gouging rebate on oil refiners for the abnormally higher gas prices and profits in the state, according to a poll conducted for Consumer Watchdog by FM3 Research, Fairbank, Maslin, Maullin, Metz & Associate.
Support for the proposal is broad-based among Democrats and nonpartisans, all regions of the state and all races and ethnicities.
In his proclamation declaring the need for a special session, Governor Newsom noted:
“WHEREAS the limited explanations refiners have offered, such as low
inventory levels and overlapping scheduled maintenance schedules, can
account for only part of the 2022 price spike and suggest the need for
closer oversight of the refining sector to prevent supply shortages that
artificially drive up prices; and
“WHEREAS gas prices in California have remained elevated, without
explanation, since a price shock that followed a refinery explosion-an
episode that was exacerbated by unlawful price manipulation by market
participants, according to the Attorney General; and
“WHEREAS the Legislature enacted, and I signed, the California Oil
Refinery Cost Disclosure Act (Senate Bill No. 1322, Allen) in 2022, to provide
more information about refiners’ margins by requiring reporting of data
that will make windfall profits more apparent, yet even greater
transparency is needed in light of oil companies’ recent pricing decisions,
particularly with respect to information regarding the timing and
production impact of refinery maintenance and timely information about
inventory levels; and
“WHEREAS oil companies are entitled to a reasonable return, but not
to engage in opportunistic price gouging for gasoline, which remains a
necessary commodity for most Californians even as the state begins the
process of moving away from relying on fossil fuels to power our vehicles…
“WHEREAS these extraordinary circumstances require the Legislature
of the State of California to be convened in a special session.”