HomestoryOil Companies › $1.2 Billion: California Motorists Spent Record Amount On Gas In July During Price Spike

News Story

$1.2 Billion: California Motorists Spent Record Amount On Gas In July During Price Spike


As gas prices slowly drop across the region, California motorists can take a sigh of relief after spending $1.2 billion more on gas than the rest of the nation in July, while refineries brought in record profits, according to Consumer Watchdog.

The group, a nonprofit that advocates on behalf of consumer interests, said California drivers spent $201 more on gas last month than people in the rest of the country.

“This is the largest price differential and overpayment California has ever had,” said Jamie Court, the group’s president. “The reality is the second quarter profit reports for the major refineries show huge profits from the refiner businesses in the West. Tesoro reported its largest-ever quarter profits, and Valero had massive profits in California and Chevron had huge national earnings as well.”

In July, Californians saw prices jump around 50 cents in a matter of days. The gas price ultimately would leap 78 cents in less than a month, mostly due to short supply and refinery issues. In Orange County on Thursday, the average price of gasoline had decreased to $3.89 a gallon, a 21-cent decrease from last week, but still 39 cents more than a month ago.

Consumer Watchdog found that as consumers were paying more for their gas, refiners were reporting record profits of $1.61 per gallon, triple the 15-year average of 48 cents per gallon.

Chevron made $731 million in profit from its U.S. operations during the second quarter of this year, a more than 40 percent increase from the second quarter of last year, according to the company’s earnings report.

“Tight product supply, primarily on the West Coast, boosted refining and marketing margins and increased earnings by $165 million between quarters,” said Chevron executive Frank Mount.

Valero’s California profits for the quarter were 11 times higher during the second quarter of this year, when compared to the second quarter of last year.

Tesoro reported second quarter net earnings of $582 million, up from $224 million during the same quarter last year.

“This is proof of price gouging,” Court said. “Executives acknowledge that it was tight supply driving these profits.”

Marie Montgomery, spokeswoman at the Automobile Club of Southern California, said refineries were seeing huge profits because the Exxon Mobil facility in Torrance was down for repairs. The refinery shut in February after an explosion and is still offline. It is expected to re-open later this year.

“They benefited from Exxon Mobil’s misfortune. They could produce virtually no gasoline, and the other refineries benefited from that,” Montgomery said.

Exxon Mobil reported a 52 percent decrease in earnings from the second quarter of this year compared to last year.

Alison Mac, a petroleum analyst at GasBuddy, said down refineries and low crude oil prices both led to record earnings for refineries.

“The gasoline that was being produced was in high demand and oil prices were very low so . . . they were able to charge more for the gasoline,” she said.

Tupper Hull, vice president of strategic communications at the Western States Petroleum Association, said refiners had good quarters mainly because of the low oil prices.

“They are in a period where the raw material needed to make their product is quite low,” Hull said. “There is not necessarily a connection between what we see at the pump and what companies are earning at their bottom line. It’s a misconception that there’s a direct relation.”

Consumer Watchdog is working on legislation, and a ballot measure if that fails, that would require: a minimum level of reserves; that refiners give public notice of refinery maintenance and outages so the market can adjust; oil companies fully disclose their profits; and greater financial penalties for oil companies if they conspire to increase gas prices, in order to prevent fast price spikes.

“Oil companies are disingenuous to say this is just about supply and demand when their profits are astronomical. They make huge profits from refinery disruption and low inventory, so there are no incentives for them to fix the issues,” Court said.

Hull said he does not expect the volatility of California’s gasoline market to change anytime soon.

“We understand and appreciate the frustration that motorists feel when they see prices changing rapidly,” he said. “Sadly that is a feature of our markets in California and has been for a long time. We don’t see that improving. We think the increased volatility that we are subject to in California is only going to become greater as we continue to make regulatory decisions that further isolate the California market from the rest of the country and world.”

Meanwhile, Montgomery expects gas prices to decrease around 3 cents a day for the foreseeable future.

As of Wednesday, the wholesale price of gasoline was $1.91, down $1.50 from its peak in July. Montgomery added that consumers usually pay $1 more for gas than the wholesale price, so the current $2 margin is unusual, which is why she expects prices to continue to sink.

Mac predicts gas prices could fall below $3 a gallon by the end of the year – assuming that there are no refinery issues – for a number of reasons: low oil prices; the switch to a cheaper blend of gasoline; and fewer people driving during winter months.

“The lowest price that we saw this year in Orange County was on January 30 and it was $2.43 a gallon,” she said. “It was that low because the refineries were running smoothly and oil prices were very low, as was demand.”

Contact the writer: or Twitter: @HannahMadans