For Immediate Release: Nov. 30, 2022
State’s oil refiners decline to participate as industry reports record profits
SACRAMENTO — Yesterday, the California Energy Commission (CEC) held a hearing to seek answers about this fall’s spike in gasoline prices as the oil industry recorded record profits. The spikes happened despite decreasing crude oil prices, minimal unplanned outages for maintenance, and no new state taxes or fees on gas at the pump.
The hearing was called by CEC Chair David Hochschild following a letter he sent to industry executives Sept. 30 amid rapidly rising prices. It was focused on getting information from oil companies and discussing increased transparency to protect Californians from price shocks in the future.
The state’s major oil refiners failed to provide sufficient responses leading Chair Hochschild to personally invite them to a follow up hearing. Representatives were asked to provide information regarding inventory management practices and other factors cited as the reasons for the recent price spikes but declined to participate in the discussion and instead were represented by the Western States Petroleum Association.
“Better understanding the facts around the petroleum market is essential to safeguarding vulnerable Californians from the impact of price shocks,” said CEC Vice Chair Siva Gunda. “These are the same communities who bear the brunt of the state’s pollution burden which is why we need all parties working together to develop solutions that move us toward our collective goals in a sustainable manner.
On the Oil Industry Lack of Participation
In opening remarks, Chair Hochschild expressed disappointment in the industry’s response saying, “The two things that are unprecedented for me about today is that first, as Drew (Bohan) mentioned, we have never in history seen a gap this big between state and national gasoline prices, over $2.60 coming on very suddenly. And then secondly, that we are here today but without the five refiners.” He continued, “This is unprecedented. We have hearings, workshops and commission meetings with every industry in the state . . . I’ve never had an industry not show up with their individual company representatives.” (Related comments from Nov. 29 gasoline hearing speakers)
California State Senator Monique Limón, who participated in the hearing, also reacted to the absences, stating, “To say that I am disappointed that some of our biggest oil producers in the state are not here is probably an understatement, and simply because having folks at the table who care about the issue, and who also want to be part of the solution, is critical to how we move forward.” (Related comments from Nov. 29 gasoline hearing speakers)
On Reasons for High Prices
The agenda featured a panel of petroleum industry experts and public advocates who discussed current challenges and offered ideas on what additional safeguards and transparency measures could be put in place to ensure a successful transition away from fossil fuels.
Severin Borenstein, professor at the Haas School of Business at UC Berkeley and faculty director of the Energy Institute at Haas, encouraged an examination of what he calls the mystery gasoline surcharge and opined that “the (price) differential, it's coming downstream. It's coming in the marketing distribution and retailing sectors. Refiners continue to play a huge role there. They own some of the downstream stations, and they have tremendous control over the pricing for most of the other branded downstream stations.” (Related comments from Nov. 29 gasoline hearing speakers)
“There's less competition for drivers who have fewer choices in their buying experience in California than they do in other parts of the country,” agreed David Hackett, chairman of the board of Stillwater Associates, who explained how main brand stations charge more for the same product as unbranded stations. (Related comments from Nov. 29 gasoline hearing speakers)
On Record Oil Industry Profits
Consumer Watchdog President Jamie Court highlighted the industry’s record-breaking profits saying, “There's no question that there was huge windfall profits for the five big oil refiners this year, if you look at their total profits, They went up by four times – quadrupled to $67 billion dollars in raw profits for the first nine months this year (compared to) $17 billion last year.” (Related comments from Nov. 29 gasoline hearing speakers)
On Burdens to Low-Income Communities
Dr. Elena Krieger, director of research at PSE Healthy Energy, described how gasoline price spikes and pollution impacts burden low-income communities of color the most emphasizing, “The very fact that we are having this hearing is a reminder of the need to rapidly transition away from fossil fuels and envision a transportation sector that reduces climate impacts and health damaging air pollution; provides energy, security and resilience; and is affordable for those currently burdened by our existing system and accessible for those who face barriers to adopting cleaner fuels.” (Related comments from Nov. 29 gasoline hearing speakers)
Recent Gasoline Price Trends
CEC staff also provided an overview and analysis of data related to recent gasoline price trends. Major highlights include the following:
Gasoline inventories have been at their lowest levels in a decade.
In September and October 2022, four California refiners conducted planned maintenance reducing capacity by 55,000 barrels per day or 6 percent of estimated statewide gasoline demand.
California experienced the two highest weekly price spikes ever at the end of September 2022.
On October 4, 2022, Californians paid a record $2.60 more per gallon than the rest of the United States — more than double the previous record. The record occurred as refinery cost and profits per gallon tripled compared to the previous month.
Prices have since decreased more than $1.40 to under $5 per gallon.
Staff then detailed a study the CEC is developing to better understand the impact of climate goals on supply and demand for petroleum fuels, in-state production capacity, and the reliability and affordability of petroleum fuels. Panelists all agreed the study will be an important next step toward ensuring a reliable, affordable and equitable transition away from petroleum in California.
To watch the hearing recording, view the following YouTube video:
About the California Energy Commission
The California Energy Commission is leading the state to a 100 percent clean energy future. It has seven core responsibilities: developing renewable energy, transforming transportation, increasing energy efficiency, investing in energy innovation, advancing state energy policy, certifying thermal power plants, and preparing for energy emergencies.