Los Angeles, CA—PBF Energy today posted an annual profit of $2.9 billion. The five refiners controlling California’s gasoline market — PBF Energy, Chevron, Marathon Petroleum, Valero, and Phillips 66 – have now reported a combined 2022 annual profit of $75.4 billion, nearly three times the $27.8 billion reported for all of 2021.
Like other refiners, PBF’s profits per gallon in California took a nose-dive in the fourth quarter after Governor Newsom called for a special session to deal with price gouging.
PBF’s per gallon 4th quarter margins in California were nearly half what it reported for the rest of the year – 41 cents per gallon in the 4th quarter as opposed to 74 cents, 82 cents, and 78 cents per gallon in the first three quarters. This is in line with its historical margin of 41 cents per gallon since it began operating in California. Also, in the fourth quarter PBF’s California margins were no longer the highest among its four regions, bucking the annual trend.
“This shows that the Governor’s price gouging penalty proposal likely curbed the industry’s greed and brought PBF’s fourth quarter margins in line with its historical margins,” said Jamie Court, president Consumer Watchdog. “We need a permanent windfall profits cap in place to deter the outrageous profit taking that California’s big refiners engaged for most of 2022. This is the only thing that will protect average people from the outrageous price spikes.”
Still, for the year, PBF made profits off California consumers at the pump of 58 cents per gallon in 2022, breaking the 50 cents windfall profit cap (the mark recommended by Consumer Watchdog) for the first time in California. The mark was only broken by refiners three times in the last twenty years, each time by Chevron.
In 2022, all five refiners broke the 50 cent per gallon windfall profit barrier, with an average 66 cents profits per gallon for the year. (Chevron posted 85 cents per gallon profit for the year, Marathon Petroleum 75 cents, Phillips 57 cents, and Valero 55 cents.)
If a windfall profits cap of 50 cents were applied quarterly, that would create $3.3 billion in price-gouging penalties for the five refiners for 2022. PBF would owe Californians a $706 million penalty.
Consumers should not expect an easing in gasoline prices in 2023, the company indicated today on its investor call on 2022 results. CEO Tom Nimbley said inventories for gasoline and distillates “remain well below the five-year average in most places.”
A contributing factor is a heavy refinery maintenance schedule, taking refineries offline. These factors make for a “constructive” market set up going forward, PBF executives said. “We believe that we are going to see some tailwinds behind gasoline as we move to the high driving season,” said Nimbley. “Overall, things are looking reasonably positive for products.”
“The market may look rosy for investors, but not for consumers looking for respite from price gouging at the pump,” said Consumer Advocate Liza Tucker. “Especially for millions of minimum wage workers that can spend up to 70% of their daily take home pay filling their gas tank when gas is $6 per gallon, as opposed to half their pay when it is $4 per gallon.”
The legislature is considering SBx1 2 (Skinner) to establish a windfall profits cap on how much oil refiners can make in profit per gallon of gasoline before it is considered excessive. Consumer Watchdog has suggested penalties kick in after 50 cents per gallon. Historically, over the last 20 years, California refiners have made an average profit of 32 cents per gallon and have only exceeded the 50-cent mark three times. See slide 5 here.
Refiners report gross refining margins per barrel that reflect the difference between what a refinery pays for crude versus what it charges for finished products. This allows Consumer Watchdog to calculate profits per gallon by dividing the reported margin per barrel by 42, the number of gallons in a barrel of oil, to arrive at a profit per gallon.
Refiners report refining margins from their operating regions across the U.S., typically the West Coast, Gulf Coast, Mid-Continent, and East Coast. PBF only runs two refineries on the West Coast and they are in California—one in Torrance and one in Martinez—and so West Coast results are for California only.
PBF reported West Coast gross refining margins of $24.69 for the year, nearly tripling the $9.42 it reported for the year before. Its annual margins were the highest in California. That comes to a profit of 58 cents per gallon this year compared to 22 cents in 2021. Its quarterly margins in California were 41 cents per gallon, down slightly over the fourth quarter profit per gallon of 43 cents in the fourth quarter the year before.
In addition, under a new law, SB 1322 (Allen), the Oil Refiner Price Disclosure act, PBF and other California refiners will be required to report monthly the cost of the crude oil they buy versus the wholesale price of the gasoline they sell and their profits made per gallon. The reporting starts March 1st.
This reporting requirement, designed for transparency in gasoline pricing, will produce data in closer to real time and will be reported to the California Energy Commission starting next month. “It’ll be easier to watchdog in close to real time if refiners are gouging,” said Tucker.