Misnomers In Legislative Debate Over Price Gouging Penalty

Thu, 03/02/2023 - 
By Jamie Court


When the California Senate Energy Committee took on the price gouging penalty for the first time recently, economists with a track record of working for the oil industry tried to muddy the waters on the real issues in the debate.

Did oil refiners make massive profits off refining California gasoline in 2022? The companies’ own profit reports don’t like lie, unlike some of the so-called economic experts in attendance, who claimed it was the gas station owners’ fault.

We recently sent the following notes to the Energy Committee members to clear up any misnomers during the long hearing. This includes an absurd rant by one committee member, Senator Kelly Seyarto, about how people of color and low income people are not disproportionately impacted by oil drilling in their neighborhoods.

2022 Profits From Gasoline Price Spikes Were At The Refinery Level: Despite discussion of retailer profiteering being a factor in the 2015 price spikes, the 2022 price spike profits showed up at the level of refining margins. Audited data publicly reported by the companies to their investors showed the refining margin – the money made at the refinery -- doubled in 2022, from 33 cents per gallon historically to 66 cents per gallon in 2022. Refiners have only crossed the 50 cent per gallon profit line three times in 20 years. Whatever “mystery surcharge” exists at the retailer level, there was a $3.1 billion “refiner surcharge” if you draw a windfall profits caps at 50 cents per gallon. (For more detail see slides 6 - 10: https://consumerwatchdog.org/sites/default/files/2023-02/Oil%20Refiners%20Slideshow%202-21-23%20v3.pdf )

The Price Gouging Penalty Is A Profits Cap, Not a Price Cap, Targeting The “Refining Surcharge”: The windfall profits cap/penalty applies only after crude costs, environmental costs and taxes are accounted for. If legitimate costs raise the price of gasoline, there is no penalty. The penalty kicks in only when oil refiners’ margins rise to extraordinary levels that have only been met three times in the last twenty years. There is also an exemption process should refiners have legitimate reasons to seek one.

Low income and people of color do live disproportionately near oil wells:
· People of color represent roughly 92% of residents who live near oil wells
· Almost 20% of Californians who live below the poverty line (700k+) also live within a mile of an oil well.
· In LA County, 280,000 people living below the poverty line live within a mile of an oil or well
o % of county population living below the poverty line: 17.5
o % of people living below the poverty line within 1 mile of an oil or gas well: 19.5
· In LA County, 1.1 million people living within one mile of an oil and gas well are people of color. This is 73% of the population living within 1 mile of a well.
· The EPA’s CalEnviro states that Californian’s living within one mile of a well are the most vulnerable to effects of pollution.