Trey Paul, FISM News
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Amidst record-high gas prices, state officials in California — where the current state average sits at $6.33 per gallon for regular unleaded — have accused oil and gas companies of gouging Americans already hurting financially. Last week, company leaders with Valero wasted no time pointing the finger back at California’s Energy Commission (CEC).
Scott Folwarkow, Valero’s vice president for state government affairs, targeted California directly for having the highest gas prices in the country by calling it a state with “the most expensive operating environment in the country and a very hostile regulatory environment for refining.”
California has imposed some the most aggressive, and thus expensive and limiting, environmental regulatory requirements in the world. California policies have made it difficult to increase refining capacity and have prevented supply projects to lower operating costs of refineries.
Folwarkow was writing in response to a letter the CEC wrote to oil refinery executives late last month. CEC chair David Hochschild wrote “the oil industry owes California answers” regarding why gas prices are going up even though crude oil prices are going down.
“As you know, crude oil prices are down and industry profits are up, yet gas prices have increased by a record $0.84 per gallon in 10 days in California — a $2.50 difference compared to U.S. prices,” Hochschild wrote.
From there, accusations ensued with Hochschild writing:
This dramatic jump in California gasoline prices occurred despite crude oil prices dropping nearly $10 per barrel below the average price in August 2022 — a savings your industry is not currently passing on to consumers at the pump. During this same period, despite multiple requests, your industry also has not provided an adequate and transparent explanation for this price spike, which is causing real economic hardship to millions of Californians.
Hochschild demanded to know why gas prices have risen so dramatically, what measures the State of California could take to address any logistical obstacles, and why refiners allegedly allowed inventory levels to drop “when they have known for months, or in some cases years, that planned maintenance would occur at this time.”
The short time frame to provide a response was noted in a follow-up letter by Folwarkow. He began the letter by denying allegations of “price conspiracies”, writing on Oct. 3: “As demanded and with one business day to respond, Valero is providing the following response to the California Energy Commission (the “Commission”) letter of September 30, 2022 letter.
He went on to write:
As the Commission knows, and as countless investigations have demonstrated, market drivers of supply and demand, together with government-imposed costs and specifications, determine market price. Ironically, on the same day we received the Commission’s letter, a federal judge in a 103-page reasoned order, following review of thousands of pages of documents and hours of depositions and discovery, yet again threw out another case alleging price conspiracies by the fuel industry finding no basis for the allegations.
Noting “the seriousness of the implications” in the CEC’s letter, Folwarkow addressed “the planned maintenance activity underway” at one of the California refineries, but said company leaders made arrangements in advance to meet the contractual obligations to customers.
Folwarkow hit back further by blaming low gas inventories on a limited supply in the wake of the COVID-19 pandemic.
Congressman Jim Jordan noted the spike in gas prices in this recent tweet: “Gas prices are rising again. Just what Americans need on top of record crime, record inflation, and record illegal immigration.”
Gas prices are rising again. Just what Americans need on top of record crime, record inflation, and record illegal immigration.
— Rep. Jim Jordan (@Jim_Jordan) October 5, 2022
After Valero’s letter was released to the public, California Gov. Gavin Newsom also took to Twitter and promised to call a special session of the state Legislature to pass a new tax on oil company profits.
He tweeted: “I’m calling for a Special Session to address the greed of oil companies. Gas prices are too high. Time to enact a windfall profits tax directly on oil companies that are ripping you off at the pump.”
NEW: I'm calling for a Special Session to address the greed of oil companies. Gas prices are too high. Time to enact a windfall profits tax directly on oil companies that are ripping you off at the pump.
— Gavin Newsom (@GavinNewsom) October 7, 2022
Numerous conservatives, including Republican California State Assembly member James Gallagher, pointed out the obviously counterproductive idea of raising taxes on a product in order to lower prices.
Only in California would someone propose to increase taxes as a solution to lowering gas prices.
— James Gallagher (@J_GallagherAD3) October 6, 2022
At last check, AAA.com data showed the average cost of gas in California was the highest in the nation, about $6.33 a gallon, compared to a national average of $3.91.