A year ago, Exxon's Torrance refinery suffered an explosion that brought the refinery's gasoline production to a halt. Since then, Californians have been on a gas price roller-coaster, paying the highest costs in the nation while the industry claims they are scrambling for gasoline.
Exxon's refinery supplies 20 percent of Southern California’s gasoline, and its shutdown has cost drivers more than $10 billion over what the rest of the US pays for gasoline in the course of a year. Californians usually pay 20 or 30 cents per gallon over the national average, but throughout much of 2015 Californians paid a dollar more per gallon than the national average.
Here are six takeaways from this disaster for California consumers:
- No one regulates refineries in California or how they price their gasoline. Piecemeal regulation from air emissions to worker safety ensures that no one regulator looks critically and in totality at the causes of industry’s refinery outages, shoddy maintenance, or price manipulation that leads to huge gas price spikes. Regulatory fines are a wrist-slap.
- No one can force oil refiners to provide information about their accidents. You can’t even get Exxon to answer US Chemical Safety Board subpoenas about its Torrance operations and what caused the explosion that took out a 12-story piece of air pollution equipment, narrowly missed killing four workers, and avoided by a hair’s breadth touching off a Bhopal-like explosion of highly dangerous Modified Hydrofluoric Acid stored on site and used to make gas. The fines charged are useless. The Chevron Richmond accident in 2012 sent thousands of people to the hospital, but the company paid just $2 million in fines while Californians paid hundreds of millions in increased gas prices.
- Four refiners, Chevron, Tesoro, Phillips & Valero, control 78% of the state’s refining capacity. If that doesn't sound like a competitive market, you're right. California now is the world’s eighth-largest economy and number three for gas guzzling after the United States and China. Exxon isn't even one of these Big Four but when Torrance went down gas prices went through the roof. That's because the oligopoly took advantage of the explosion to jack up prices. Tesoro, Chevron and Valero reported record 2015 profits from oil refining in Califonia.
- California refiners export gasoline year-round, sometimes at the height of price spikes. They often ship finished gasoline to other nations and other states in the middle of a price crisis. No state officials comprehensively track imports and exports of gasoline and commercial oil price information services often miss many of them because no one compels oil companies to report them all. Our lastest report, "Against The Tide: How Missing Tankers Pumped Up Gas Prices and Refiner Profits," demonstrates how Exxon refused to import gasoline to make up for its deficits from Torrance, but instead drew down the state's gasoline supplies to pump up prices, and how Chevron exported to other nations at the height of the crisis. Exxon's only flagship vessel capable for making gasoline deliveries between US ports and to California was mysteriously on a 140-day voyage, including 70 days in Singapore, without bringing any gasoline to California.
- The street price of gasoline in California is barely connected to the cost of crude oil, and not at all to the cost of refining. Refiners have shown that they can simply charge whatever they want for their product and captive consumers will pay it. Refiners have forced branded stations under contract to pay far higher prices for gasoline than refiners that sell it on the wholesale market. Still, unbranded stations are making a killing too by marking up the price drastically.
- Refiners misrepresent the costs of switching away from deadly Modified Hydrofluoric Acid (MHF) used in the refining of gasoline. In California, only two refineries still use MHF and the rest use Sulfuric Acid. The company purchasing the Exxon Torrance refinery, PBF Energy, claims that “no commercially viable alternative” to MHF exists. In fact, for $64 million, Exxon Torrance could switch to a far safer solid-acid catalyst, according to chemical engineers. Switching to Sulfuric Acid, which is far safer but still kills refinery workers every year, would cost twice that price.