The rest of the country is happily watching gasoline prices sink as the latest bubble in oil crude prices springs a leak. Except California. Nationally, gasoline prices are down more than 15 cents a gallon over the last month, according to the daily AAA fuel gauge. California drivers are still cringing, with prices up more than 15 cents a gallon in just the last two weeks.
What gives? As usual, it’s the refineries. There are only 12 refineries supplying gasoline in the state, according to the California Energy Commission. Several of them are fully or partly shut down, for repairs or “scheduled maintenance” or just because the owner thinks refining gasoline is temporarily not profitable enough. This restriction in the state’s gasoline supply can go on for as long as refineries wish–the state has no authority to demand that scheduled maintenance be more rationally planned or efficiently conducted, or to investigate whether a plant owner is playing games with our pocketbooks.
The bottom line is that California, because it’s not on any major gasoline pipeline network, can’t bring in supplies to counter refinery shutdowns, is stuck with whatever shortage-induced gasoline price the refineries want to impose. If they can make up on profit what they lose on production, it’s just dandy for their bottom line. The extra profit that refineries generally make in California even has a name in the industry: “West Coast Premium.”
According to a 2009 investor report by the Texas-based refiner Tesoro, West Coast refineries have an average margin that is $8.50 per barrel higher than those operating on the Gulf Coast.
Given the power that refiners’ restrictions of gasoline supply have on gasoline prices, the state should have more regulatory power over refinery operations, modeled on regulation of power companies. The refiners would be guaranteed a modest but steady profit, and would in return have to guarantee a steady, reliable gasoline and diesel fuel supply. The new oversight would be more than paid for with a modest extraction tax on oil drilled in California–something every other oil-producing state enacted long ago.
Another conclusion from current gasoline prices in the state is that drilling more in California–off the coast, in deep shale, or by using dangerous superhot steam to wring more from old oilfields–won’t lower pump prices by a penny. Oil prices are going down now because speculators finally had to admit that there is no shortage of oil in the U.S. or in the world, but California drivers haven’t seen a penny of benefit.
California, even if it could produce every drop of oil that the state uses, would still be largely at the mercy of refiners.
17. May 2012 at 12:16 pm
The oil corporations are similiar to a public utility, because there is no business competition to keep the gasoline price down. Their gasoline prices go-up together, meaning price fixing and collusion. 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 environmental destruction, no public health risks, no accounting tricks, no corruption, no collusion and no illegal tax loopholes.
The state government has to form the California Oil Price Regulation Commission (COPRC), to receive and investigate comsumer complaints and to regulate the oil industry. The price of gasoline has to be decided by COPRC and not the refiners, after an investigation in the production and transportation costs, because there are 3.5 billion barrels of oil in the ground in California, so the price of gasoline should be the same as in Saudi Arabia, about 60 cents a gallon. The refineries shutting down at the same time, suggests another Enron-type, rip-off. Jerry Brown should look into this.
Gasoline prices are rising in California and falling the rest of the nation, because this is Big Oil’s revenge against Caliifornia for voting for the Democrats and for not approving Proposition 23. Oil is too critical a resource to be manipulated and controlled by greedy refiners and greedy corportaions.
8. December 2012 at 1:43 pm
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