Oil execs skip hearing on gas prices
“We asked them to explain why they are sticking you with the bill.”
Gov. Gavin Newsom, on Twitter
California energy regulators held a marathon hearing Tuesday about the state’s soaring prices at the gas pump. But the hearing was overshadowed from the start by who declined to testify.
Executives from five major oil refineries that supply most of California’s gasoline — Chevron, Marathon Petroleum, PBF Energy, Valero Energy and Phillips 66 — declined a request from the state’s Energy Commission to appear at the hearing in Sacramento, where five empty chairs and nameplates for the companies were set at the table. An industry trade association leader testified virtually.
Gov. Gavin Newsom chided the absent firms on Twitter: “Oil companies experienced record profits this year — while you paid record prices at the pump,” he posted with a video of the empty seats. “We asked them to explain why they are sticking you with the bill. They refused to show up.”
The refiners all told state officials, almost two weeks ago, that they didn’t plan to attend, citing concerns that sharing information about their operations could violate federal antitrust laws that prohibit price-fixing and other anti-competitive practices. But PBF, which operates a large refinery in the East Bay, was more stinging in its response.
“The politicization of this issue by Governor Newsom, heightened by the misleading information he released and commented on related to our 3Q22 earnings, precludes us from participating in this hearing,” the company wrote in a letter to the Energy Commission.
The hearing came as state legislators are expected on Monday to convene a special session to confront California’s high gas prices.
California’s average statewide price for a gallon of gas was nearly $5 on Tuesday, about $1.48 more than the national average. Prices have fallen in recent weeks after spiking to a statewide average of about $6.40 in the early fall.
During the hearing, state regulators heard testimony from a panel of experts, including energy analysts and consumer advocates who argued there is no justifiable explanation for the gap in prices.
Severin Borenstein, an economist and faculty director of the Energy Institute at Haas at UC Berkeley, said that less than a third of the difference in prices can be explained by the state’s higher sales taxes and environmental fees. Since 2015, he said the industry has consistently forced Californians to pay a “mystery gasoline surcharge.”
Borenstein said most of the cost difference occurs downstream during the process of marketing and distributing gas, long after refineries have processed crude oil brought into the state.
While major oil refineries declined to testify, a representative from the Western States Petroleum Association said she spoke on their behalf and testified that higher prices at the pump reflect a host of factors that make California the “most expensive and challenging operating and regulatory environment in the country.”
Catherine Reheis-Boyd, the association’s president, said those factors include higher taxes and environmental fees; local and state regulations that have led to the closure of refineries, thereby limiting supply; and the isolated nature of the state’s gas market due to rules that require the sale of a unique, more eco-friendly gas blend and a lack of pipelines importing crude oil from other states.
“I encourage this commission to really focus on the root causes,” she said. “We need policies that reduce cost and increase supply to meet demand.”
State taxes and fees account for only about 69 cents of the roughly $1.48 more that drivers in the state pay per gallon, according to an analysis from Consumer Watchdog, an advocacy group. The analysis found the large refiners have posted profits of $67.6 billion in the first nine months of 2022, up from $17.6 billion during the same period last year.
Jamie Court, Consumer Watchdog’s president, said the only solution to prevent such price-gouging must come from the Legislature in the form of a profit cap, which would tax the portion of the industry’s profits that are at historically unprecedented levels and redistribute the money to drivers via a rebate.
“We need that pricegouging penalty, otherwise it’s going to go on again,” he said.