Los Angeles, CA—Valero’s net income hit $2.8 billion for the third quarter of 2022, more than quintupling the $463 million reported for the same quarter last year.
Valero’s Western region profits, which are strictly from its California refineries, topped 60 cents per gallon. That is only the second time it has reported such a windfall of over 50 cents per gallon since 2001. The first time was the second quarter of 2022 when its California profits were 83 cents per gallon. Valero’s California profits were once again higher than any of its other regions in the country and the world.
“These windfall profits must be returned to California drivers if the oil refiners are to treat Californians like customers rather than ATMs,” said Jamie Court, president of Consumer Watchdog. “These profits show Governor Newsom is justified in his call for a special session to mandate a price gouging refund.”
In California, the Valero profits translate into an estimated quarterly windfall profit of $50.8 million that should go back to consumers, Consumer Watchdog said today, calculating all monies made over 50 cents per gallon as a windfall profit.
In the second quarter, Valero’s windfall profits made on margins of 83 cents per gallon was $161,700,000. Adding to Valero’s windfall profit from last quarter, Valero would need to refund $211 million in windfall profit back to California consumers if a price gouging refund law were in effect.
Governor Newsom has called a special legislative session in December to consider a windfall profits cap and price gouging rebate for California consumers. Consumer Watchdog estimates that the amount of windfall profits to be returned to consumers by refiners reported so far this year is now over $1 billion. See the calculation.
The formula used to calculate windfall profits is every dollar in profit made above 50 cents per gallon, which the company has only reported twice since 2001 — in the second and third quarters of 2022. View the chart of per gallon West Coast profits since 2001.
None of the four California oil refiners who reported windfall profits in the second quarter of 2022 had previously made more than 50 cents per gallon annually in all their years doing business in California. Chevron’s profits only exceeded 50 cents per gallon three times in the last twenty years.
Three other California refiners—PBF Energy, Phillips 66 and Marathon Oil—will be reporting third quarter profits in the coming two weeks. Chevron, which serves one third of the California market, only reports margins annually.
Valero’s haul of 60 cents per gallon off its California refineries is more than it has made at any other point in the last 20 years except for last quarter. Cents per gallon are calculated by dividing the gross refining margins on a barrel of crude by 42—the number of gallons in a barrel. Gross refining margins reflect the difference between the cost of crude oil bought and the price of petroleum products produced and sold by the refiner.
Oil refiners' reports to investors only reveal Western regional margins, not California specific profits, which are generally higher. Two of the five oil refiners, Valero and PBF, have their Western refineries in California only.
In the third quarter, Valero’s California refineries more than doubled margins per barrel to $25.36 from $11.29 in the same quarter last year. For the nine months, West Coast margins were $25.89 over $9.81 year before. The margins were the highest reported among Valero’s four regions of operation, including the U.S. Gulf Coast, North Atlantic and U.S. Mid Continent.
A new law, SB 1322 (Allen), backed by Consumer Watchdog, will require oil refiners to post their profits per gallon from refining monthly beginning in January. This will give California the basis to monitor for price gouging in real time and, if a price gouging rebate is enacted, to give the excess profits back to drivers.
On Valero’s earnings call with investors today, its Chief Executive Officer Joe Gorder noted that refining margins “remain supported” by strong product demand and low product inventory. Despite high output, Gorder said that global supplies remained “constrained” due to refineries being taken offline, “unfavorable economics,” and switching refineries away to producing low carbon fuels.