California Gov. Gavin Newsom issued a video blaming oil companies’ “greed” and “price gouging” for the state’s gas prices, which, at an average of $4.60 per gallon, are $1.16 above the national average. [emphasis, links added]
Newsom’s energy commissioner, however, disagrees, noting in May testimony that no “price gouging” has been found and that “increasing supply in the market” would best “protect consumers.”
Total taxes and fees add up to approximately $1.62 to the cost of each gallon of gasoline sold in the state, more than the difference between gas prices in California and the rest of the nation.
Of that $1.62, only 18 cents is from federal taxes, meaning the rest is from California taxes and fees.
“What’s going on with the price of gas?” said Newsom in a video on social media. “California’s clean air policies aren’t the problem — greed is.”
Newsom also noted that four companies refine 90% of the gasoline in the state; there are only 10 active refineries in California making gasoline.
Last May, Vice Chair Siva Gunda of the California Energy Commission — appointed by Newsom and commissioner of energy assessments, including energy data — provided testimony to the California Senate Standing Committee on Energy, Utilities, and Communications that comes into conflict with the governor’s message.
When asked by State Sen. Josh Newman, D-Fullerton, if there is “any clear evidence of price gouging in this marketplace,” Gunda said there isn’t, and said increasing the supply of gasoline would be key to reducing price volatility for consumers from when one of the state’s handful of refineries goes down for maintenance.
“By increasing supply in the market, we will reduce the spot market volatility and hence protect the consumers,” Gunda said.
State Sen. Kelly Seyarto, R-Murieta, noted there’s little incentive for companies to build gasoline refineries in a state that is seeking to eliminate gasoline demand.
“Who’s going to invest here? Who’s going to build a refinery here when we’re trying to shut them all down and taking steps to decrease supply faster than we take steps to decrease demand?” said Seyarto at the hearing.
“How many times have we found gouging and collusion? Anybody?” Seyarto continued. “It’s zero.”
Chevron, which has 2,000 employees in California and operates two of the ten gasoline-producing refineries in the state, recently announced it is relocating its headquarters to Houston, Texas.
Read more at Heartland Daily News
I can tell, from comments by Govenor Newsom, that he knows very little to nothing about the petroleum industry and more to the point, how pricing works upstream of the service station.
There are specialists working daily in the oil companies to calculate what it’s costing (their company) to produce a gallon of gas and that calculation can change multiple times during the 24 hour cycle.
Here’s a hint:
Refinery costs; crude costs (and there could b more than two) Shipping (to the refinery); additive costs; – Okay that’s enough, before we get to adding government charges and shipping out of the refineries terminal. (Trucking to the service station)
When a final price is arrived at, that becomes the “refinery price” (at the time) Sales departments are notified and they determine what the selling margin needs to be to (1) be competitive and (2) to ensure a wholesale profit is made. Then a price notification is sent to service stations and distributors who are buying from that refinery/company.
The final part is – what will they sell the gas for? The price motorists see on the boards. That is their decision.
This is how the price of gas that we see on the boards at the service station is arrived at.
My background – I worked for ExxonMobil for 35 years in most downstream departments and I can assure readers that the slightest mistake by pricing analysists could cost a company millions of dollars in a single day. The people doing this critical work, keeping our big oil companies operating profitably are the backbone of the supply chain that the public takes for granted. Bare in mind, I’m talking decimal points of a cent when I say this because the wholesale gross margin – when I was working, was no more than three cents per litre or 14 cents per gallon.
My final comment. Can you imagine what the cost is to our big oil companies when government interference in the industry causes crude prices to fall? That is something most politicians would never understand or, if they did, would not admit it..
American should be proud of the bit oil companies because in more ways that just making gas, they really are the backbone of the country.
Governor Nuisance is still a total idiot just like Moonbeam was Politics over Science