Consumer Watchdog Reports On Historic Gap Between Wholesale Prices and Retail Prices At Gas Pump To Expose California Gas Price Manipulation To Energy Commission

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Sacramento, CA — Consumer Watchdog testified Tuesday that the gap between the retail price paid at the California gas pump and the wholesale price of gas traded within the oil industry has never been greater – signaling gouging of the consumer.

Consumer Watchdog presented evidence before the California Energy Commission's Petroleum Market Advisory Committee (PMAC) that there's never been a greater gap between wholesale and retail gasoline prices in the state of California as during August and September, as well as through the Spring of 2015. Analysis of state and industry data shows that California’s oil traders are buying finished gasoline at $1.20 less per gallon than they’re selling it at the pump, which is an unprecedented margin. Typically, the wholesale price has averaged 77 cents per gallon since 2000. View the presentation here:

“All levels of the oil industry are raking it in while consumers are shelling it out to the tune of $6 billion more than US drivers spent since February,” said Jamie Court, president of Consumer Watchdog. “The lack of competition in the market is the result of four refiners controlling 78% of the state’s supply and these companies using their market power to drive up prices and drive away competition.”

Consumer Watchdog testified California’s gasoline price spikes were also partially the result of chronically low inventories, which were created by the industry itself in order to drive up prices. However, even as inventories evened out during certain periods, oil refiners used their contractual leverage over their branded stations to keep gasoline prices artificially high.  

Consumer Watchdog’s analysis found:

•    The historic retail/wholesale gap reflects a new predatory pricing strategy by California’s oil refiners, who are able to set the retail price through their contractual power over 85% of California’s gas stations, their branded stations.   

•    In 2015 there was an unprecedented gap between branded and unbranded wholesale prices at the “rack.” This means oil refiners were charging the small independent wholesale market 30 to 35 cents less for gasoline, the competitive prices, and keeping gasoline prices artificially high at their branded stations, which represent the lion share of the market.  This is an unprecedented tactic by oil refiners in 2015, previously the branded-unbranded gap had averaged only 4 cents since 2000.

•    Unbranded station margins are higher than ever before because the independent stations are paying closer to the true price of gasoline, but only having to undercut branded station prices by a few pennies, thus are able to sustain higher profits.  Since the sector is only 15% of the market, it has a negligible impact on retail prices.

•    An analysis by Consumer Watchdog shows that Tesoro and Valero’s profits soared as the gaps between branded and unbranded stations soared during the Spring and Summer.  

•    An analysis of profit reports and state data showed that Valero and Tesoro both saw unprecedented profit bumps as inventories and production fell as well – showing the incentive to keep the state running on empty.

The Western States Petroleum Association refused to answer questions for CEC and sent a threatening letter from its law firm warning about industry data becoming public Friday. Read the letter here:

Consumer Watchdog called on state leaders to subpoena oil industry executives who have consistently refused to testify about California's 2015 gas price spike. Read that letter here:

Consumer Watchdog researcher Cody Rosenfield stated, “The industry wants to keep us in the dark, which is why we need more sunlight to make the market more competitive.”

At the hearing, Consumer Watchdog proposed a solution to the state’s gasoline problem. The organization called for increased transparency. Consumer Watchdog stated that the California Energy Commission should receive & publish the following data:

–    Prices along the entire supply chain

–    Refinery schedules & outages

–    California refining profits

–    Detailed import & export data

Consumer Watchdog also proposed a system for requiring refiners to keep adequate supply of gasoline: that the state should require refiners to submit a plan to the CEC laying out how they plan to responsibly hold gasoline in case of a supply disruption or planned maintenance. The CEC should have the ability to accept or deny the plan.

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Jamie Court
Jamie Court
Consumer Watchdog's President and Chairman of the Board is an award-winning and nationally recognized consumer advocate. The author of three books, he has led dozens of campaigns to reform insurance companies, financial institutions, energy companies, political accountability and health care companies.

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