Study: Texas-Based Valero Gouging California Drivers For A Decade

Tue, Oct 12, 2010 at 12:30 am

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Study: Texas-Based Valero Gouging California Drivers For A Decade

Top Prop 23 Funder Doesn’t Want Greentech Competition To Get in Way of Profiteering

Santa Monica, CA – A new report by Consumer Watchdog’s OilWatchdog.org project finds that Valero Energy reaped over $4.5 billion in refining profit while gouging California motorists since it bought its second California refinery in 2002.  The oil refining giant, which is also the largest funder of Proposition 23, averaged 37% higher margins on each barrel of oil it refined in California than at refineries it owns elsewhere in the country, according to data published in company financial reports.

Read the full report and accompanying charts and data.

The nonprofit, nonpartisan Consumer Watchdog said today that the Texas-based Valero reaped billions from its California operations while Californians were paying substantially higher gas prices than drivers across the country.

“Valero has made more money per barrel in California and gas prices have been higher here than the rest of the nation, said Consumer Watchdog Executive Director Douglas Heller.  “California has been a gold mine for Valero and it wants the gold rush to continue, by curbing green-tech competition and keeping prices at the pump as high as possible. ”

According to the report:

•    Valero’s net refining margins in California have been 37% higher per barrel than those from its refineries in other regions since 2002.
•    Profits have been highest in California for the company during periods of steadily rising gasoline prices; Valero earned more than $1 billion in California refining profits in 2006 alone.
•    Higher than average gasoline prices in the West, created by artificially low supplies during periods of high demand, have been Valero’s recipe for big profits.

“Valero was not in the public consciousness until it started funding Prop. 23 this year, but it has been in our pocketbooks for almost a decade, making billions of dollars by gouging California drivers,” said Judy Dugan, who directs Consumer Watchdog’s OilWatchdog.org project.

Valero Counts On High Gas Prices In California

Valero’s ability to exact outsized profits from California depends on high pump prices because, unlike integrated oil companies like Chevron, it doesn’t extract crude oil, it only refines oil and sells its products at retail gas stations.  This means that refining margins are central to its profits.  During the recession, Valero  has been selling off refineries in the Northeast, but has held onto its California refineries with the expectation that it will resume getting outsized California profits by keeping refined gas supplies tight and charging high prices for gasoline in the state.

The report noted, however, the ability to tighten gas supplies in California – a key component of the price gouging strategy of Valero and other refiners as found in state investigations, lawsuits and Consumer Watchdog studies – could be limited by new environmental rules that support green alternatives to oil and less dependence on gasoline in California.

“In order to continue sending billions of dollars from California to Texas, Valero needs to ensure that nothing hampers refiners’ ability to short the market and gouge drivers,” said Dugan.
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Consumer Watchdog is a nonpartisan consumer advocacy organization with offices in Washington, D.C. and Santa Monica, CA. Consumer Watchdog’s OilWatchdog.org project publishes reports, news and analysis about the oil industry. Find us on the web at: OilWatchdog.org and  ConsumerWatchdog.org

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This post was written by:

Doug Heller

- who has written 7 posts on Oil Watchdog.

Doug Heller is Consumer Watchdog's Executive Director. Heller advocates on behalf of consumers on a range of issues including insurance, energy and political reform.

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14 Responses to “Study: Texas-Based Valero Gouging California Drivers For A Decade”

  1. Earl Richards Says:

    The California Jobs Initiative (CJI) is an oil corporation farce and fraud. There is no connection, whatsoever, between greenhouse gas emission reduction and the loss of jobs. This notion is an insult to the intelligence of the people of California. In fact, there is job growth in the clean, renewable energy industry. Chevron employs 65,000 worldwide and CJI is not going to change this. The only jobs created by the oil industry are clean-up jobs after oil spills and deep water, blow-outs and pump-handler jobs. CJI will make fantastic profits for the oil industry, increase air pollution, especially in communities around their refineries and there will not be lower gas prices. Koch Industries, Valero, Marathon and Tesoro are super Enrons. Since when did the oil companies start to show any concern for the unemployed and their families and for small businesses?

    Reply

  2. Earl Richards Says:

    The oil companies, collectively, are similiar to a public utility, because there is no business competition to keep the price of gasoline down. Therefore, the oil companies have to be tightly regulated by the government, in the public interest, to ensure that there is no price fixing, no price gouging, no fraud, no excessive profiteering, no lax safety standards, no environmemtal destruction, no public health risks, no accounting tricks, no corruption, no collusion, no transfer pricing and no illegal tax loopholes.

    The Commodities Futures Trading Commission and the FTC are ineffective in controlling the oil corporations; therefore, the state government has to form the CALIFORNIA OIL PRICE REGULATION COMMISSION, to receive and investigate compliants, in the consumers’ interest, and to regulate the California oil industry. The price of gasoline has to be decided by COPRC and not determined by the fraudulent “round-trip” trades of the “dark pool”trading on the Intercontinental Exchange (ICE) in Atlanta. ICE operates outside of U.S. law and is owned by the international Big Oil/big banking cabal. ICE can ratchet-up the price of oil, anytime they feel like it, through the use of “round-trip” trades. Google “The Global Scam”. The price differential betwen the ICE price and the lower California price has to be decide by COPRC, and not decided by the market manipulation and excessive speculation of non-California interests. ICE is a super Enron. Oil is too critical a resource to be under the control of greedy stockholders, greedy directors, greedy executives and greedy oil/banking corporations.

    Reply

    • scoop Says:

      Earl, the place for you is Mexico. Pemex owns and controls all gas stations there. They do as you suggest…control the prices as well. Last thing we need here, is the govt. running the oil industry. They already own the auto and insurance companies, and you can see how the govt. manages their budget. As for no competition between oil companies, next time you fill up, please look across the street where you will see a different oil company selling gas. That is not competition? Guess what, if the price is too high, I drive to another station. What other business posts the price of their product where it can be seen from the street. Before you suggest a govt. takeover of the oil industry, try Mexico first.

      Reply

  3. Joe Doherty Says:

    Prop 23 is a bad idea, I hope it loses, and I hope the money spent by Valero and others is a lesson to them to stay out of our politics (a lesson never learned). But the little I know about oil industry economics and Valero in particular suggests that this is a red herring. I’m not in the industry, and not a shill for anyone but myself. I just can’t stand bad analysis. This is how I see it.

    Most companies refine sweet light crude (most of it imported), which is expensive to buy but cheap to refine. Valero made a decision years ago to convert its refineries to sour crude (much of it domestic), which costs more to refine but is cheaper to buy. Right now Valero’s bet is paying off because the price difference between sweet light and sour is large (about $8/bbl today), and the extra cost of refining is more than compensated by the difference in price. Since the market price for gasoline is dominated by refiners of sweet light, they aren’t “gouging.” By refining sour crude they are increasing the supply and possibly depressing the price.

    At least that’s what I think is going on.

    Reply

  4. Jah-Jim Says:

    Actually, Valero makes it’s inroads to California gas consumers by selling their gasoline for LESS that all the other oil companies, so if Valero is gouging us, what do you call what Chevron, Shell and all the others are doing to us???

    Valero is in the public mind for two reasons, 1) their nations President has the balls to tell the US and it’s President to take a long walk off a short pier, something we’ve apparently needed to hear for a long time, and 2) They offer more value for the same money compared with ANY other oil company and 3) NOT because of some recent proposition.

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  5. Jesse Says:

    You fail to mention it this post that California’s demands for clean fuels raises the price at the pump due to the extra refining operations used to create this fuel. You take a number like 37% but I doubt you’re factoring in cost to refine it. It’s easy to throw some words out there to trick many people with propaganda but there are others out there who see past the B.S. Now with proposition 23 likely being “ousted”, alternative fuel investors can eliminate competition under the guise of “creating a better tomorrow” which is exactly what they’re after. You think California fuel prices are too high now? Wait 5 to 10 years. Californians will get exactly what they got coming to them,……..all at the expense of the customer!

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Trackbacks/Pingbacks

  1. California Pension Funds Should Divest From Price Gouging Oil Firms Behind Prop 23 | Oil Watchdog - 16. Oct, 2010

    [...] 20-21 of the slides).  We also cited recent findings from our Oil Watchdog project report Valero Energy and Its California Profit Pipeline that, because of this West Coast Premium, Valero nets 37% more per barrel refined in California [...]

  2. Tesoro Banks On High Gas Prices In California, Touts “West Coast Premium” | Oil Watchdog - 18. Oct, 2010

    [...] Last week, Consumer Watchdog also published a report showing that since 2002 Valero Energy’s net refining margins in California have been 37% higher per barrel than the company’s margins in other parts of the country. During that period, Valero reported $4.5 billion in operating profits from its California refineries. That report can be viewed at http://www.oilwatchdog.org/2010/10/study-texas-based-valero-gouging-california-drivers-for-a-decade/. [...]

  3. Valero ‘Eve of Destruction’ Was a Big Fake | Oil Watchdog - 14. Dec, 2010

    [...] Consumer Watchdog study, however, proved that Valero was only interested in staving off competition from green energy [...]

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