By Tom Elias, VENTURA COUNTY STAR
November 28, 2022
For many months, there has been little or no doubt that California's five big gasoline refiners were gouging most of this state’s drivers. The question now is how much of a windfall profit tax to assess and whether to send that money directly back to people who fill their tanks regularly.
Electric car drivers, for one example, probably don’t deserve any of the projected return of cash contemplated in a special session of the Legislature called by Gov. Gavin Newsom.
Newsom’s move marks the first time any California governor has actually tried to stop the refiners from cheating Californians at the pump.
Sure, there are still folks who take the side of the oil companies, claiming things like California’s high gas taxes, old and decrepit refineries that need frequent repairs and special seasonal smog-busting gas formulations are the reason for the sudden price increases that still afflict the state 10 months after February’s sudden $2-plus price increases.
Here’s the problem with that thinking: All those factors existed long before February and were already factored for years into the prices that prevailed before, so they could not have played a role in this year’s huge price increase, no matter what refiners might say.
This realization is the why the Legislature last fall overwhelmingly passed a new law that will force refiners to report their per-gallon gasoline profits starting at the end of January.
For now, though, it is not all that difficult to calculate the likely profit margins for the big refiners that make 97% of California gas: Marathon, Valero, Phillips 66, Chevron and PBF.
“The proof of the gouging always comes out in the companies’ profit reports,” said Jamie Court, president of Consumer Watchdog, which has emerged as this state’s most active consumer advocacy organization.
The group’s analyses have rarely proven wrong over the more than 30 years since it made big headlines for writing and then running the campaign for the 1988 Proposition 103, which lowered California insurance rates, made the insurance commissioner an elected official and has so far saved consumers several billion dollars.
Over the last 20 years, says the group’s analysis of the most recent profit statements from the big refiners and their parent oil companies, California refiners averaged about 30 cents per gallon in profits and rarely cleared more than 50 cents per gallon, or about $21 per barrel. “Now,” says Court, “they are raking in more than $1 per gallon in profit. These windfall profits must be rebated to California drivers to stop oil refiners’ price gouging.
“The reason California have paid $2.50 per gallon more for their gasoline is clearly price gouging.”
Valero’s third quarter report revealed a lot about this. The Texas company’s net income was $2.8 billion for the third quarter of this year, ending Sept. 30. This more than quintupled the $463 million reported for the same quarter last year. Valero’s California profits were also higher than in any of its other regions around the nation and the world.
“The oil companies must again treat Californians like customers rather than ATMs,” said Court.
Now it’s up to state legislators to decide how much of the refiners’ new income is ordinary profit and how much is in the windfall category, the result of corporate collusion or taking advantage of artificially created shortages.
Consumer Watchdog analysts suggest that if a 50-cent per gallon windfall profit tax were applied to the four in-state refiners that report results quarterly (Chevron does it annually), those four would owe motorists more than $930 million for excess profits in the first half of this year.
Add in Chevron, which makes 29% of California gas, and the return to buyers would be well over $1 billion. Returning that would be one way to fight the inflation that has been fueled to a large degree by refiners.
But until they passed the law demanding monthly per-gallon profit reports, legislators had always handled the oil companies with kid gloves. Now those gloves are off. We will know soon if the legislators really were serious, or whether they will quickly revert to being oil company lapdogs.