The Observer: Way Past Time For Windfal Tax On Oil Companies

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Editorial by Editorial Board, UKIAH DAILY JOURNAL

October 9, 2022

The Observer: Way past time for windfall tax on oil companies

You could say it’s about time but Gov. Gav Newsom finally on Friday, Sept. 30, called for a windfall tax on oil companies who’ve been ripping off Californians for decades, but especially in the past year.

Newsom’s plan requires that the tax would go directly back to taxpayers.

Here’s what you need to know: While crude oil prices are down, oil companies have increased gas prices in California by a record 84 cents per gallon in just the last 10 days. At the end of August, crude oil prices were roughly $100 per barrel, and the average gas price in California was $5.06; now, even though the price of oil has decreased to $85 per barrel, the average gas price at the pump has surged to $6.29.

Petroleum industry analysts point out that oil priced at $60 per barrel delivers very healthy profits for oil companies.

Notwitstanding that fact, this past Wednesday, the OPEC alliance of oil-exporting countries, decided to sharply reduce production, a move that may well play hell with struggling economies everywhere.

Meanwhile, oil companies have soaked Californians for nearly $100 billion in the last three months alone. As always, the heaviest burden of unfair economic practices falls on workers and the middle class whose backs are already against the wall.

Oil companies have failed to provide an explanation for the unprecedented divergence between prices in California compared to the national average.

“Crude oil prices are down but oil and gas companies have jacked up prices at the pump in California. This doesn’t add up,” said Newsom. “We’re not going to stand by while greedy oil companies fleece Californians. Instead, I’m calling for a windfall tax to ensure excess oil profits go back to help millions of Californians who are getting ripped off.”

Newsom also ordered the California Air Resources Board (CARB) to make an early transition to winter-blend gasoline, and CARB took prompt action. This change is expected to immediately increase oil supplies by 5-10% and drop gas prices. When California did this in 2012, gas prices dropped by 25 cents within two weeks.

Also, starting next week, millions of Californians should get upwards of $1,050 in their bank accounts from the earlier promised budget surplus payments due to rising consumer costs and related inflation.

“As the cost of living continues to rise, California families have been forced to cut back on spending and rethink their budgets,” said California Attorney General Rob Bonta. “Earlier this year, my office warned refineries against taking advantage of ongoing market disruptions, and I want to again be clear: Market manipulation is illegal. My office is monitoring the market closely, and we will not hesitate to take action if we find evidence that the law is being violated.”

Bonta should spring into action right now and drag the oil company gougers into court.

This past summer, the state Assembly launched a select committee to investigate rising gas prices, which only held only two hearings before the Legislature adjourned for the year.

Economists told the committee that name-brand gas stations were charging higher prices at an average of about 30 cents more per gallon than their unbranded competitors. Experts suggested lawmakers look into why the state doesn’t have as many non-brand gas stations.

Just prior to Newsom announcing his windfall tax proposal, Consumer Watchdog asked him to call a special session of the California legislature to address the unprecedented, nearly $2 per gallon extra Californians are paying at the pump compared to other states.

The consumer group pointed out that California’s environmental regulation and extra taxes add only about 60 cents to the price at the pump.  The US Energy Information Administration data just released shows Californians paying $5.61 per gallon and US drivers paying $3.71 per gallon.

Newsom signed a new law, SB 1322, that will require oil refiners to post their monthly profits per gallon starting in January.  Consumer Watchdog said the Governor and legislature should not wait until the data is available to enact a windfall profits tax

The group pointed to second quarter profits reports provided to oil refiner investors showing the companies are making unprecedented profits of more than $1 per gallon in the Western region off Californians’ pain at the pump.

“The oil industry has declared war on the state of California and is raising prices unreasonably to punish the public and lawmakers for enacting tough new laws,” said Jamie Court, president of Consumer Watchdog. “The state must fight back with a new law to take back windfall profits that the companies are almost certainly making from their $2 per gallon surcharge on California drivers. The oil refiners don’t have added production costs. They are simply charging more because they can and want to.  That’s gouging.”

The oil industry is unhappy with new environmental laws and is currently challenging via referendum a new law requiring that there be no new wells within 3,200 feet of communities.  These laws have no impact on the price at the pump.  Oil refiners, however, seem to be making a statement about their discontent by charging Californians two bucks more per gallon as punishment, Consumer Watchdog said.

“Oil refiners are trying to rake in as much profits as they can now before SB 1322 takes effect and they have to report their per gallon profits publicly in January,” said Court. “The legislature shouldn’t wait until January to enact a law that holds the refiners accountable for ill-gotten gain. The Governor should call the legislature into special session to decide whether to enact a windfall profits tax that takes back excessive profits for the state immediately. They need to send a message that this level of pig-at-the-trough price gouging is simply unacceptable.”

It’s not only unacceptable but it’s illegal, and the law needs to be fully enforced. As in back-breaking fines and jail.

Jim Shields is the Mendocino County Observer’s editor and publisher, [email protected], the long-time district manager of the Laytonville County Water District, and is also chairman of the Laytonville Area Municipal Advisory Council. Listen to his radio program “This and That” every Saturday at noon on KPFN 105.1 FM, also streamed live:

Consumer Watchdog
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