Santa Monica, CA – Advocates from Consumer Watchdog testified today at the California Energy Commission’s Petroleum Market Advisory Committee (PMAC) that California drivers are still paying 50 cents more than US drivers as oil refiners continue to reap double their historical profits.
The nonprofit public interest group called on PMAC – the committee set up by Governor Brown to analyze California’s gasoline price spikes – to make recommendations to the legislature and governor that oil refiners open their books and be forced to disclose pricing strategies and that regulators better police the highly concentrated market.
“The four oil refiners that control 78% of the market continue to cut back on production, as they told their investors they would do, in order to keep Californians paying 30 cents more than they should per gallon,” said Jamie Court, president of Consumer Watchdog.
Consumer Watchdog pointed to a statement by PBF CEO Tom Nimbley on July 29th that, “there’s too much clean product and the only way you can solve that problem is reducing the amount of clean product that you make.” Clean product refers to gasoline and other refined products.
The consumer group’s presentation showed that in October, oil companies in California were using refineries at the lowest rate in history – despite drivers still spending over 50 cents more than the national average per gallon.
While refiners paid roughly the same per gallon to each other in California on the wholesale or “spot market” for gasoline as they did in other regions, they were charging consumers an extra 50 cents per gallon, down from 70 cents per gallon after the reopening of the downed Torrance refinery, which had been off line for about one year and half.
Consumer Watchdog pointed to state figures that show while oil refiners historically have made 46 cents per gallon (including cost & profit), in October 2016 it was nearly double, at 80 cents per gallon. Station owners are making 20 cents more than their historical averages (38 cents per gallon vs 16 cents per gallon).
“Everybody’s getting rich because they are taking drivers to the poorhouse,” said Cody Rosenfield, a researcher for Consumer Watchdog. “It’s high time the state stepped up with some reforms.”
The Consumer Watchdog analysis found that the primary cause of the increased prices is market control by just a few oil refiners in the state. Chevron & Tesoro control more than 55% of the state’s refining capacity. This market control reaches down to gas stations, where roughly 80% of the gas stations in Southern California are branded stations and the price is controlled by the major refiners.
At the last meeting in August, oil trading firm Vitol criticized ExxonMobil’s lack of transparency after the outage at their Torrance refinery caused gas prices to reach almost $1.50 over the rest of the nation at certain points in 2015. The committee members decided that the next meeting should focus on retail price manipulation, and market control as the potential cause of routinely higher gas prices in California. Today’s meeting will further dive into this topic.
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