Santa Monica, CA – Valero reported $294 million in second quarter California profits, more than ten times higher than the same quarter last year when the Texas refiner made $24 million. The most staggering increase came in per barrel profits. Last year the company made just 99 cents per barrel in California. This year that number reached $11.23 per barrel.
“Californians know they are being gouged at the pump and these windfall profits are an offense to the hard working people of this state.” Consumer Watchdog’s Cody Rosenfield stated.
Over the last few months, Consumer Watchdog has chronicled exports leaving the state to Mexico. Executives on the earnings call this morning acknowledged the exports that they have refused to admit to the news media. Valero executive Gary Simmons stated, “Some of these export markets in particular, Mexico, we are seeing a lot of good demand from Mexico for gasoline.”
Despite claims that production was down across the state, Valero increased the amount of barrels it refined per day in California from 266,000 last year to 288,000 in 2015. Across the nation the company doubled operating earnings to $2.2 billion.
In California, four oil refiners control 78% of the state’s refining capacity, creating an oligopoly. In a competitive market, when profits skyrocket, a competitor will offer lower prices and steal market share from other companies that charge too much. In this state, when one refinery has a problem, all other companies raise their prices across the board.
“In California the cozy relationship between the refining companies means they don’t undercut each others' prices,” said advocate Liza Tucker. "This reflects a market that is not competitive and doesn’t benefit consumers the way a healthy market would.”
Valero executives stated on the earnings call that the appeal of the West Coast market hinged on whether refineries continued to have problems.
Exports on top of those problems have helped refiners in California. The profit report verifies California Energy Commission data publicized by Consumer Watchdog that showed that refiners were receiving more money per gallon of gasoline than ever before. The state data showed that refiners were getting an all-time record of $1.17 per gallon of gasoline, almost triple their usual returns of 45 cents per gallon. The cost of running refinery operations is included in that figure and not broken out. â€¨â€¨
Consumer Watchdog has analyzed California’s gasoline market and found multiple strategies that oil refiners use to create price spikes. Findings can be found in our reports:â€¨
1) Companies use the price of gasoline and political tactics to falsely attack environmental regulationsâ€¨ – Report: Pump Jacking California’s Climate Protection: The threat of Oil Industry Influence & Market Manipulation –http://www.consumerwatchdog.org/resources/OilIndustryManipulationReport.pdfâ€¨â€¨
2) In December of 2014 oil companies exported more gasoline from the West Coast to foreign nations than ever in history – â€¨Release: http://www.consumerwatchdog.org/newsrelease/west-coast-oil-companies-exported-record-amount-gasoline-foreign-nations-month-%E2%80%9Csupply-sâ€¨â€¨
3) Price spikes over the last fifteen years have occurred due to perpetual low inventories kept by oil companies in the state. Prices especially increase when refiner’s maintenance schedules overlapâ€¨ – Report: Price Spiked: How Oil Refiners Gouge Californians on Their Gasoline – http://www.consumerwatchdog.org/resources/PriceSpiked.pdfâ€¨â€¨
4) Oil refiners made huge profits in California during the first quarter of 2015 despite claims that the industry was struggling and prices had to rise due to costs – â€¨Report: Refining Profits: How Californians Get Fleeced at the Pump – â€¨http://www.consumerwatchdog.org/resources/refiningprofits.pdfâ€¨â€¨
5) Oil companies charged their own branded gas stations 30 cents more per gallon than independent stations on the wholesale market for gasolineâ€¨ – Release: http://www.consumerwatchdog.org/newsrelease/consumer-watchdog-presents-evidence-attorney-general-state-oil-refiners%E2%80%99-unprecedented-m
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