[Note from BenIndy: Remember the article alleging exactly why Valero commanded higher profits in California compared to other regions, and how Senate Bill X1-2 sought to shield Californians from gasoline price spikes? Tai Milder, director of the new Division of Petroleum Market Oversight, issued a letter with a few potential reforms that could decrease the volatility of CA’s gas market. The letter is an important read but if you don’t have the time this SacBee article offers a great, quick analysis of the contents – and notes the immediate frustration voiced by the Consumer Watchdog that the development of a penalty structure for price gouging has been delayed. The images in this post were added by BenIndy and are not original to the SacBee post.]
Consumer watchdogs seek to shield Californians from insane gas-price spikes. | Uncredited image from 2022.
California’s new gasoline industry watchdog wants to see mysterious price spikes at the pump come to an end. After months of investigation, he shared options for how energy regulators could stop them — penalties not yet included.
Gov. Gavin Newsom’s appointed director of the new Division of Petroleum Market Oversight said the California Energy Commission should impose additional transparency in the daily gasoline market and require oil refineries to store supplies in a Wednesday letter.
“In California we have unexplained price spikes,” said Tai Milder in a news briefing. “Our core goal is to protect consumers. That doesn’t mean the absolute level of prices but making sure prices are set in a fair manner.” Fuel prices have stabilized somewhat. A gallon of gasoline today costs $4.537 on average in California, 2 cents lower than last month and about the same as last year, according to the latest prices from AAA.
Image from the California Energy Commission’s November 28, 2023 “SBX1-2 Workshop on Maximum Gross Gasoline Refining Margin and Penalty” presentation. To learn more about this workshop, click this link. You will be redirected to the workshop page on the CEC’s website.
They are far lower than the summer of 2022 spike that sent lawmakers into a special legislative session to address oil price gouging. At that time, average fuel costs rose to a sky-high $5.52 a gallon.
The governor signed Senate Bill X1-2 last March, establishing the new watchdog division within the California Energy Commission. In September, the division highlighted a suspicious trade on the state’s real-time market for gasoline that quickly caused a 50-cent-per-gallon price spike.
At the time, Milder called the single transaction “unusual” and said it may be a result of the underlying structure of California’s gasoline market. He also criticized refiners for failing to maintain adequate inventories of refined gasoline.
In a new letter to the governor, Milder pointed to two reform options he said would reduce the risk of price spikes.
The first is to publish a daily report on trading information in the real-time spot market for gasoline, which he said would decrease volatility in that unregulated facet of the state’s gasoline economy with an outsized influence on prices.
“It appears that spot market volatility, illiquidity, and lack of transparency may all be contributing to and exacerbating price spikes during periods of under-supply and refinery maintenance,” Milder wrote in the letter.
He also recommended imposing minimum gasoline storage requirements for refiners. Milder said when refineries are undergoing maintenance, they often haven’t maintained adequate levels of inventory. This drives down supply during periods of high demand and contributes to price spikes.
Next up, the watchdog division will issue additional data transparency regulations this spring and determine whether to set a refining margin and penalty by the end of the year.
Advocates with the Consumer Watchdog group were quick to criticize a delay in the division’s timeline. Milder had initially set out to issue a penalty recommendation this summer, in time for peak travel season.
“Californians cannot wait an extra six months for the price gouging penalty promised them last year,” said the group’s president Jamie Court. “Governor Newsom needs to put his foot in the Energy Commission’s a– and get them moving quicker if he is going to deliver.”
But Severin Borenstein, director of the Energy Institute at UC Berkeley’s Haas School of Business, considered the delay a wise decision. Setting up the market oversight division is time consuming, and implementing a gasoline storage requirement will be extremely complicated.
“This was never going to be a quick fix,” Borenstein said. “Creating the penalty structure is going to be extremely challenging, too. The downside of getting it wrong is it could really create disruptions in the market.”
[Note from BenIndy: Today, we came across an article claiming that Valero commanded higher profits in California compared to other regions – in the third-quarter of 2023, at the very least. After looking for other articles from Q3 referencing Valero’s higher refining margins in California, we learned that Valero reported gross refining margins of 78 cents per gallon on the West Coast, vs. “41 cents for the Gulf Coast, 49 cents for the U.S. Mid-Continent, and 48 cents for the North Atlantic.” Consumer Watchdog, by the way, suggests that 50 cents is the ‘red line marker’ for price-gouging. Wow. While it’s a little old, the best analysis of the price-gouging allegations levied against Valero and other refining giants comes from this October 2023 Daily Kos post. The images in this post were added by BenIndy are are not original to the Daily Kos post.]
Valero Posts $2.6 Billion 3rd Quarter Profit On CA Gasoline Margins 70% Greater Than Other Regions
Image generated by DALL·E, OpenAI’s AI-driven image creation tool. Please note that this image’s text is gibberish and not connected to reality, a known flaw in AI image generators, but the big “78 cents” referencing Valero’s refining margins in Q3 2023 is certainly correct.
Los Angeles, CA—The third quarter report to shareholders by Valero Energy Corporation shows it made 70% more per gallon in California than in any other region of the U.S. or the globe that it operates in, according to a report from Consumer Watchdog today.
Headquartered in San Antonio, Texas, the corporation operates 15 refineries in the U.S., Canada and U.K.
Consumer Watchdog called for the California Energy Commission to expedite the process for setting a price gouging penalty under a new law passed this year, SBx1 2.
“It is time for the California Energy Commission to put its foot on the gas and set a price-gouging penalty on big refiners ripping us off at the pump,” said Consumer Advocate Liza Tucker. “It is time for the state to prevent refiners from using us as one big ATM.”
Valero, one of the five big California refiners that control nearly the entire gasoline market, reported net profits of $2.6 billion this quarter, down a tick from $2.8 billion the year before, according to Tucker. Its refining sector reported third quarter operating income of $3.4 billion, down from $3.8 billion the year before: investorvalero.com/…
“Our refineries operated well and achieved 95 percent through put capacity utilization, which is a testament to our team’s relentless focus on operational excellence,” gushed Lane Riggs, Valero’s Chief Executive Officer and President in a press release. “Product demand remained strong in our U.S. wholesale system, which matched the second quarter record of over 1 million barrels per day of sales volume.”
Tucker had a quite different assessment of the corporation’s “relentless focus on operational excellence” than Valero CEO Riggs, describing the company’s profit margins on the West Coast, obtained through apparent price gouging, as “eye popping.”
Image from the California Energy Commission’s November 28, 2023 “SBX1-2 Workshop on Maximum Gross Gasoline Refining Margin and Penalty” presentation. To learn more about this workshop, click this link. You will be redirected to the workshop page on the CEC’s website.
“3rd quarter gross refining margins of 78 cents per gallon were eye-popping on the West Coast, far higher than in any other of Valero’s operating regions,” she stated. “Valero reported margins on Gulf Coast at 41 cents; at 49 cents for the U.S. Mid-Continent; and 48 cents for the North Atlantic.”
“The West Coast gross refining margin also blew past Valero’s 60 cents per gallon reported in the third quarter of 2022. Valero only has West Coast refineries in California,” Tucker pointed out.
She also said the gross refining margins reported to investors understate the gasoline profits as jet fuel and diesel are included,
Senate Bill (SB) 1322 requires all refiners of gasoline products in the state to provide monthly data about various price and volume information. The California Energy Commission (CEC) must publish aggregated, volume weighted reports of this data, within 45 days of the end of each calendar month
“Last year, legislation empowered the California Energy Commission to form a special division to investigate gas prices in California and to set a price-gouging penalty, which Governor Newsom has called for. Last week, the Commission voted to begin such a proceeding that first involves the gathering of accurate data from refiners. SB 1322 requires refiners to report their margins to the regulator that then posts them on its website,” concluded Tucker.
WSPA and Big Oil pump Big Money into influencing California regulators
As Valero made 70% more per gallon in California than in any other region of the U.S. or the globe that it operates in, the oil and gas regulators in“green” California, the seventh largest oil producing state in the nation, continue to issue new and reworked oil drilling permits. The Newsom administration has approved a total of 15,722 new and reworked oil wells since January 2019.
This year CalGEM, the state’s oil and gas regulator, “has gone rogue, approving hundreds of oil permits in vulnerable communities breathing poisonous emissions from both active and idle wells,” reported Consumer Watch and FracTracker Alliance. For a complete permit update, see: https://newsomwellwatch.com
Why do California regulators continue to approve hundreds of new and reworked oil drilling permits each quarter as oil companies like Valero gouge Californians at the pumps?
It’s all due to deep regulatory capture by Big Oil and Big Gas in the “green” and “progressive” state of California. The Western States Petroleum Association (WSPA), Chevron and the oil companies exercise their influence and power through a very sophisticated public relations machine in California and the U.S.
WSPA describes itself as “non-profit trade association” that represents companies that account for the bulk of petroleum exploration, production, refining, transportation and marketing in Arizona, California, Nevada, Oregon, and Washington. WSPA’s headquarters is located right here on L Street in Sacramento.
Catherine Reheis-Boyd, the President and CEO of WSPA, is the former chair of the Marine Life Protection Act (MLPA) Initiative Blue Ribbon Task Force for the South Coast to create “marine protected areas” in the same region that she was lobbying for new offshore drilling.
Since 2009 I have documented how WSPA and the oil companies wield their power in 8 major ways: through (1) lobbying; (2) campaign spending; (3) serving on and putting shills on regulatory panels; (4) creating Astroturf groups; (5) working in collaboration with media; (6) sponsoring awards ceremonies and dinners, including those for legislators and journalists; (7) contributing to non profit organizations; and (8) creating alliances with labor unions, mainly construction trades.
The oil and gas industry spent over $34.2 million in the 2021-22 Legislative Session lobbying against SB 1137, legislation to mandate 3200 foot buffer zones around oil and gas wells, and other bills they were opposed to: cal-access.sos.ca.gov/…
For the oil companies, this was just pocket change when you consider that combined profits of California oil refiners, including PBF Energy, Chevron, Marathon Petroleum, Valero, and Phillips 66, were $75.4 billion in 2022.
The two biggest spenders were WSPA and Chevron. WSPA spent $11.7 million in the 2021-22 session, while Chevron spent a total of $8.6 million lobbying California officials.
Lobbying disclosures from Quarter 2 of 2023 reveal that oil companies and trade associations spent more than $3 million lobbying and a grand total of $4,085,639.57 in just three months to shape policymaking efforts in its favor in California. That brings the total spent by Big Oil and WSPA to over $13.4 million total in the first six months of 2023, putting them on track to exceed the 2022 expenditure of $18 million.
Chevron topped the lobbying expenses with $1,139,130, while WSPA placed second with $716,824.
The latest disclosures follow the $9.4 million that Big Oil spent to influence the California Legislature, Governor’s Office and agencies in the first quarter of 2023. Chevron came in first with over $4.9 million spent in the first quarter, while the WSPA finished second with over $2.3 million and Aera Energy finished third with nearly $628,000.
WSPA sponsors media dinners and awards for journalists
This year Big Oil has sponsored a chilling and highly successful campaign to sponsor dinners, awards ceremonies and conferences for journalists and the media. WPSA sponsored a “media dinner” on Tuesday, February 28 in Sacramento as part of #BizFedSactoDays.
The flyer for the event stated, “Journalists who play an outsize role in shaping narratives about state politics and holding lawmakers accountable will join business leaders to pull back the curtain on how they select and tell stories about California policies, policy and power.”
Speakers at the program included Coleen Nelson of the Sacramento Bee, Laurel Rosenhall of the Los Angeles Times, Kaitlyn Schallhorn of the Orange County Register and Dan Walters of Cal Matters.
Then on March 16, the Sacramento Press Club announced in a tweet that WSPA was the new “Lede Sponsor” of the Sacramento Press Club’s Journalism Awards Reception that was held on March 29: “Thank you to our new Lede Sponsor @officialWSPA! WSPA is dedicated to guaranteeing that every American has access to reliable energy options through socially, economically and environmentally responsible policies and regulations. Learn more more at http://wspa.org.
In response to this tweet, investigative journalist Aaron Cantu tweeted back on March 20, “As the recipient of @SacPressClub ’s environmental award last year, it’s concerning to see fossil fuel industry talking points passed off uncritically here. WSPA becoming lede sponsor happened in the context of a global PR turn as the climate crisis worsens.”
Unfortunately, Cantu and this writer are the only journalists with the courage to publicly criticize the sponsorship of a “journalism awards reception” by WSPA.
In addition to sponsoring journalism events in California, the Western States Petroleum Association has expanded its campaign to influence journalists nationally. WSPA and the controversial waste management firm Veolia North America sponsored events at this year’s Society of Environmental Journalists (SEJ) conference in Boise, Idaho, according to a report from DeSmog: https://www.desmog.com/2023/04/11/industry-sponsors-dinner-society-environmental-journalists-veolia-wspa.
The agenda for the conference, hosted in Boise, Idaho, revealed that WSPA and the waste management company Veolia North America sponsored two of the “beat dinners” hosted on April 21, the article by Sam Bright reported.
When #BigOil teams up with journalists, columnists and editors at events and only a couple of writers thinks there’s something wrong with this, you know we must be in deep trouble. Of course, no mainstream media reported on this huge scandal because it unveils the deep links between Big Oil and Big Media.
Background: California Oil Refinery Cost Disclosure Act Monthly Report
Senate Bill (SB) 1322 requires all refiners of gasoline products in the state to provide monthly data about various price and volume information. The California Energy Commission (CEC) must publish aggregated, volume weighted reports of this data, within 45 days of the end of each calendar month.
Specifically, SB 1322 requires the CEC to publish the following information from the refinery operators’ monthly reports:
A volume weighted gross gasoline refining margin for the state.
The gross gasoline refining margin for each refinery with two or more refining facilities in the state.
Volume and price of domestic and imported crude oil.
The breakdown of five types of sales required to be reported by refiners and associated volumes, prices per gallon, and actual or estimated costs associated with the Low Carbon Fuel Standard (LCFS) and Cap and Trade programs.
The data below complies with the CEC’s requirements to post the data as reported by the refiners. CEC continues to investigate the reported numbers. Additional findings, recalculations, further analysis, revised data, or other conclusions will be publicized here as we continue to verify the reported data.
Refiner Margin Data
Data last updated: October 18, 2023.
On October 3, 2023, the California Energy Commission published new petroleum market data showing the net gasoline refining information for California refiners. Volume-weighted average California gross refiner margin, net refiner margin, and numbers in the “Aggregated Data Reported” section are all calculated using information obtained from all six refinery companies. Gross and net margins reported by refinery company only reflect information from California refiners with two or more facilities which are Chevron, Valero, PBF, and Phillips 66.
The data show that in August, California refineries produced and sold 950,529,000 gallons of gasoline for a total estimated profit of $228,126,960.*
CEC staff will continue to collect and report refiner information on a monthly basis in order to analyze long-term trends as part of its assessment of setting a maximum gross refining margin and penalty for exceeding that maximum, as allowed by SB X1-2.
* Based on data reported by California refiners. The total profit estimate does not include spot pipeline transaction sales and may be considered a conservative estimate as a result.
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.
“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.
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