Common sense returns to Virginia as California Governor Gavin Newsom Struggles to defend inane policy. Let’s start with Newsom and gasoline prices.
In a Wall Street Journal Op-Ed, Newsom says “What people pay at the pump isn’t simple supply and demand but the result of a highly concentrated and opaque market.“
Here are the facts. Price spikes—like the $6.42 a gallon in June 2022 that sparked our new price-gouging law—happened when California taxes and fees remained unchanged, and crude prices had actually decreased. What drove up prices were increases in industry profits.
California’s new law provides us with tools to investigate profit spiking by Big Oil, helping us to prevent supply disruptions and take legal action when necessary. Another potential tool to encourage the oil industry to do right by Californians is a price-gouging penalty that will be developed through a public process.
What people pay at the pump isn’t simple supply and demand but the result of a highly concentrated and opaque market that lets a handful of mega-profitable oil companies upcharge tens of millions of people. In California, four companies control 90% of the gasoline refining capacity.
Factors such as refinery maintenance and lack of planning have been shown to reduce supply and increase refinery margins by upward of 200% at a time. California has also found that traders on the open “spot market” drive up prices, benefiting oil companies.
A Concentrated and Opaque Market
OK, why is the market in California concentrated and opaque?
- California has the most regulations of any state
- Refiners tired of California nonsense have left the state
- California seasonal blend requirements have costs. But there’s not just one summer blend. Refineries make more than 14 kinds due to different state regulations.
Two California Refiners Shut Down
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