AG says excessive oil company profits adding to price hikes
SACRAMENTO – California oil companies are adding to motorists’ misery at the pump by making excessive profits on gasoline, Attorney General Bill Lockyer charged Tuesday.
He suggested lawmakers approve an excess profits tax combined with a corresponding cut in the sales tax on gasoline to ease California prices, which are running about 19 cents more a gallon than in the rest of the country.
The average price for a gallon of regular-grade gas in California jumped 43 cents from $1.36 to $1.79 between Jan. 13 and March 20. During the same period, the amount going to oil refineries increased 42 cents from 24 cents to 66 cents, while other cost factors either dropped or increased a few pennies, Lockyer said.
The cost of crude oil, for example went up just 4 cents per gallon and the amount taken by gas stations dropped 6 cents.
”It seems to me that is excessive profit-taking by refineries,” Lockyer told members of two Assembly committees and a subcommittee. ”It has nothing to do with any other factor except they can get away with it.”
He proposed the excess sales tax that would allow oil refineries to make a specified maximum, 40 cents per gallon, for example. Anything over that, the state would take and cut the sales tax on gas by a corresponding amount.
The plan would enable the state to lop 8 to 10 cents off the price of a gallon of gasoline, Lockyer added.
Chevron and Arco, two of the state’s biggest oil companies, challenged Lockyer’s figures.
Chevron spokesman Mike Libbey said the numbers undercalculated the cost of crude oil.
”We are prohibited from discussing our earnings until they are announced,” Libbey said. ”But analysts will tell you that we are pretty close to breaking even in the refining and marketing segment of the business. The reason is that our raw material costs rose so rapidly that it outpaced our ability to recover our costs through price increases for fuels.”
Jeff Wilson, a spokesman for the Western States Petroleum Association, an oil industry group, said an excess profits tax was ”definitely not the free market at work,” and he complained that Lockyer’s suggestions were premature.
”The attorney general has created a gas price task force to look at several different factors that could lead to higher gas prices in California,” Wilson said.
”It’s a little disappointing that he is making recommendations before his own task force meets and draws its own conclusions.”
Lockyer’s proposal is the most recent fuel tax plan to surface in recent weeks in response to the latest gas price spike.
Assembly Republicans want to permanently eliminate the sales tax on gasoline.
Assembly Speaker Antonio Villaraigosa, D-Los Angeles, has responded with a plan to partly suspend the sales tax during the summer months to help hold down fuel costs when many motorists take vacations.
Severin Borenstein, director of the University of California’s Energy Institute, told the committees that just cutting sales taxes probably would not help consumers much, at least not in the short run.
He said that cutting taxes would increase demand for fuel and cause prices to rise.
”The idea that it would be fully passed on to consumers is wrong,” he said.
He suggested that price spikes could be eased by increasing the gasoline supply by allowing the sale of gasoline that meets federal clean air requirements but not the more stringent California standards.
An increase in air pollution could be avoided by adding a surcharge to that fuel and using the extra revenue to buy older, dirtier vehicles from motorists and get them off the roads, Borenstein said.