California Democrats demanded answers from gas companies for still skyrocketing gas prices, accusing oil and gas producers and refiners of raising prices more than necessary in order to rake in profits.
“Here are the facts: Crude oil prices are DOWN. And yet…gas prices are up. That’s because greedy oil companies are ripping you off,” California Governor Gavin Newsom tweeted on Thursday, saying that he planned to tax the oil companies more in response. “They are raking in record profits at your expense. I’m calling for a new tax on these corrupt oil companies to put money back in your pocket.”
California Department of Energy Chair David Hochschild demanded answers from the industry, tweeting, “Last week I asked the oil industry for answers about the recent gas price spike placing an unacceptable burden on Californians. Maintenance alone cannot explain a sudden $1.54 increase in what refineries charge for every gallon of gas.”
Last week I asked the oil industry for answers about the recent gas price spike placing an unacceptable burden on Californians
Maintenance alone cannot explain a sudden $1.54 increase in what refineries charge for every gallon of gas
My full statement ➡️ https://t.co/Z5IXvKgySa pic.twitter.com/jytPr7vXQj
— David Hochschild (@ChairHochschild) October 6, 2022
Texas-based Valero Energy issued a response — with one day to spare — and laid out a litany of reasons that serving the California market was an uphill battle for any energy company.
NEW: VALERO responds to California’s demand for answers recent gas price spike.
“As demanded with one business day to respond…”
“California is the most challenging market to serve in the United States for several reasons.” pic.twitter.com/r2T2UQleme
— Ashley Zavala (@ZavalaA) October 8, 2022
“For Valero, California is the most expensive operating environment in the country and a very hostile regulatory environment for refining,” Scott Folwarkow, Vice President of State Government Affairs wrote in the letter. “California policy makers have knowingly adopted policies with the expressed intent of eliminating the refinery sector. California requires refiners to pay very high carbon cap and trade fees and burdened gasoline with cost of the low carbon fuel standards. With the backdrop of these policies, not surprisingly, California has seen refineries completely close or shut down major units. When you shut down refinery operations, you limit the resilience of the supply chain.”
Folkwarkow went on to explain that California had mandated a special fuel blend that was not available in other parts of the country — meaning that it had to be specially formulated and that in times of shortage, additional supply could not be simply shipped in from elsewhere.
“From the perspective of a refiner and fuel supplier, California is the most challenging market to serve in the United States for several reasons,” he wrote, adding, “California has imposed some of 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 concluded by warning the state that additional taxes and regulations — such as the tax proposed by Newsom — would very likely only serve to make the situation even worse.
“We believe the Commission experts understand that California cannot mandate a unique fuel that is not readily available outside of the West Coast and then burden or eliminate California refining capacity and expect to have robust fuel supplies,” he wrote. “Adding further costs, in the form of new taxes or regulatory constraints, will only further strain the fuel market and adversely impact refiners and ultimately those costs will pass to California consumers.”
