Russia’s invasion into Ukraine has pushed California’s already high gas prices to record levels, but a local lawmaker wants to know why Golden State prices are routinely so much higher than the rest of the nation.
Senate Bill 1322, authored by state Sen. Ben Allen, D-Redondo Beach, would require the state’s five big oil refiners — Chevron, Marathon, PBF Energy, Phillips 66 and Valero — to disclose the monthly cost of the crude oil they buy, what they pay to convert it into gasoline and how much they sell it for.
Allen joined with consumer advocates Friday at the Los Angeles offices of Consumer Watchdog to announce the new legislation, also known as the California Oil Refinery Cost Disclosure Act.
‘Smoke and mirrors’
“We ask the oil companies on behalf of California drivers: Let’s end the games of smoke and mirrors,” he said. “Open your books and show the public your true costs of doing business.”
Gas prices at this Mobile station near the Beverly Center in Los Angeles were well above $7 a gallon on Thursday, March 10, 2022. (Photo by David Crane, Los Angeles Daily News/SCNG)
Allen conceeded that California’s stringent environmental standards and voter-approved gas tax have boosted fuel costs. But prices spiked dramatically following a 2015 explosion at an ExxonMobil refinery in Torrance, he said, and they’ve never fully retreated.
“They went up $1.50 a gallon after that explosion, but they only came back down $1,” he said. “So there’s a 50-cent surcharge that oil companies have been profiting from ever since. We want to get to the bottom of that.”
California motorists currently pay a state excise tax of 51.1 cents per gallon and a federal excise tax of 18.4 cents per gallon, as well as additional taxes imposed by local governments that range from 2.25% to 5.75%, according to the state Legislative Analyst’s Office.
A strict regulatory and political environment
Represenatives with the various oil companies could not be reached Friday. But Kevin Slagle, a spokesman for the Western States Petroleum Association, which represents the refiners, said California’s high fuel prices are largely the result of the state’s strict regulatory and political environment.
“The first $1.27 a gallon California motorists pay is for regulatory programs,” he said. “That’s why California has been at the higher end of gas prices for years.”
Slagle said California is also a “fuel island.”
“The oil we produce in California is refined in California, but that only accounts for about 30% of our needs,” he said. “The other 70% is imported from Ecuador, the Middle East and other places around the world. The cost of shipping the crude oil raises the cost of gasoline.”
California could produce more oil in-state, Slagle said, but the state’s political environment has made it near impossible to get drilling permits.
“There are more than 1,000 permits waiting for approval, but Gov. Newsom’s administration has essentially imposed a ban by not issuing drilling permits,” he said.
‘Charging higher prices’
A 2019 report from the California Energy Commission concluded that the primary cause for the state’s rising price increases is “simply that California’s retail gasoline outlets are charging higher prices than those in other states.”
California motorists paid an estimated $1.5 billion more in gas costs than the rest of the nation in 2018, and $11.6 billion more over the last five years, the report said.
Consumer Watchdog President Jamie Court links the hikes to Chevron, Marathon, PBF Energy, Phillips 66 and Valero — refiners he says control 96% of the gasoline made in the state. Court said they have the market power to sell gas to their branded retail outlets at 30 to 40 cents more per gallon than the prices they charge smaller, independent retailers.
“California has been an ATM for oil refiners for too long, it’s time to pull the curtain back and find out how much California oil refiners are making off every gallon of gasoline they sell and take back the excessive profits,” he said.
The recent Russian/Ukraine conflict has hiked Southern California prices well above $6 a gallon. On Friday, prices at several Shell, Chevron and Mobil stations in Los Angeles County ranged from $6.49 to $7.35 a gallon.
Court said California motorists are paying way too much for gasoline.
“They’ve been ripping us off for too long,” he said. “We even have a name for it — the ‘Golden State Gouge.’ “
Jenn Engstrom, director of the consumer-advocacy group CAL-PIRG, said environmental regulations and and taxes only account for a small part of the higher prices at the pump.
“When there is so much fluctuation with gas prices, it’s important we have better transparency so we can call out oil refineries if they needlessly raise prices,” she said.
SB 1322 was introduced Feb. 18 and will be first headed to the Senate Energy Committee for a hearing.