By JW August, TIMES OF SAN DIEGO
November 21, 2021
You might be asking yourself, why are we paying on average $4.70 for a gallon of gasoline in California, while the cost for the rest of the country is more than a dollar less?
The debate over the Golden State's much higher fuel prices has been going on for years, and a primary reason for the pricier gasoline these days, maintains Jamie Court of Los Angeles-based Consumer Watchdog, is "gouging by the fiver big refineries in California."
A year ago San Diegans were paying $3.15 a gallon for regular. Now, the price is nearing a decade-old record.
We have been hit with a double whammy. Demand for fuel has increased since we exited the worst of the pandemic, and Saudi Arabia is punishing the United States for getting tough over the murder of a Saudi journalist, experts say.
No matter the causes, Californians are still paying more than anyone in the country. It should be noted that the price of gasoline in the state is unregulated.
California shares some blame for these cost differences, says Court.
"We've allowed these companies to consolidate power in so few hands that there's so little competition."
According to the most recent government data from the California Energy Commission, the top five refiners control more than 96% of the market.
These firms also own 70% of the gas stations in Southern California, says Court.
The Western States Petroleum Association is the oil industry's top lobbyist, representing 25 companies. When it has been asked about the claims of gouging, its public relations firm has said, "WSPA has no specific information about supply chain disruptions or pricing behavior unique to specific members or market participants,"
According to a state investigation and Consumer Watchdog, the "gouge" began after a 2015 explosion of the Exxon refinery in Torrance, which produced 10% of all the refined gas in the state. California residents began paying as much as $1.50 more than drivers in the U.S. for their gasoline.
The state's attorney general has sued some of the smaller suppliers, companies based in Houston and South Korea, for "unfair and fraudulent" pricing.
But the "gouging" hasn't stopped, according to an investigation by the California Energy Commission in 2019. Investigations have found the refineries took advantage of the reduced supplies and began to charge their own branded stations 30 to 40 cents a gallon more than what they sold to independents.
That's why the same gas can cost less at smaller stations. That report added that "there is no apparent difference in the quality of gasoline at retail outlets in the state."
The report also concluded that higher-price brands such as 76, Chevron and Shell have "increased those margins far beyond their competitors."
When Gov. Gavin Newsom learned of this he asked the attorney general at that time to investigate the oil companies. He said "there is no evidence" to justify the gouging by the companies, saying an investigation is needed.
The current Attorney General's Office under Rob Bonta was asked if anything has been done to date, and it responded, "To protect its integrity, we are unable to comment on, even to confirm or deny, a potential or ongoing investigation."
Even as the cost of crude goes up, it's not costing the refineries more because they have long-term contracts for delivery from the tankers bringing the oil into the state, Court says.
But when the prices go up, it's their opportunity to raise costs in California, Court said. The state doesn't produce much of its own oil for use, "it's really heavy crude, not the kind used to produce gasoline" used in California, he explained.
The state has no pipelines coming in with fuel, only a pipeline going out — the Cavnev pipeline — which begins in Los Angeles and runs to Las Vegas.
Even if the cost of the imported crude drops in the future, Court warns not to expect quick relief. When gas prices go up, he said, "they go up like a rocket, but when they come down, they come down like a feather."
He notes that with "other commodities, the price goes up when it becomes scarce, when you flood the market, the price comes down." Not so gas, particularly in California.
Court says his organization is considering pushing for a new law to increase transparency by the oil companies by requiring them to publish their quarterly profits made in California. He believes it's doable given that the Democrats, who control the state's governorship and Legislature, "are turning down their money" and thus are more willing to create a new law.
JW August is a San Diego-based broadcast and digital journalist.