Tag Archives: California Governor Gavin Newsom

CA Gov. Gavin Newsom, Gasoline prices, Price gouging, Valero

Valero raked in $11.5 billion in 2022 profits, beating its $930 million for the previous year by a dozen times.

Valero 2022 Profits Skyrocket But Gas Pump Gouging In CA Moderates As CA Threatens Refiner Penalty

Consumer Watchdog, by Liza Tucker, 01/26/2023

Los Angeles, CA—Valero raked in $11.5 billion in 2022 profits, beating its $930 million for the previous year by a dozen times. However, Governor Newsom’s call for a special session in October to deal with price gouging appears to be having an impact on gouging in California as California-reported refinery margins were lower than any other region for the first time this year and in line with historic margins.

“Valero reported profits per gallon of gasoline in California during the fourth quarter at below 50 cents, a red line marker for price gouging,” said Consumer Watchdog Liza Tucker. “It reported per gallon profits off California gas at 36 cents, a reasonable profit in line with what the refiner earned here for the last 20 years. Meanwhile margins elsewhere remained high.

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“The threat of a legislative penalty on gasoline price gouging that Governor Newsom called for appears to be reining in gas prices in California already,” said Tucker. “Clearly, California lawmakers should enact that penalty.”

Consumer Watchdog has called for 50 cents as a demarcation line on profits per gallon above which refiners will pay a penalty. SBX 1 2, introduced by Senator Nancy Skinner (D-Berkeley) will set a penalty on California refiners when gas prices and the profits refiners make per gallon off consumers become abnormally high. The legislature has yet to set a profit level for the penalty.

Five refiners control California’s gasoline market by making 97% of the state’s gasoline. They usually report higher profit margins per gallon of gasoline for the US West Coast than any other region in which they operate, said Tucker.  Valero’s 4th quarter profits were the first indication the price gouging penalty has impacted the companies’ policies. In addition, November and December gasoline prices in California were more in line with the typical spread between average US and California prices of a little more than a dollar.

“Just raising the price gouging penalty has significantly curbed Valero’s profit taking in California and made gasoline more affordable for Californians and in particular the most vulnerable in the state who were paying as much as 20% of their after-tax income for gasoline,” said Jamie Court, President of Consumer Watchdog. “Imagine how much Californians will save once a penalty is enacted.”

Valero tripled its fourth quarter profits to $3.1 billion from $1 billion. But Valero reported West Coast refining margins per barrel—the difference between what crude oil costs a refiner compared to the wholesale charge for the finished product—that were the lowest among its regions of operation.  Since Valero only has Western refineries in California, the margins are California-specific.

Valero reported a margin of $15.43 for the West Coast, compared to $18.88 for the US Mid-Continent, $22.68 for the Gulf Coast, and $29.66 for the North Atlantic. Consumer Watchdog divides margin per barrel numbers to arrive at a per gallon profit.  That translated into a profit of 36 cents per gallon in California, 44 cents in the US Mid-Continent region, 54 cents on the Gulf Coast, and 70 cents in the North Atlantic.

In contrast, Valero bagged price gouging profits per gallon in the second and third quarters of 2022. In the second quarter of 2022, Valero reported an 83 cent per gallon profit at the pump and, in the third quarter, a 60 cent per gallon profit in the third quarter, according to Consumer Watchdog research. See refiner profit per gallon chart here.

According to Gary Simmons, Valero’s executive vice president, profits were buoyed by a continued tight market for crude. Simmons said that bad weather also interfered with the restocking that normally occurs at this time of the year. “That sets up the year nicely from the refinery margin perspective,” he said.

As it was, California’s big five oil refiners posted overall profits of $67.6 billion in the first nine months of 2022 – nearly quadruple the profits recorded for the same period in 2021. Chevron reports its fourth quarter and annual earnings tomorrow. It controls 30% of California’s gasoline market.

Big Oil, Valero, Windfall profits

Governor Newsom Convenes Special Session to Hold Oil Industry Accountable for Price Gouging

Valero’s $2.82 billion in profits were 500% higher than the year before.

Newsroom, Office of Governor Gavin Newsom, Nov 30, 2022

SACRAMENTO – As oil companies continue to evade questions about unexplained gas price increases, Governor Gavin Newsom today convened a special session of the California Legislature on December 5 to pass a price gouging penalty on oil companies that will keep money in Californians’ pockets.

The Governor’s action comes on the heels of a state hearing  yesterday – which five major oil refiners refused to attend – to investigate this fall’s unprecedented spike in gasoline prices. This spike in gasoline prices resulted in record refiner profits of $63 billion in just 90 days, disproportionately affecting low- and middle-income families.

“Big oil is ripping Californians off, and the deafening silence from the industry yesterday is the latest proof that a price gouging penalty is needed to hold them accountable for profiteering at the expense of California families,” said Governor Newsom. “I’m calling a special session of the Legislature to do just that, and to increase transparency on pricing and protect Californians from outrageous price spikes in the future.”

Governor Newsom signs proclamation convening a special session to pass price gouging penalty on oil companies

This fall’s spike occurred while crude oil prices dropped, state taxes and fees remained unchanged and gas prices did not increase outside the western U.S., so the high prices went straight to the industry’s bottom line.

The text of the Governor’s proclamation convening a special session can be found here.

During the special session, the Legislature will also consider efforts to empower state agencies to more closely review gas costs, profits and pricing as well provide the state with greater regulatory oversight of the refining, distribution and retailing segments of the gasoline market in California.

Taking action to lower prices at the pump, Governor Newsom in September ordered the switch to winter-blend gasoline and demanded accountability from oil companies and refiners that do business in California. Since California’s record-high gas prices of $6.42, the Governor’s actions have reduced those prices to $4.95 most recently – a decrease of $1.47 since the peak.

In the third quarter of 2022, from July to September, oil companies reported record high profits:

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CA Gov. Gavin Newsom, Valero, Windfall profits

Valero Quintuples 3rd Quarter Profits: Makes Windfall Of $50 million Off California Consumers

60 cents per gallon profit – “These profits show Governor Newsom is justified in his call for a special session to mandate a price gouging refund.”

Consumer Watchdog, By Liza Tucker, October 25, 2022

Los Angeles, CA—Valero’s net income hit $2.8 billion for the third quarter of 2022, more than quintupling the $463 million reported for the same quarter last year.

Valero’s Western region profits, which are strictly from its California refineries, topped 60 cents per gallon. That is only the second time it has reported such a windfall of over 50 cents per gallon since 2001. The first time was the second quarter of 2022 when its California profits were 83 cents per gallon. Valero’s California profits were once again higher than any of its other regions in the country and the world.

“These windfall profits must be returned to California drivers if the oil refiners are to treat Californians like customers rather than ATMs,” said Jamie Court, president of Consumer Watchdog. “These profits show Governor Newsom is justified in his call for a special session to mandate a price gouging refund.”

In California, the Valero profits translate into an estimated quarterly windfall profit of $50.8 million that should go back to consumers, Consumer Watchdog said today, calculating all monies made over 50 cents per gallon as a windfall profit.

In the second quarter, Valero’s windfall profits made on margins of 83 cents per gallon was $161,700,000. Adding to Valero’s windfall profit from last quarter, Valero would need to refund $211 million in windfall profit back to California consumers if a price gouging refund law were in effect.

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. See the calculation.  

The formula used to calculate windfall profits is every dollar in profit made above 50 cents per gallon, which the company has only reported twice since 2001 — in the second and third quarters of 2022. View the chart of per gallon West Coast profits since 2001.

None of the four California oil refiners who reported windfall profits in the second quarter of 2022 had previously made more than 50 cents per gallon annually in all their years doing business in California. Chevron’s profits only exceeded 50 cents per gallon three times in the last twenty years.

Three other California refiners—PBF Energy, Phillips 66 and Marathon Oil—will be reporting third quarter profits in the coming two weeks. Chevron, which serves one third of the California market, only reports margins annually.

Valero’s haul of 60 cents per gallon off its California refineries is more than it has made at any other point in the last 20 years except for last quarter. Cents per gallon are calculated 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.   Two of the five oil refiners, Valero and PBF, have their Western refineries in California only.

In the third quarter, Valero’s California refineries more than doubled margins per barrel to $25.36 from $11.29 in the same quarter last year. For the nine months, West Coast margins were $25.89 over $9.81 year before.  The margins were the highest reported among Valero’s four regions of operation, including the U.S. Gulf Coast, North Atlantic and U.S. Mid Continent.

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.

On Valero’s earnings call with investors today, its Chief Executive Officer Joe Gorder noted that refining margins “remain supported” by strong product demand and low product inventory. Despite high output, Gorder said that global supplies remained “constrained” due to refineries being taken offline, “unfavorable economics,” and switching refineries away to producing low carbon fuels.

Climate action

Newsom calls for more aggressive climate action

Oak Fire forecast for July 28 2022

CalMatters, by Emily Hoeven, July 25, 2022

As the largest wildfire of the year rages across California, Gov. Gavin Newsom is doubling down on an aggressive strategy to combat climate change — one that also appears to involve boosting his national profile.

Newsom on Saturday proclaimed a state of emergency in Mariposa County due to the Oak Fire near Yosemite National Park, which since igniting on Friday has burned through more than 15,600 acres of bone-dry fuel and was 0% contained as of Sunday night, according to Cal Fire.

California has secured federal support to help defray the costs of battling the blaze, which as of Sunday was being attacked by nearly 2,100 firefighters. More than 6,000 people were under evacuation orders, nearly 3,000 PG&E customers were facing power outages and 15 structures had been destroyed or damaged with thousands more threatened.

  • The Oak Fire marks the end of California’s relatively calm start to the fire season: Fewer than 34,000 acres burned statewide from Jan. 1 to July 19, the lowest total during that time period since 2009, according to a Mercury News analysis.
  • Isaac Sanchez, a Cal Fire battalion chief: “People shouldn’t get complacent. If this was a baseball game, we are in the middle innings. There are still a lot of dry months to come.”

Newsom alluded to complacency at the national level in a Saturday letter to President Joe Biden, in which he slammed “uncooperative Republicans and a lone Democrat from a coal-producing state” (West Virginia Sen. Joe Manchin) for holding “hostage” parts of Biden’s climate agenda.

  • Newsom added: “We want to reiterate our commitment to … finding new ways to work around those Senators who chose to keep their head in the sand instead of confronting the crisis we are all facing together. Partnering with California and other leading states and cities is now essential.”

As a proof point of what Newsom described as California’s world-leading action on climate, he cited a blueprint — released just the day before — to make the state’s ambitious climate plans even more aggressive. Continue reading Newsom calls for more aggressive climate action →