You can hate on California for being too environmentally overbearing. But you might want to hear what it’s doing about the extreme gas prices running concurrently with record oil company profits. California has especially high prices, with an average price of $4.71 as opposed to the national average of $3.38. There are reasons why California’s gas prices are more, but there are plenty of questions as to why prices are so high when they’re making billions of dollars in profit per quarter.
California says gas prices are gouging residents
A man refueling his Ford F-150 at a gas station | Craig Hartley/Bloomberg via Getty
The state has determined that under the current circumstances, the state is being price gouged. So it is holding a special session to strategize how it should penalize the oil companies. “Either Big Oil reins in the profits and prices, or they’ll pay a penalty,” says Cali governor Gavin Newsome. “Big Oil has been lying and gouging Californians to line their own pockets long enough. I look forward to the work ahead with our partners in the Legislature to get this done.”
Phillips 66 has seen a 1,243 percent increase in profits year-over-year. PBF Energy recorded profits 1,700 percent higher year-over-year. Over at Exxon, it has recorded its highest earnings ever. But with inflation, mostly fueled by high gasoline prices, and the combined Soviet sanctions limiting global crude oil sales, as good citizens there has to be a certain amount of consideration by the oil companies. There is fiduciary responsibility, but at some point does it step into plain and simple greed?
How will California penalize companies with excessive gas prices?
E15 fuel offered at a gas station highway | Thierry Monasse/Getty
The state wants to impose civil penalties if the companies hike per-barrel oil prices proportionally higher. If the state determines the oil companies have exceeded certain margins, the penalty will kick in. California’s Energy Commission would impose the penalties.
The special session will determine what margin falls into the “excessive” category. Once the funds are collected they would go into a pool that gets parsed back to Cali residents. The legislature also wants the state to have oversight of refiners in the surf and sun capital.
Over the years the state has been unable to get oil producers to define how they determine their prices. That, and why certain refineries are shut down for maintenance or repairs during peak gasoline demand. Just two weeks ago it opened a hearing for oil companies to explain their pricing. The companies were all a no-show.
Isn’t the reason Cali gas prices are high because of unique blends?
A BP gas station pump in New York City | Michael M. Santiago/Getty
A certain percentage of the difference between Cali oil prices and the rest of the country is justifiable. The state requires special gasoline formulations, which raise the cost of manufacturing. It goes so far as to require both summer and winter blends. These uniquely configured gasoline components cost more to manufacture. And changing over from summer to winter blends also costs more to complete.
Fiduciary responsibility to shareholders is hurting the consumer population. Yet, it seems like an uneven tradeoff. And it becomes a slippery slope when Big Government starts interfering with capital markets. High gas prices are affecting you. Do you agree with California’s plan?