San Francisco, CA — Consumer Watchdog published a new report today, “Refining Profits: How Californians Get Fleeced At The Pump,” showing that oil refiners have made large profits from gasoline price spikes recently and over the last decade. The report reviewed ten years of publicly available profit data.
“The proof’s in the oil companies’ own profit reports,” said Jamie Court, president of Consumer Watchdog. “California drivers are getting gouged and California refineries are getting richer every time a refinery goes down and gasoline prices go up.”
First quarter profit reports from the state’s oil refiners show that recent gasoline price spikes, precipitated by refinery outages that started in February, translated to big profits for two of the state’s major oil refiners that specifically report their California refining data.
Valero, the state’s fourth largest refiner, nearly quadrupled its typical quarterly profits in the first quarter of 2015 as gasoline prices began to spike. Over the last five years, average quarterly California refinery profit for Valero was $25 million. In Quarter 1 of 2015 Valero’s profit was $82 million.
Tesoro, the state’s second biggest refiner which shut down its Martinez refinery in early February and had to buy its gasoline on the spot market to fulfill contracts, still made a first quarter 2015 profit of $119 million.
California gasoline prices Monday were $3.71 per gallon, $1.09 above US prices, and up 31cents in a week.
Consumer Watchdog analyzed Tesoro and Valero profit and production data from the last decade and found that refiner profits were twice as high as the refiners’ average quarterly profit in quarters where gasoline prices spiked.
The analysis, which can be read online at http://consumerwatchdog.org/resources/refiningprofits.pdf, shows:
• Over the last ten years, price spikes have corresponded with huge profits for Tesoro and Valero.
• Valero’s operating income (refining profit after expenses) per barrel increased in the first quarter of 2015 by a whopping $1.55 per barrel, leading to $82 million in California refining profit for the company, the best 1st quarter operating income since 2009.
• Valero has averaged $100 million in profit per quarter over the last ten years. During seven quarters with spiking gas prices, the refiner averaged $220 million per quarter – an increase of 120%. Price spikes increased Tesoro average quarterly operating income of $142 million per quarter up to an average of $231 million.
• Tesoro, despite claiming a labor dispute was crippling their operations, increased its profits per barrel by 20 cents in the first quarter, adding to California’s huge price spikes.
• Gasoline consumption has dropped by 8 percent since 2005, but the price of gas in 2014 averaged 51% higher than in 2005.
Consumer Watchdog reiterated its call for greater state regulation of oil refiners.
“Their incentive is to keep the current system of low inventories, downed refineries and little transparency in place,” the report concluded. “Governmental intervention is the only hope for changing a system that’s been tilted against drivers for the last decade.”
Consumer Watchdog called on the California legislature to take the following steps to benefit consumers:
• Create greater transparency and accountability for refiners. California should publish refinery maintenance schedules, outages, and accidents in real time, and ask refiners to publicly disclose weekly supply figures.
• The state should require refiners to keep another week’s worth of gas supply on hand so that it matches national days of supply.
• The state should accelerate the transition to alternative transportation technologies such as electric vehicles.
The analysis did not include Chevron, which does not give California specific data. However, Chevron, California’s largest refiner, saw its refining profits double in the first quarter of 2015 compared to the same quarter last year. Chevron General Manager Jeff Gustavson admitted on a recent call with investors that the company profited from California’s market failings, “Margins increased earnings by $435 million driven by unplanned industry downtime and tight product supply on the US West Coast.”
Report co-author Cody Rosenfield responded that, “When a company like Chevron admits that low inventories and refinery outrages make the company a killing, it’s going to take the government to intervene in order to rein in this out-of-control market.”
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