2015 may be remembered as the year that refiners swindled Californians at the pump and bamboozled lawmakers in the Capitol – and got away with it.
It's true, if you’re an oil company looking at the world market today, things don’t look great. The price of crude oil has collapsed so low (below $40) that it is no longer worth the expense of drilling for it. Meanwhile, the profitable portion of the business, the sale of refined products – is being philosophically attacked across the world for their connection to climate change.
But enter California, the third largest gasoline market in the world after the United States, as a whole, and China, and the state that has historically paid a few dimes more for its gasoline. It's also a state with important environmental protections, but very little regulatory oversight over the gasoline market. Politicians have had no stomach for that confrontation. So this is the place where many oil companies have turned to keep their companies profitable. Much like the decision Enron made to target California – a rich state, large enough to be its own country – large enough to make a few billion, but since it’s only one state, it won’t garner too much attention.
To understand that point, look at the report Consumer Watchdog released Thursday on the oil industry in California. Tesoro and Valero had their best quarters (Q3 2015) and years (2015) ever for refining in California. Chevron, which doesn’t release state-specific information, also had their best year-to-date and quarter ever in United States refining. A majority of Chevron’s refining takes place in California – meaning a huge portion of that profit comes from the state.
California is where the oil industry can make a profit and blame high gas prices on the state with the best environmental regulations in the world. Unfortunately for the industry, the truth is in public the data – which the California Energy Commission provides – that shows that refiners made more per gallon of gasoline than ever before.
And the refiners have made sure that they won’t lose their profit center. To protect it, the oil industry had a record quarter for lobbying. For Valero, Tesoro, Chevron, and major oil lobbyist the Western States Petroleum Association, 2015 represented the most spending they’ve ever done in the first three quarters of a year.
The oil companies were fighting the usual battle against regulations regarding the environment, toxics, and climate change. They also avoided scrutiny over the price spike. But this time around, there was one specific piece of legislation that would have been a significant blow to the industry - SB 350, a bill that would have reduced petroleum use in the state by 50% by 2030. On track to make history, the petroleum portions of the bill were derailed in the last days of session as millions of dollars worth of ads flooded TV & radio across the state, saying California was trying to ration gas, and would cause gas prices to rise.
The oil industry has decided our golden state is its golden goose, and its gold-plated lobbyists are here to remind politicians not to get in the way.
