Group Makes Case For Price Gouging Penalty Set At 70 Cents Per Gallon
Sacramento, CA -- Consumer Watchdog made a record of oil refiners’ profiteering in California and disinformation campaign in official comments before the California Energy Commission as it determines a price gouging penalty on oil refiners, according to press release from the group.
The comments note the extraordinary growth in profits margins by California oil refiners in recent years and the fact that refiners made 30% more profit in California in 2022 than anywhere else in the world or nation.
“Creating a maximum gross refining margin and penalty is the most effective way to keep gasoline prices in California in line with US gasoline prices and to better balance supply and demand,” CW president Jamie Court wrote. “Five oil refiners control 98% of the gasoline supply in California and this oligopoly has abused its market powers to keep gasoline prices artificially high to its great financial benefit.”
To prove his point, Court pointed to his group’s review of Securities Exchange Commission (SEC) filings showing major refiners’ annualized gross refining margins in the West/California topped 50 cents per gallon only three times in the last 20 years, except for 2022 when all exceeded that mark. He noted even higher margins in 2023, including the unprecedented margin of $1.49 per gallon reported by refiners to the CEC in September when gasoline price topped $6 per gallon – compared to 66 cents in January.
With regards to the methodology of setting the appropriate maximum margin level, after which a progressive penalty would apply, Court pointed out that the enabling legislation SBx1 2 requires the market to be based on the “rack price,” rather than the dealer tank wagon price, which is the higher price branded stations pay for gasoline delivered to them. As a result, the margin should be set a lower level and in accordance with the CEC research on gross refining margins based on the rack price.
“Based on the chart provided by the CEC at the workshop, showing the maximum margin monthly using the rack price only from 2015 – 2023, a beginning maximum margin in the 70 to 80 cents range would provide deterrence without denying refiners a reasonable profit,” Court noted. “The CEC data shows that since 2015 on a monthly basis oil refiners made 80 cents or greater margins 19% of the time and $1.00 or more 5% of the time. Most of these occurrences have been in recent years when the gap between California and US gas prices has grown significantly. There is a direct correlation between the excessive gross refining margin and the periods when California gasoline prices exceed a $1.10 gap with US gas prices. Limiting the gross refining margin will deter gas price spikes and the periods of great disparity with US gas prices, which are the most devastating on low-income individuals.”
Court also took issue with the industry’s disinformation during the proceeding.
“Oil industry claims about their net margins being in sync with other industries is phony as a three-dollar bill,” Court wrote. “The net margins reported to the CEC appear to be pure fiction. For example, the big refiners reported a net margin of 38 cents from gross refining margins of $1.49 in September. This would mean the cost of making a gallon of gasoline has increased from about 20 cents per gallon, the refinery operating expenses reported by three of the five refiners to the SEC over the last two years (PBF, Valero and Marathon), to $1.11 per gallon. Given the average margin over the last 20 years is under 60 cents per gallon, this would mean that oil refiners have been losing 51 cents on every gallon of gas made. The oil refiners are clearly obfuscating and padding their true expenses so that they can falsely claim a reasonable net margin.”
Court called on the CEC to publish the breakdown of expenses oil refiners use to calculate their “net margin” and clarify which are reasonable and unreasonable. “For example, are the expenses for making jet and diesel lumped in with the expenses of making gasoline, thereby pumping up the expense costs?” Court asked. “What capital expenditures and amortization are included? The CEC should clarify what can and cannot be counted and publish its own net margin calculations as allowed and provided for under SBx1 2. The industry should not be allowed to obfuscate its true profits. When companies are this dishonest about their expenses and profits the need for greater oversight is clear.”
Court also took issue with the industry’s false claims about how much taxes and environmental fees add to a gallon of gas in California as opposed to the average state, as well as the refiners’ claims that excessive regulation shut down California refineries. Court noted memos from three big California oil refiners showing the companies shut down capacity to drive up price.
“The oil refiners in California have systematically shut down refiners and refineries as a way of maximizing their profits,” Court concluded. “The only recourse against big price spikes and big profit spikes is a maximum gross refining margin penalty that sets an upper limit on their greed.”
Background: New report reveals fossil fuel's media influence as Big Oil sponsors dinners, awards for journalists
The oil industry, as Court pointed out in his testimony exposing the false claims of Big Oil at the CEC hearing, are masters of propagating disinformation.
For years, I have covered the capture of media outlets, journalists, politicians, regulators and even some environmental NGOs by the fossil fuel industry in California and the West.
It’s good to see that somebody else — several national media outlets — are finally stepping up to the plate on a national and global level on exposing the increasing collaboration between Big Oil and media corporations.
Drilled and DeSmog, in collaboration with The Intercept and The Nation, just released a startling new report: Readers for Sale: The Media's Role in Climate Delay.
"As the business model for media has faltered, the fossil fuel industry has increasingly weaponized weaknesses to its benefit," the report begins.
The report, coming out as the ongoing COP28 climate summit continues to generate controversy, goes into detail on how much money some of the biggest media companies in the world are taking in from fossil fuel, and where exactly the money is being spent.
“Reuters is one of at least seven major news outlets that creates and publishes misleading promotional content for fossil fuel companies, according to a report released today. Known as advertorials or native advertising, the sponsored material is created to look like a publication’s authentic editorial work, lending a veneer of journalistic credibility to the fossil fuel industry’s key climate talking points,” wrote Amy Westervelt and Matthew Green in the Intercept on Dec. 5.
“In collaboration with The Intercept and The Nation, Drilled and DeSmog analyzed hundreds of advertorials and events, as well as ad data from MediaRadar. Our analysis focused on the three years spanning October 2020 to October 2023, when the public ramped up calls for media, public relations, and advertising companies to cut their commercial ties with fossil fuel clients amid growing awareness that the industry’s deceptive messaging was slowing climate action,” the authors wrote.
“All of the companies reviewed — Bloomberg, The Economist, The Financial Times, The New York Times, Politico, Reuters, and The Washington Post — top lists of most-trusted news outlets in both the U.S. and Europe. Each has an internal brand studio that creates advertising content for fossil fuel majors that range from podcasts to newsletters, videos, and advertorials, and some allow fossil fuel companies to sponsor their events. Reuters goes a step further, with marketing staff creating custom industry conferences explicitly designed to remove the “pain points” holding back faster production of oil and gas.”
Read the Intercept article here: https://theintercept.com/2023/12/05/fossil-fuel-industry-media-company-advertising/
And view the full report here: https://www.documentcloud.org/documents/24183641-drilleddesmog_mediagreenwashingreport
You will rarely see deep reporting on Big Oil regulatory capture by journalists in the MSM and “alternative” media. The new report by Drilled and DeSmog, in collaboration with the Intercept and The Nation, is very welcome news in a time of increasing collaboration between media and Big Oil.
This has been a big year for capture of the media and journalists by the Western States Petroleum Association in California and the U.S., as I have documented in my articles.
In one of the clearest examples of the collaboration between Big Oil and the media, the Western States Petroleum Association, the largest corporate lobbying group in California and the West, sponsored a “media dinner” on Tuesday, February 28 this year 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.”
Featured 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.
In a tweet, Catherine Reheis-Boyd, President of the Western States Petroleum Association (WSPA) and former Chair of the Marine Life Protection Act (MLPA) Initiative Blue Ribbon Task Force to create “marine protected areas” in Southern California, gushed:
“One of our favorite times of year is #BizFedSactoDays- when @BizFed helps amplify the presence and power of business in California. And we're honored to host the Media Dinner and featured media speakers! @DanCALmatters @LaurelRosenhall@ColleenMNelson @K_Schallhorn”
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 is the only journalist other than me with the integrity to contest the sponsorship of the Sacramento Press Club’s Journalism Awards Reception by WSPA.
Even more unfortunately, there is no doubt that WSPA and Big Oil have for years worked closely with media outlets.
In 2015, I wrote this article about how LA Times and the California Resources Corporation (formerly Occidental Petroleum) teamed up on a propaganda website: https://www.dailykos.com/story/2015/10/30/1442947/-LA-Times-and-Big-Oil-team-up-on-propaganda-website. Fortunately, the Times is no longer managing and running that website.
In another example of media collaboration with Big Oil, Catherine Reheis-Boyd, WSPA President, was on the "short list" of nominees for the LA Times "Inspirational Women Awards” held on October 18, 2022.
Can you guess who was one of the sponsors of the LA Times awards? Yes, you guessed right — WSPA was a sponsor.
According to a tweet from @OfficialWSPA, "Today @latimes acknowledged a woman who is already well known in our industry as a trailblazer and inspiration to tens of thousands of women. Congrats to our fearless leader @WSPAPrez for being recognized as a shortlisted nominee for the Inspirational Women Awards."
In addition, four LA Times reporters received the “Courage in Journalism” award from the Sacramento Press Club in 2022. Yes, the Western States Petroleum Association was one of the sponsors of these awards last year also.
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: scq.io/...
“The agenda for the conference, which is being hosted in Boise, Idaho, shows that the Western States Petroleum Association (WSPA) and the waste management company Veolia North America are sponsoring two of the “beat dinners” hosted on Friday, April 21 — the third day of the event,” the article by Sam Bright reported.
Fortunately, WSPA and Veolia’s sponsorships of the SEJ conference spurred condemnation by at least one group, Fossil Free Media.
“There’s no excuse for these sorts of conflicts of interest,” Jamie Henn of the campaign and communications group Fossil Free Media told Bright. “By letting the fossil fuel industry sponsor events, groups like SEJ lend credibility to bad actors” that are attempting to “influence coverage and maintain their social license by pretending to be well-meaning supporters of the free press.”
The Western States Petroleum Association, the largest and most powerful corporate lobbying group in Sacramento, 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.
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.
When so called journalism organizations are tainted by the toxic stench of Big Oil money — and very few “environmental” and “climate” organizations have any problem with this — you know that were are in a really dark time in human history.