Watchdog Tells AC Assembly Select Committee State’s Pain at Pump Needs New Oversight, Excess Profits Tax, New Excessive Price Standards and Update antitrust laws
LOS ANGELES, July 22, 2022 /PRNewswire/ — President of Consumer Watchdog Jamie Court called on the California Assembly Select Committee on Gasoline Supply and Pricing to address recent extreme profit taking by California consolidated oil refineries and consider the strongest possible responses, including the recovery of excess profits.
“Industry consolidation has allowed five oil refiners to control 96% of the gasoline produced in California“, Court wrote to the Assembly committee. “When the opportunity arises to rush us, they can and they do.
“The cause of the current gap between California gas prices and US prices is clear: extreme profit taking by California major oil refiners,” Court continued. “The proof is in the earnings reports for the first quarter of 2022. California Oil refiner margins — the difference between the crude they buy and the gasoline they sell — are at all-time highs according to reports provided to investors. Second-quarter earnings reports, due later this month, may be even more revealing.”
“This committee can either accept that this is an unrestricted commodity market that will allow extreme profit taking by oil refiners or propose new restrictions on this market,” Court warned. “The high cost of gasoline affects every Californian. In order to address this problem, dramatic action must be taken.”
Read the full court testimony: https://consumerwatchdog.org/sites/default/files/2022-07/LtrAssemGasPricingTaskforce%207-22-22_0.pdf
The Court noted a solution already pending in the California Assembly. Senate Bill 1322 (Allen) requires petroleum refiners to report their actual crude oil costs and actual refining margins (gross and net) to the CEC on a monthly basis and that the CEC publish margin information. The bill was passed by the Senate and the Assembly’s Natural Resources Committee.
“To protect consumers, more information on California refiner operations must be made public so that market watchers and others are able to monitor and hold the market accountable,” Court said. “SB 1322 is a small step
Consumer Watchdog also made the following recommendations for new laws.
Tax on Excess Profits: An excess profit limit should be set for California oil refiners. When their profits per gallon exceed a certain amount or are greater by a certain percentage than their profits from operations elsewhere in the country, those profits must be recaptured in the form of an excess profits tax. In response to Shell’s excessive profits, the British government instituted such an excessive tax on profits.
New Watch: “History has shown that the California Energy Commission is ill-equipped to oversee this industry, let alone regulate it, which it currently has no power to do anyway. We have allowed our largest market, the one that causes inflation in all others, to be unregulated.
“California needs a new gas pricing czar with the power to see oil refiners’ books, get full subpoena power and be able to get real-time earnings information , supply, costs, etc. We just passed $9.5 billion in return to the public for the high price of gasoline. It’s time to create new oversight to make sure we get the money back if we’ve been scammed.”
New standard of price gouging: “Excessive pricing laws only apply after a state of emergency,” the Court noted. “They stipulate that no price increase should exceed a certain percentage unless it is justified by the cost. A new law on excessive gasoline prices could be enacted to prohibit such similar price increases at the pump if they are not justified by the cost, regardless of the declaration of a state of emergency.
Collusion and updating anti-trust law: “When the Big Five refiners want to rush us, they can. Absent evidence of a tacit agreement between them to do so, there is no anti-trust case against them. California must update its anti-trust laws to create a new normal for the kind of tacit collusion that exists in the gasoline market.
“Refiners share gas price information with each other in the form of the Lundberg Survey, a detailed corner-by-corner gas station price survey that is not available to those who do not part of the industry. This allows companies to know what their competitor is charging each gas station owner for gasoline. This type of information sharing between refiners should be considered a tacit agreement that constitutes a violation antitrust laws. In addition, refiners have shared storage facilities and terminals. When they know how much supply their competitors have and how much they charge for that supply, they can collude. This shared information allows competitors to act like a cartel even though there is no smoky back room where they have agreed on a fixed price. This type of information sharing between companies should be severely restricted. nt under penalty of antitrust prosecution. »
SOURCE Consumer Watchdog