LOS ANGELES, July 22, 2022 /PRNewswire/ — Consumer Watchdog President Jamie Court called on the California Assembly Select Committee on Gasoline Supply and Pricing to look to the recent extreme profit taking by California’s consolidated oil refiners and consider the strongest possible responses, including taking back excess profits.
“Consolidation in the industry has allowed five oil refiners to control 96% of the gasoline produced in California,” Court wrote to the Assembly committee. “When the opportunity arises to squeeze us, they can and do.”
“The cause of the current gap between California gas prices and US prices is clear: extreme profit-taking by California’s big oil refiners,” Court continued. “The proof is in the profit reports from the first quarter of 2022. California oil refiners’ margins – the difference between the crude they purchase and the gasoline they sell – are at historic highs based on the reports provided to investors. Second quarter profit reports due out the end of the month could be even more revealing.”
“This committee can either accept that this is an unrestrained commodities market that will allow for extreme profit-taking by oil refiners or it can propose new restraints on that market,” Court cautioned. “The high cost of gasoline affects every Californian. In order to address this issue, dramatic steps must be taken.”
Read Court’s full testimony: https://consumerwatchdog.org/sites/default/files/2022-07/LtrAssemGasPricingTaskforce%207-22-22_0.pdf
Court noted one solution already pending in the California Assembly. Senate Bill 1322 (Allen) requires the oil refiners to report monthly their actual crude oil costs and actual refining margins (gross and net) to the CEC and for the CEC to publish information about the margins. The bill has passed the Senate and the Assembly Natural Resources Committee.
“To protect consumers, more information about California refiner operations needs to be made public so that market watchers and others are in a position to monitor and hold the market accountable,” Court said. “SB 1322 is a small step
Consumer Watchdog also made the following recommendations for new laws.
Excess Profits Tax: A limit on excess profits needs to be set for California oil refiners. When their profits per gallon exceed a certain amount or are a certain percentage more than their profits from operations elsewhere in the country, those profits need to be taken back in the form of a tax on excess profits. In response to excess profits by Shell, the British government has instituted such an excessive profits tax.
New oversight: “History has shown the California Energy Commission is ill-equipped to watch this industry, let alone regulate it, which it doesn’t have current authority to do in any case. We have allowed our biggest market, the one that drives inflation in all others, to go unregulated.
“California needs a new Gas Pricing Czar with the power to look at the oil refiners’ books, be granted full subpoena power, and be able to obtain real-time information about profits, supply, costs, etc. We have just spent $9.5 billion in give-back to the public for the high price of gasoline. It’s time to create new oversight to make sure we get the money back if we have been ripped off.”
New price-gouging standard: “Price-gouging laws only apply after a state of emergency,” Court noted. “They state that no price increase shall exceed a certain percentage unless justified by the cost. A new gasoline price-gouging law could be enacted to prohibit such similar price spikes at the pump if not justified by the cost regardless of the declaration of a state of emergency.”
Collusion and updating anti-trust law: “When the Big Five refiners want to squeeze us, they can. Absent proof of a tacit agreement among them to do so, there is no anti-trust case against them. California needs to update its anti-trust laws to create a new standard for the type of tacit collusion that exists in the gasoline market.
“The refiners do share gas pricing information among themselves in the form of the Lundberg survey, a detailed, corner by corner gas station price survey that is not available to those outside of the industry. This allows the companies to know what its competitor is charging every gas station owner for gasoline. This type of information sharing among refiners should be considered a tacit agreement that constitutes an anti-trust violation under the law. In addition, refiners have shared storage facilities and terminals. When they know how much supply their competitors have and how much they are charging for that supply, they can collude. This shared information allows competitors to act as a cartel even if there is no smoky back room where they have agreed to a set price. This type of information sharing among companies should be severely restricted under penalty of anti-trust prosecution.”
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SOURCE Consumer Watchdog