Los Angeles, CA— California’s third biggest oil refiner made a whopping $2.26 billion off refining gasoline, tripling its profit in the third quarter, after excluding special items.
PBF reported making 78 cents per gallon refining crude oil into gasoline in California in the third quarter– the greatest raw profits anywhere in the nation or world. By contrast, PBF’s profits per gallon were 48 cents on the Gulf Coast, 49 cents per gallon on the East Coast, 55 cents per gallon in the Midwest – an average of 50 cents across the rest of America.
This California margin reflects a windfall profit of $176.4 million for the quarter calculating the windfall profits at every penny made over 50 cents per gallon. That is a mark hit by refiners in California only three times in the last 20 years before 2022.
“These profits prove the Golden State gouge is real and California needs to enact a price gouging refund law to counter it,” said Jamie Court, president of Consumer Watchdog. “With its windfall profits in this quarter, PBF would owe Californians $441 million for the year if California enacted a windfall profits tax setting the rate at all profits above 50 cents per gallon.”
See the calculation and historic profits chart.
PBF’s Western region profits per gallon that come strictly from its two California refineries in Torrance and Martinez totaled 78 cents per gallon. In the second quarter this year, the company posted per gallon profits of 82 cents and an average 74 cents per gallon in the first quarter.
PBF CEO Tom Nimbley attributed the runaway profits to tight inventories. “We are trying to get them rebuilt,” he told investors at the third quarter presentation. “A problem is quite clear here…Covid and being ganged up on policy that does not drive you to want to operate the facilities or invest as necessary if you think that there is not a long enough runway on that investment.”
Nimbley said that California “is the same story only a little bit on steroids.” Refinery capacity has tightened with Marathon taking a refinery in Martinez offline to convert to renewable diesel fuel, he said. “So, the market has simply tightened up.”
“For consumers, it’s a sad story,” said Consumer Advocate Liza Tucker. “For oil executives with stock holdings it’s a bonanza.” Some executives are cashing out. According to the Daily Beast, four senior PBF executives sold off more than $9 million worth of stock last spring as PBF’s stock price flew up 145%.
Governor Newsom has called a special legislative session in December to consider a windfall profits cap and price gouging rebate for California consumers. Consumer Watchdog estimates that the amount of windfall profits to be returned to consumers by refiners reported so far this year is now over $1 billion. The formula used to calculate windfall profits is every dollar in profit made above 50 cents per gallon.
A new law, SB 1322 (Allen), backed by Consumer Watchdog, will require oil refiners to post their profits per gallon from refining monthly beginning in January. This will give California the basis to monitor for price gouging in real time and, if a price gouging rebate is enacted, to give the excess profits back to drivers.
Consumer Watchdog calculates cents per gallon in profits by dividing the gross refining margins on a barrel of crude by 42—the number of gallons in a barrel. Gross refining margins reflect the difference between the cost of crude oil bought and the price of petroleum products produced and sold by the refiner.
Oil refiners' reports to investors only reveal Western regional margins, not California specific profits, which are generally higher. But both PBF Energy and Valero run West Coast refineries only in California.
In the third quarter, PBF’s California refineries more than doubled margins per barrel to $33.02 from $8.06 in the same quarter last year. For the nine months, West Coast margins were $27.31 over $6.06 for the nine months the year before. The margins were the highest reported among PBF’s four U.S. regions of operation—West Coast, East Coast, Gulf Coast, and Mid-Continent.