Sunday, January 29, 2023

California governor on oil industry: “They think they can get away with it”

SAN DIEGO — California Governor Gavin Newsom is making an intervention to start 2023 by standing on the opposite corner of the oil industry.

“They’re taking advantage of you because they think they can get away with it,” Newsom said during a special legislative session on Monday.

He didn’t hold his ground while accusing the five biggest companies operating in California.

He asked the new legislature to introduce a new law that would tax the oil industry on every dollar of profit it deemed windfall.

“The new tax is not the solution, as I am telling you, there are many factors that contribute to the cost of fuel,” said Argelia Leone, spokeswoman for the Western Petroleum Association (WSPA).

Lyon said the war in Ukraine, lack of infrastructure and oil production in California and other market demands are what determine the cost of gasoline.

Last week, Newsom also showed video of several empty chairs reserved for the five refineries during a special hearing by the State Energy Commission.

The objective of the meeting was to understand why companies posted record profits this year while motorists paid huge sums to fill their tanks with fuel.

“No matter what we say, (Newsom) will always be against industry,” lamented Lyons, who assured that the solution does not lie in adding even more state taxes.

He said the association had come for a hearing on behalf of the industry, but companies cannot hold open talks on pricing issues as it is an anti-trust issue.

How did we get to this point?

We’re paying $4.58 per gallon of gas through 2022. By June, this cost had increased from more than $1.70 to $6.29. An increase that came despite the fact that there has been no change in state regulations.

Besides, there are profits of the industry.

In the third quarter of 2022, Phillips 66 projects a profit of $5.5 billion, compared to $402 million in the same quarter last year.

Marathon Petroleum recorded $4.5 billion in 2021, compared to more than $694 million.

Valero posted $2.8 billion compared to $463 million a year earlier.

PFB Energy’s earnings reached more than a billion in profit, while during the same three months of 2021, it had an income of $59 million.

Lastly is Chevron. The company saw one of its best quarters ever, generating over $11 billion compared to last year’s $6 billion.

The WSPA explained that these gains are due to increased demand for gasoline, and when there is not enough of it, the cost goes up and that’s what it explains.

But some economists said these costs, and then a little more, are what is being passed on to the consumer.

“The big oil companies sell oil and gasoline,” explained Alan Jin, an economist and professor at the University of San Diego (USD). Jin said the companies control the entire process from producing oil to selling gasoline.

“That’s why we see record profits with oil companies,” Jin said.

On the other hand, a new state law will take effect on January 1 that will require oil companies operating in California to report details of their earnings on a monthly basis.

Which could shed light on whether the industry makes more money selling gasoline to Californians than other states across the country.

It’s unclear how the governor would characterize an extraordinary benefit, but we’ll await his proposal as it moves through the legislature.

Nation World News Desk
Nation World News Desk
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