California Fuel Costs: State Gains More Revenue Than Refinery Companies
California Fuel Costs: State Gains More Revenue Than Refinery Companies
In 2022, California Governor Gavin Newsom approved SB-1322, the Crude Oil Profit Disclosure Act, turning it into law. This legislation was celebrated as a significant step towards transparency, compelling California refineries to provide detailed monthly figures on their gasoline profit margins. Specifically, they need to disclose:
- The price they paid for crude oil
- The retail price of gasoline
- The gross and net profits per gallon of refined gasoline
Advocates for consumers, such as Consumer Watchdog, suggested that SB-1322 would expose the significant profits refineries were making through their high gas prices in California. Newsom himself continues to argue that oil companies are exploiting California consumers, as demonstrated in this recent TikTok clip by Matt Randolph.
However, less than two years after enacting this law, the data points to a different scenario. Instead of revealing lucrative profits, disclosures reveal narrow — even negative — profit margins for refineries in the state.
Gross vs. Net: The Misleading Narrative
Recently, several public interest groups brought up CEC data showing that refineries had gross margins of more than $1 per gallon in 2023. They urged the CEC to impose a price-gouging penalty before the summer driving season.
This assessment, however, overlooked a major point: gross margins do not equal net profits. The CEC defines Gross Gasoline Refining Margin as the retail gasoline price subtracted from the crude oil cost. To determine the Net Gasoline Refining Margin, refineries must deduct operational expenses, which averaged over $1 per gallon during the reporting period.
Since the state started reporting net margins in June 2023, the data presents a stark contrast to the narrative promoted by those advocating anti-gouging measures. In the past 11 months, refineries posted a positive net margin for only six months. The average net profit margin from June 2023 to April 2024 was merely $0.09 per gallon — far from the substantial profits critics claim.
Where Do the Gasoline Dollars Go?
If refineries are not primarily responsible for California's astronomical gas prices, where does the money go? According to CBS 8 San Diego, Californians pay approximately $1.40 per gallon in taxes and fees — the highest in the US. Here's the split-up:
- State Excise Tax: 57.9 cents per gallon (as of July 2024)
- Federal Excise Tax: 18.4 cents per gallon
- Cap-and-Trade Program: 23 cents per gallon
- Low-Carbon Fuel Standard (LCFS): 18 cents per gallon
- Underground Storage Tank Fee: 2 cents per gallon
- Sales Tax: Approximately 3.7% of the retail price
The following taxes and regulatory fees, combined with California's strict fuel standards — which mandate unique summer and winter gasoline mixes — lead to substantial price increases that far outweigh the refineries' net margins.
Conclusion: Who's Really Behind California's High Gas Prices?
While SB-1322 may have been designed to highlight refiners, the results show a compelling truth: California itself generates more revenue from gas sales than the refineries do. Once operational expenses are accounted for, the profits made by refineries amount to a minor figure.
If policymakers and consumer groups are genuinely committed to addressing high gas prices in the state, they would be wise to examine California's tax and regulatory framework instead of accusing the refineries.
- Despite approving SB-1322 in 2022, California gas prices continue to be high, leading some to question who profits from these prices.
- According to CBS 8 San Diego, Californians pay around $1.40 per gallon in taxes and fees, the highest in the US.
- Oil refiner profit margins in California, as disclosed under SB-1322, have been narrow or even negative, contradicting initial assumptions.
- Cap-and-trade gas fees, federal excise tax, state excise tax, the Low-Carbon Fuel Standard, underground storage tank fee, and sales tax contribute significantly to the high gas prices in California.
- The California Energy Commission data from June 2023 to April 2024 shows an average net profit margin of only $0.09 per gallon for refineries, challenging the notion of substantial profits from California gasoline sales.