In 2022, California Governor Gavin Newsom signed SB-1322, the Oil Refiner Price Disclosure Act, into law. The law was hailed as a primary step toward transparency, requiring California refiners to report detailed per month knowledge on their gas benefit margins. Specifically, refiners will have to disclose:
Supporters, including customer advocacy outfits like Consumer Watchdog, argued that SB-1322 would disclose “excessive profits” made through refiners and hold them accountable amid California’s notoriously high gas costs. In fact, as this recent Matt Randolph TikTok video shows, Gavin Newsom continues. to claim that oil corporations are ripping off California customers.
However, a little over two years after signing the bill into law, the data tells a different story. Far from uncovering windfall profits, the disclosures reveal razor-thin — and often negative — margins for refiners in the state.
Earlier this year, several public interest groups pointed to the California Energy Commission’s (CEC) knowledge that refineries appeared to earn gross margins (which those outfits incorrectly referred to as “gross profits”) of more than $1 per gallon in 2023. They suggested the CEC impose a penalty for fraud before the summer driving season.
But this interpretation missed a very important point: gross margins do not equal net profits. The CEC defines the gross gas refining margin as the wholesale value of gas minus the cost of crude oil. To calculate the net gas refining margin, refiners will have to subtract refining costs, which averaged just over $1 per gallon in the report during the period.
Since California began reporting its net margins in June 2023, the knowledge paints a very different picture than that presented by advocates for anti-abuse measures. In the last 11 reported months, refiners posted a positive net margin in just six months. The average net profit margin from June 2023 to April 2024 was just $0. 09 per gallon, which is nowhere near the exaggerated profits that critics claim.
If refineries are the main cause of California’s sky-high gas prices, where does the money go?According to CBS 8 San Diego, Californians pay about $1. 40 per gallon in taxes and fees, the highest in the country. Here’s the breakdown:
These taxes and regulatory fees combined with California’s stringent fuel standards — which mandate unique summer and winter gasoline blends — drive up prices far more than the refiners’ net margins.
SB-1322 would possibly have been designed to shed light on oil refineries, but its findings reveal a basic truth: California itself benefits more from gas sales than refineries. When operating prices are taken into account, the profits made through refineries are minimal.
If policymakers and consumer groups really want to address higher gasoline prices in the state, they would be better off examining California’s regulatory and fiscal design than targeting refineries.
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