A nonprofit group that has repeatedly accused the oil industry of collusion to keep gasoline prices high in California reiterated that charge Thursday, pointing to new earnings reports, price data and remarks made by PBF Energy, the owner of the Torrance refinery.
Jamie Court, president of Consumer Watchdog, said the Santa Monica-based group would provide the evidence it collected to the state Attorney General’s Office, which is investigating possible manipulation of California pump prices.
“This is the Golden State gouge,” Court said. “We have significant new evidence that refiners are using their market power to keep prices artificially high.”
This time around, the group noted that the only two companies that separately report profits from their refining operations in California are earning hundreds of millions of dollars despite the gasoline glut that has devastated the industry, leading to low pump prices, layoffs and the bankruptcies of some companies.
Tesoro, which operates the largest refinery on the West Coast in Wilmington, on Thursday reported $332 million in second-quarter profits, the nonprofit said. Valero, which also operates a refinery in Wilmington, had earlier reported $141 million in profits from its refining operations, nearly triple its average quarterly profit of $57 million.
Consumer Watchdog contended that’s because pump prices are artificially high in the state.
Drivers are paying $1.58 more per gallon than on the wholesale market where refiners buy and sell to one another. Usually, pump prices are about 88 cents more than on the spot market, the group said.
Meanwhile, refiners are paying $1.17 on the wholesale market in the state, the lowest price in the nation and 18 cents less than in Chicago. Yet pump prices are 45 cents per gallon higher here than in Chicago.
“Supply and demand is completely out of whack,” Court said.
Oil companies usually justify the higher pump prices motorists pay here by pointing to the additional environmental regulations that make gasoline production more expensive and the fact the market is “isolated” because of the lack of pipelines that connect with the rest of the U.S.
PBF Energy remarks
To back up its argument that oil refiners are engaging in price fixing, the group pointed to two comments made by PBF Energy CEO Tom Nimbley last week during a conference call with analysts.
“I said this to the people of Torrance — the (refinery) hardware is unbelievably good,” he said. “Exxon spent a ton of money fixing things that they did (that) they obviously had problems with. As I look at Torrance, this is a facility that has somewhat (been) under black clouds for a period of time.
“I personally believe Exxon probably had made (a) decision that they were not going to run a single refinery operation in the state of California,” Nimbley added.
Consumer Watchdog interpreted that to suggest ExxonMobil intentionally didn’t fix problems at the refinery to ensure it wasn’t running the plant at capacity, thereby keeping gasoline prices high.
The group also noted that Nimbley described the Torrance refinery as a “gasoline machine,” and said “bottom line is there’s too much clean product and the only way you can solve that problem is reducing the amount of clean product that you can make.”
“Those two quotes are smoking guns that suggest refiners are talking and colluding to keep California clean-burning fuel in short supply to keep prices up,” adding that the group feared PBF would start making products to export and cut back on refining crude oil for the state market.
“We have problems not with production costs or an isolated market, but with refiners who don’t want to operate their refineries at full tilt,” Court added.
PBF Energy response
Jeffrey Dill, PBF Energy’s president of its West Coast operations, said the group had deliberately misinterpreted Nimbley’s comments to support its own agenda.
“I have no idea whatsoever why any company would intentionally keep an asset idle — that serves no purpose whatsoever,” he said. “To say that ExxonMobil was intentionally keeping the refinery shut down is ludicrous. ExxonMobil spent a good deal of money and worked incredibly hard to get the refinery back on line as quickly as it did.”
Government regulators have charged that ExxonMobil’s deliberate failure to fix equipment despite knowing it could lead to a life-threatening blast caused the February 2015 explosion that crippled the plant’s ability to refine gasoline and sent pump prices soaring.
Dill also rejected the assertion the company might cut gasoline production to maintain pump prices.
“We are absolutely maximizing production,” he said. “That comment was not directed at California. He’s talking about other regions of the country in that part of the conference call.
“There is throughout industry the law of supply and demand,” Dill added. “If there’s too much supply and not enough demand, prices collapse.”