California oil refineries will be required to disclose more information about what goes into the price of gasoline that Golden State motorists pay at the pump under a bill that was passed by the Sacramento Legislature and soon to land on Governor Gavin Newsom’s desk.
Senate Bill 1322Sponsored by Senator Ben Allen (D-Santa Monica), requires the state’s five refiners to report to the California Energy Commission how much crude oil they refine into gasoline each month, how much they paid for each barrel, and how much they earn.
Proponents say the legislation will help explain what has been dubbed a ‘mystery surcharge’ – an unexplained price difference paid by California drivers when they fill up, even after all federal and state taxes and fees have been waived. removed from the equation.
“The reason we think gas prices are so high is because oil refiners are charging us based on the world price of crude oil,” he said. Jamie Court, President of Consumer Watchdog, a Los Angeles-based consumer group that supported the bill. “But their crude oil is much cheaper because they have long-term contracts for crude oil and they basically exploited the Ukraine crisis just to make a killing.”
But Kevin Slagle, spokesman for the Western States Petroleum Assn.a trade group representing oil companies and refineries in the region says the bill is unnecessary because the industry already submits “an excessive amount of data” to the energy commission on a monthly basis .
“It’s a solution in search of a problem,” Slagle said.
It’s well known that California drivers pay more for a gallon of gasoline than drivers in almost any other state, largely due to higher taxes and fees, as well as the cost of manufacturing specially blended gasoline. state that is formulated to reduce air pollution.
In February 2015, a explosion at an Exxon Mobil refinery in Torrance destroyed about 10% of the state’s gasoline supply, driving up prices. After resuming normal operations, prices fell slightly. But the research of Severin Borenstein, professor at UC Berkeley and others showed that prices had not fully returned to pre-blowout levels.
And over the past seven years, that residual amount – the mystery surcharge – has never gone away.
“There continues to be a big black hole when it comes to data from the oil and gas industry on how they price gasoline at the pump for ordinary Californians,” Allen said. at a press conference earlier this year. “We call on the oil companies on behalf of California drivers, end the smoke and mirror games, open your books, show the public your true cost of doing business.”
In their latest quarterly earnings reports, four of the five companies with refineries in California posted higher profits in the second quarter of this year than they did a year earlier. Chevron reported adjusted earnings of $11.6 billioncompared to $3.1 billion in the second quarter of last year.
“Yes, the last few quarters have been healthy quarters for the energy industry across the country and that’s driven by demand,” Slagle said. “When you look during the COVID years where there was no demand, they lost $70 billion to $80 billion, so there’s really a causal relationship to demand as much as anything. “
The Court accused the refineries of price gouging. “Even though they took a dip at the start of the pandemic, they are catching up now,” he said.
UC Berkeley’s Borenstein estimates that the unexplained differential that Californians are paying at the pumps currently stands at about 50 cents per gallon. But he’s not convinced that the SB 1322 will find out exactly what’s behind it.
“If I had the data they’re asking for, I would definitely find it interesting and I would definitely look at it to see what I could glean from it,” Borenstein said. “I think [the bill] is a good start, but we’re going to need a lot more information than it actually asks for.
Borenstein suspects the problem isn’t the refinery price, but somewhere between the raw material price (the cost after the oil is turned into California blended gasoline) and the retail price (the cost consumers pay at the pump).
” We do not have [the equivalent of] a Federal Trade Commission in California, and that’s what you want,” Borenstein said. The FTC has “economists who have studied the gasoline industry for decades and [who] really think about the competition. No agency in California has that skill set,” he said.
“I think this bill will provide information, but I guess it won’t provide enough information to really answer the question,” Borenstein added. “But hopefully it will continue to move things forward.”
As gasoline prices hit record highs earlier this year, a select committee in Sacramento was convened to review gasoline supply and prices. It is chaired by Assembly Member Jacqui Irwin (D-Thousand Oaks).
SB 1322 passed 22-4 in a Senate vote in May, passed through the Assembly, receiving a 42-23 vote on Monday, and was approved in a 30-9 vote with Approval of the Senate on Tuesday.
Asked if Governor Newsom will sign the bill, a spokesperson for the governor’s office said Wednesday morning, “we haven’t commented on this one.”