The class action lawsuit argues that five gasoline producers preemptively raised prices before changes to the low-carbon fuel standard kicked in.
By Alex Nieves, POLITICO
California consumer attorneys have filed a class-action lawsuit against five major oil companies, claiming that they illegally hiked gas prices ahead of new fuel regulations taking effect.
What happened: Consumer Watchdog and two private law firms filed a complaint in the U.S. District Court for the Northern District of California last month, arguing that drivers overpaid for gasoline after fuel suppliers preemptively raised prices before updates to the state’s low-carbon fuel standard kicked in on July 1.
The move comes after the California Air Resources Board released data in July — first reported by POLITICO — that showed state gas prices had jumped roughly 5-8 cents per gallon starting in January, as companies began incorporating rules designed to reduce the carbon intensity of transportation fuels into their pricing ahead of time. That resulted in consumers paying over $300 million in unnecessary charges, according to CARB’s calculations.
The lawsuit calls for the companies — Chevron, Valero, PBF Energy, Marathon Petroleum and Phillips 66 — to pay roughly $350 million in restitution and seeks an independent audit of their past LCFS cost reporting.
“This hidden overcharge implemented by each defendant has added hundreds of millions of dollars to the cost of gasoline for California consumers, in direct violation of antitrust and California consumer protection laws,” the complaint argues.
Why it matters: The lawsuit marks the latest twist in a closely watched debate over how much the board’s amendments to the LCFS program would raise gasoline prices. The fight largely centered around an initial CARB estimate — offered in September 2023 — that the new rules could raise prices at the pump by 47 cents per gallon. The agency eventually walked back that report and declined to offer a new figure.
The LCFS program requires producers of high-carbon fuels to purchase credits from companies that develop cleaner options — like electricity, hydrogen and biofuels — once they exceed annual carbon-intensity targets.
More details: The lawsuit argues that the hike in gas prices before July 1 is part of a larger pattern of market manipulation in California. The complaint points to an October report from the state’s Division of Petroleum Market Oversight that found California drivers have faced a 41-cent surcharge that isn’t linked to California’s regulatory scheme or operating expenses, costing drivers roughly $59 billion between 2015 and 2024.
“Thus, Defendants’ phantom LCFS surcharge is just one aspect of the long-running unjustified price inflation Defendants have imposed on California consumers,” the complaint states.
Spokespeople for the five companies didn’t immediately respond to requests for comment.
What’s next: District Judge Trina Thompson has set an initial hearing to establish the schedule and deadlines in the case on Feb. 26.