By J.W. August
A version of this article was originally published in Times of San Diego, a member of the San Diego Online News Association.
Photo: Oil refinery; CC by SA via Bing
March 15, 2022 (San Diego) -- Just how much do oil refiners make in California? Only the owners of the five refineries in the state know. They control 96% of gasoline made in California, according to the California Energy Commission.
But soon every driver in the state can find out how much refineries are making if SB 1322, the California Oil Refinery Cost Disclosure Act, gains traction in Sacramento.
With California gas prices topping $5 to $7 per gallon in March, California State Senator Ben Allen (D-Los Angeles) joined with consumer advocates Friday to announce new legislation that will require oil refiners to disclose monthly the price they pay for crude oil and the profit margins they make on the gasoline they refine and sell.
SenatorAllen says the bill would require the refineries to report their profits every month from each gallon they sell. It’s time for transparency, according to Allen, because "costs at the pump in California are inflated compared to neighboring states" but there is a "big black hole when it comes to data with relation to the oil and gas industry, how they price gas at the pump," and the industry prefers that it stay that way.
It's worth noting that a state investigation into gas pricing found in October, 2019 that retailers in California were charging more than other states for gasoline. A report by the California Energy Commission concluded that the primary cause of the residual price increase is simply that California’s retail gasoline outlets are charging higher prices than those in other states, resulting in “California gasoline consumers paying an estimated additional $1.5 billion in 2018 and $11.6 billion over the last five years.”
A request by Governor Gavin Newsom for the Attorney General’s Office to investigate the issue has resulted in no action by that office. As the report noted. in this state the cost of gas is unregulated, so the price is whatever consumers are willing to pay.
Joining the Senator at a Friday press conference was long-time consumer activist Jamie Court, president of Consumer WatchDog. "California has been an ATM for oil refiners for too long" says Court. "The pain at the pump is real." Court adds, "When truck drivers have to fill up at $5 to $7 a gallon, we all pay more for the goods they are carrying to stores."
According to Court, consumers should know that the fossil fuel industry in California "isn't paying what they say they are paying" for gas. “Its time to pull the curtain back," he says.
The Western States Petroleum Association has faced off with Court and his organization before. Kevin Slagle, speaking for the association, dismisses Consumer Watchdog claims as "theatrics." Slagle says the major reason for the cost of gas at the pump “is the cost of the crude." As to what the future holds, Slater says "experts recognize that unforeseen events – as we are seeing in Ukraine and around the world today – can have significant impacts."
But Court says the reality of the California market its all smoke and mirrors. "Every time crude oil costs go up, gas prices go up. But oil companies don’t buy crude oil that day or they don’t buy it on the spot market; they buy crude oil on long-term contracts. They are paying a lot less then what the world price is now," he points out.
Contracts have a nine-year maximum term and according to the commodities market, you can buy oil for delivery in 2031 at $63.82 a barrel, far less than today’s price according to the Wall Street Journal: https://www.wsj.com/market-data/quotes/futures/CLF31
The “big five” oil refinery companies are Chevron, Marathon, PBF Energy, Phillips 66 and Valero. The Watchdog organization claims the oil refiners sell gasoline to their own branded outlets for more money, 30 to 40 cents a gallon above the price they sell the same gas to Costco and United Oil. That extra profit tacked onto their own retailers is all profit, says Court.
Slagle with the Petroleum Association blames California regulations and taxes.
"California’s mandated fuel blend requirements, increasingly high state taxes, and regulations such as cap-and-trade and the Low Carbon Fuel Standard impact" the price, Slagle said. The Association website says it represents the companies doing the bulk of petroleum "exploration, production, refining, transportation and marketing" in California, Arizona, Oregon, Hawaii, Nevada and Washington."
You can find them at https://www.wspa.org/.
Jenn Engstrom, the director of CAL-PIRG, a consumer advocacy group said at the conference, "Oil companies will blame (increased costs) on environmental protection" but that’s only a small part of costs Californians pay at the pump. She says, "Especially now when there is so much fluctuation with gas prices, its important we have better transparency so we can call out oil refineries if they needlessly raise prices.”
Sen. Allen concluded by saying, "We ask the oil companies on behalf of California drivers: Let’s end the games of smoke and mirrors. Open your books and show the public your true costs of doing business.”
His bill moves to the Senates Committee on Energy, Utilities and Communications which is chaired by San Diego Senator Ben Hueso.
If interested in the issue you can reach the Senator’s office in Chula Vista: 303 H Street., Suite 200, Chula Vista, CA 91910. Phone: (619) 409-7690.
His 40-year career includes many honors, notably 35 Emmy awards from the National Academy of Television Arts and Sciences, the National Press Club award for consumer reporting, the Freedom Foundation award for coverage of hate groups along the border, the National Society of Professional Journalists’ Sunshine Award for fostering open government in San Diego, and the Investigative Reporters and Editors award for outstanding investigative reporting on illegal waste dumping.
August is past president of the Society of Professional Journalist’ San Diego Chapter, as well as past president of Californians Aware, a public interest group devoted to helping the press and public hold public officials accountable for their actions. He is also an adjunct professor at Point Loma Nazarene University, teaching investigative skills and long-form storytelling to aspiring future journalists.