By Tom Elias, VENTURA COUNTY STAR
California’s wealthy cadre of gasoline gougers were on a major, lucrative roll. Every few months, they added another big victory over consumerist forces seeking to limit or somehow claw back their gains of the last 14 months.
That will probably now end.
The win streak for the state’s five big refiners — who make 97% of all gasoline in California — began in February 2022, when Russian President Vladimir Putin ordered troops into Ukraine for what he expected would be a quick conquest of territory once held by the Soviet Union.
Things have not gone quickly or easily for Putin, now wanted for war crimes by the International Criminal Court, based in the Netherlands.
Immediately on news of the invasion and President Biden’s cutoff of Russian oil imports, gasoline prices shot up more than $2.50 per gallon in California, even though Russian oil accounted for under 3% of crude oil refined here.
This was pure price gouging, defined as using events for a pretext to raise prices when those events have little or nothing to do with supplies on hand or expected. Nor was there any perceptible increase in demand for gasoline.
So the first win for California refiners came when no one rolled back their price increases. The scope of this victory for the refiners became known when they filed quarterly and annual profit statements. All five big California refiners (Marathon, Valero, Phillips 66, Chevron and PBF) reported record returns both for the first two quarters of last year, and also for the entire year. Several more than tripled their best previous returns.
That sent their stock prices soaring, which led to the gougers’ next big win. That came when executives and other oil company insiders sold hundreds of millions of dollars worth of stock at big profits.
Just 60 executives and directors at the five main refiners took out more than $240 million. The Slim family of Mexico, owners of more than 10% of PBF stock, sold off $350 million of their holdings. At Chevron, executives and directors cashed out $150 million. PBF executives sold off $12 million in securities, Marathon executives and directors took home $48 million and Valero officials $24 million, while the CEO of Phillips 66 cashed out a “measly” $3 million, according to the Consumer Watchdog advocacy group.
It was the biggest insider selloff of oil company stock in more than a decade, opportunistically aiming to milk the gas price situation.
In response to these actions, Gov. Gavin Newsom ordered a special session of the Legislature to consider a windfall profits tax or other limits on the oil companies’ ability to raise prices suddenly and with little or no justification.
That set up the refiners’ third victory of the last 14 months, as the special session appeared to fizzle out in mid-March.
It was clear from the first moment of Newsom’s special session that no Republican lawmaker would vote to OK any kind of price limit on gasoline. Democrats then began to defect, under pressure from oil industry lobbyists and oil company campaign donors, who claimed any profit limit at all would interfere with their efforts to develop new energy sources. The industry win came when Newsom gave up on assessing any windfall profit tax or fee.
But Newsom then changed tacks, and now the refiners’ win streak appears almost over. He worked a deal with legislative leaders to create a new office within the Energy Commission, whose sole task would be holding refining companies accountable when they price gouge. The new office quickly passed muster in the state Senate and likely will soon be authorized to levy penalties on refiners when their profits become excessive by historical industry standards.
It’s what Newsom originally wanted, but with a different structure. Only time will tell if it helps consumers while leaving enough incentive in place to assure adequate supplies.
Of course, oil company lobbyists immediately went to work against this plan, claiming it would create “a new, unaccountable bureaucracy (imposing) hidden taxes on oil.”
This time they appear to be failing, so the likelihood is great that the refiners’ win streak will end soon.