And the Gov. Gavin Newsom calls for a special session of the Legislature to discuss instituting a windfall profits tax on oil companies after a rise in gas prices in California, the price per gallon fell for the second straight day.
The average in the regular San Diego area fell nearly a penny on Thursday and nearly three cents a gallon on Friday, settling at $6.395, according to AAA of Southern California. That’s not much but it was the first time since September 1 and 2 that prices fell for two consecutive days.
Statewide, the average price also fell slightly over the past two days, opening Friday morning at $6.392 a gallon.
“It looks like (prices) have been depressed so far, and hopefully we’ll start to see some drops at the pumps,” said Auto Club of Southern California spokesman Doug Shupe.
One of the reasons for the dip, Shupe said, is that California refineries are slowly ramping production back up after a series of at least five planned and unplanned outages that sent West Coast gasoline inventories at drop to unprecedented levels.
But David Hackett, president of Stillwater Associates, a transportation energy consulting company in Irvine, said a more direct cause stems from sudden, sharp drops in the wholesale price of gasoline.
Citing figures from the Oil Price Information Service, a price reporting agency, Hackett said the spot price in California fell about 25 cents a gallon on Monday and slipped another 25 cents on Tuesday. On Wednesday, the price fell $1.20 and then fell 5 to 10 cents on Thursday.
That’s about $1.80 in total, Hackett said. “It becomes very strong,” he explained, in large part because of Gov. Gavin Newsom raised the annual switch from California’s summer-blended gasoline to cheaper winter-blended gas to help reduce prices.
Normally, winter blending goes into gas station supplies starting Nov. 1, but Newsom last week ordered the Air Resources Board to accelerate the transition.
The winter blend has not yet made its way into supplies but the spot market declined “mainly in anticipation” of the switch, Hackett said. “So while it will be a few days before the gasoline (winter blend) comes up, as a practical matter this has popped the bubble in the spot market.”
But even with the slight reversal on Thursday and Friday, California drivers are paying an average of $1.11 more for regular-grade gasoline than they did one month ago — a 21.1 percent increase — and $1.96 more than a year ago.
“We expect prices to start moving lower from here. How much lower? That’s the big question,” Shupe told AAA. “We don’t know how quickly they’re going to go down, but we expect the prices to move closer to what we saw over the summer when they were in that mid-$5 range.”
A surge earlier this year saw the average price in the Golden State blow past $6 a gallon at the end of May. This was followed by a steady decline before the recent reversal pushed prices to record highs this summer.
As a result of the price spike, Newsom announced Friday afternoon that he will be calling a special session of the California Legislature, leading lawmakers to Sacramento on December 5.
“I’m demanding a Special Session to address the greed of oil companies,” Newsom said via Twitter. “Gas prices are too high. It’s time to enact a windfall profit tax directly on oil companies that are ripping you off at the pump.”
NEW: I’m calling for a Special Session to fight the greed of oil companies. Gas prices are too high. It’s time to enact a windfall profit tax directly on oil companies that are ripping you off at the pump.
According to the governor’s office, companies that extract, produce and refine oil would pay a higher tax rate on earnings above a set amount each year. Any additional revenue would go to California taxpayers in the form of rebates or refunds, the Sacramento Bee reported.
Newsom’s announcement comes two days after the California Energy Commission took shots at the oil industry. Chairman David Hochschild sent out a news release saying, “the recent sudden increases in pump prices are unacceptable,” and called the oil and gas trade group’s response “misleading.”
The commission – whose five commissioners have each been appointed or reappointed by Newsom – sent a letter last week to the five major refiners that lead California’s refining market, asking them for explanations.
As of Friday, the commission had issued responses from two refiners – Valero and PBF Energy, which operates one refinery in Northern California and one in Southern California.
PBF said that since 1980, about 1 million barrels per day of refining capacity has been shut down in California and “there are only a few refineries outside of California” that can import gasoline that meets the state’s blending regulations. separate fuel.
Regarding questions asked by the commission about the drop in gasoline inventory, PBF said that state and federal antitrust laws “will not allow us to discuss current or planned inventories” and those laws already prohibited refiners from scheduled maintenance coordinate with each other.
Valero, in its response, said California is “the most expensive operating environment in the country and a very hostile regulatory environment for refining. California policy makers have knowingly adopted policies that are intended to destroy the refinery sector.”
The Energy Commission indicated in its Wednesday news release the consequences but did not outline them.
“All options are on the table to ensure that Californians are not paying higher gas costs at the whims of the oil industry,” Hochschild said in his statement. “Furthermore, the CEC will use all tools at its disposal to obtain answers, and any necessary remedies will be considered if a response is refused.”
On Friday, state officials began distributing what is known as the Middle Class Tax Refund that will send direct payments of up to $1,050 — depending on income status — to state residents. The payments will go to all Californians who qualify, regardless of whether they are registered drivers or not. Owners of electric vehicles also qualify.
Internationally, the Organization of the Petroleum Exporting Countries and a coalition of selected crude oil-producing nations – known as OPEC + – announced earlier this week a cut of 2 million barrels per day from the global market.
California typically imports more than half of its crude oil from foreign countries, including OPEC+ members as well as non-OPEC countries such as Brazil and Colombia. However, fuel analysts predict that the production cut will have little immediate impact on California gas prices.
“Right now, what’s going on is that the price of gasoline is disconnected from crude oil because of the refinery problems” in California, said Hackett of Stillwater Associates. “Prices have a long way to go before they get to the point where they are affected by crude oil prices.”