With No Relief From Sky-High Gas Prices In Sight, Oil and Gas Industry Oversight Legislation Moves Forward

Published on


May 18, 2022


As the summer travel season fast approaches, 2022’s sky-high fuel prices have failed to let up, save a few brief reprieves. Sonoma County drivers are now paying an average $6.04 per gallon.

“We are seeing extremely high and rising prices, which is, of course, disappointing,” said Severin Borenstein, faculty director at UC-Berkeley’s Energy Institute. “It is the reality of where we are right now, and I don’t see us getting relief in the next month or so at least.”

World crude oil prices dropped some but have been going back up, Borenstein told me, influenced by the war in Ukraine and a supply-and-demand imbalance where labor shortages and infrastructure supply chain backups have hindered meeting increased fuel use spurred by the pandemic recovery.

Still, while consumers, and especially Californians, dig deep into their pockets at the pump, major oil and gas companies raked in $41 billion in profits in the first three months of 2022, according to government oversight group Accountable.US, with many doubling what they made by this time last year.

Of course, it’s not a one-to-one comparison, and many factors are at play, but it’s hard not to notice the contrast.

In California, the disparity is even more striking.

Last week, Consumer Watchdog published data based on investor profit reports that showed some California oil refiners reported first quarter profits that are up to five times higher than the same period last year and more than double the profits reported by the same refiners in other regions of the country.

As an example, Phillips 66’s petroleum refining margins were $17.68 per barrel in its Western region for the first three months of 2022. That compared to about $7 per barrel in its Midwest and Gulf Coast refining regions, according to the report.

Kevin Slagle, vice president for strategic communications for the powerful industry trade association, Western States Petroleum Association (WSPA), said profits are being driven by spiking demand coming out of Covid, not profiteering.

Indisputably, though, California has the some of the highest gas prices in the nation. In February, I explored how the state’s price differential—where five oil refiners control 96% of the gas in California—goes beyond temporary price spikes.

Experts and advocates trace our higher prices to a separate issue, a “mystery gas tax” that amounts to additional surcharges unexplained by taxes and environmental fees with roots going back to a 2015 Exxon refinery explosion.

Under the direction of the governor, the California Energy Commission and state attorney general have both made some attempts to investigate and address state gas pricing issues, but progress is slow and piecemeal.

“I think neither of them is really equipped to do what we need,” Borenstein told me, noting the AG office’s narrow mandate to investigate criminal behavior and the energy commission’s lack of consumer protection expertise.

“In the meantime, there’s mystery gasoline surcharges continuing along at 30 or 40 cents-a-gallon that translate to more than $4 billion a year for Californians.”

Accordingly, Consumer Watchdog is sponsoring California State Senator Bill Allen’s SB 1322, transparency legislation that would require oil refiners in the state to report their per barrel profit margins monthly.

Introduced in February, the bill could be up for a full senate vote as early as Thursday and by May 27 at the latest, per Allen’s chief of staff, Nicole Winger. It passed out of the California State Energy, Utilities and Communications committee unanimously last month, with state senators Mike McGuire and Bill Dodd voting in favor.

“It’s all about disclosure,” Consumer Watchdog’s president, Jamie Court, said at a news conference releasing the organization new industry profit findings. “Simple disclosure, and sunlight.”

According to an April state senate analysis, the Western States Petroleum Association is the only entity registered in opposition to the bill. “It’s a solution in search of a problem,” Slagle told me, arguing this kind of oversight already exists from the California Energy Commission and the Oil Price Information Service and that providing real-time market sensitive information could pose antitrust issues.

(Court and Borenstein noted that some similar margin-related data used to be reported more frequently.)

For his part, Borenstein advocated instead (or first) for an investigation of the regulatory and market situation that could identify the best changes in regulations or approaches to government oversight, like the one spearheaded by a state senate select committee into the 2000 and 2001 California electricity crisis.

In the meantime, with state coffers full of cash, Gov. Gavin Newsom released a new budget proposal with transportation rebates, including up to $800 per registered vehicle owner and grants for public transit agencies to temporarily suspend fares. But the final budget, after undergoing changes negotiated by legislators who have their own ideas, wouldn’t go into affect until July.

While all this plays out, we’ll have to sit tight. (Borenstein reminded me that the price difference between stations is much bigger in California than elsewhere, “so the payoff to shopping around and going to the cheap station when you find it is huge,” he said.)

Whether gas prices rise or fall, the underlying questions and impact of California gas pricing aren’t going away.

“There is a public interest in curbing profiteering,” Court said. “This isn’t just any industry. It affects all other industries.”

“In Your Corner” is a new column that puts watchdog reporting to work for the community. If you have a concern, a tip, or a hunch, you can reach “In Your Corner” Columnist Marisa Endicott at 707-521-5470 or [email protected]. On Twitter @InYourCornerTPD and Facebook @InYourCornerTPD.

Consumer Watchdog
Consumer Watchdoghttps://consumerwatchdog.org
Providing an effective voice for American consumers in an era when special interests dominate public discourse, government and politics. Non-partisan.

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