By Eliyahu Kamisher, BAY AREA NEWS GROUP
March 11, 2022
While Californians watch their average gas prices surge to over $5.70 a gallon, consumer advocates are demanding new disclosures to reveal how much oil refiners are profiting off your latest fill up at the pump.
State Sen. Ben Allen, a Santa Monica Democrat, has introduced SB 1322, which would require oil refiners to disclose the average price they pay for crude oil along with the profit margins on the gasoline they sell every month.
“Let’s end the games of smoke and mirrors,” Allen said at a news conference on Friday. “Open your books, show the public your true cost of doing business.”
California currently has the highest fuel costs in the nation – more than 30% higher than the national average as of Friday, according to AAA. Much of the state’s high gas prices are attributed to the high taxes that fund roadway projects, environmental programs aimed at combatting climate change, and special fuel blends that reduce pollution.
But for years there has also been a “mystery surcharge” driving prices even higher, which cost drivers $11.6 billion over five years, according to an estimate from the state’s energy commission.
The mystery surcharge took off in 2015 when gas prices spiked in the aftermath of a Torrance oil refinery explosion. Before the blast, the unaccounted-for difference in California prices versus the national average was about 2 cents, but afterward, it ballooned to over 40 cents and it has remained high ever since, according to data from UC Berkeley economist Severin Borenstein.
In 2019, responding to demands from Gov. Gavin Newson to investigate the source of the mysterious price differential, the California Energy Commission pointed the finger at name-brand gas companies like 76 and Shell for charging far more than the national average and their off-brand, local competitors. But the commission added that companies “are free to charge prices based on what consumers are willing to pay.”
Jamie Court, president of the advocacy group Consumer Watchdog, which is pushing for the legislation, said a mandated profit disclosure will fill a data void to help policymakers understand why California drivers are paying billions extra in gas costs and where the money is going.
“When the (oil refiners) have to publish these California numbers that’s when we can take action against them and figure out what’s at the bottom of the Golden State gouge and get our money back,” Court said.
Kevin Slagle, with the Western States Petroleum Association, an oil industry trade association, accused the advocacy group of taking advantage of Russia’s invasion of Ukraine, which has increased global gas prices, to push its agenda.
“They’re using human suffering of war to get out there and make wild claims,” he said, arguing the mystery surcharge is an “elusive number” not based on higher profit margins.
Borenstein of UC Berkeley also pushed back on the legislation, saying the disclosure mandate is too simplistic and the Legislature should instead look to empower a state body to investigate the industry’s pricing patterns.
“I am a big fan of investigating the mystery gasoline surcharge – I don’t think this will be very helpful,” he said. “The Legislature is not the place to determine how data should be collected for such an investigation; they do not have the expertise and it’s not going to lead to any useful outcomes.”
The state Senate bill comes as some Democratic lawmakers in Congress are taking aim at oil companies who are seeing surging profits as the country’s economic rebound fuels gas demand. ExxonMobil, the country’s largest oil company, reported $23 billion in profits in 2021 – a 60% jump over pre-pandemic profits.
U.S. Rep. Ro Khanna, a Democrat who represents parts of San Jose and Fremont, along with Sen. Sheldon Whitehouse, a Democrat from Rhode Island, introduced legislation Thursday that would tax large oil producers and importers and send taxpayers rebates amounting to approximately $240 per single filer, the lawmakers said.
“This is a bill to reduce gas prices and hold Big Oil accountable. As Russia’s invasion of Ukraine sends gas prices soaring, fossil fuel companies are raking in record profits,” Khanna said in a statement. “These companies have made billions and used the profits to enrich their own shareholders while average Americans are hurting at the pump.”
Eliyahu Kamisher is the transportation reporter for The Mercury News. He got his start in journalism covering the Israeli police and then as a foreign correspondent for the German Press Agency. Before joining The Mercury News, Eliyahu worked as a freelancer with stories across California. He is a graduate of UC Santa Barbara.
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