The Californer - California: Debunking Big Oil's lies ahead of first special session hearings

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Sep 18, 2024

Debunking Big Oil's lies ahead of first special session hearings

What you need to know: The special session on gas price spikes is underway – and the oil industry is working overtime to stand in the way of relief at the pump.

SACRAMENTO – The first hearings of the legislature's special session considering the Governor's proposal to prevent gas price spikes get underway later today.

Last year's special session allowed the state to uncover new evidence that when Big Oil lets supplies run low, they can charge higher prices and earn windfall profits, all while California consumers are left to face the brunt of price spikes at the pump.

When refineries go offline for maintenance but fail to maintain back-up supply, gas prices spike. Last year alone it cost Californians upwards of $2 billion while refiners netted $50 billion in profits.

And the state's new petroleum watchdog issued a consumer advisory last week, warning that refinery maintenance, low inventories, and spot market volatility are driving up California gas prices once again, even as crude oil prices and national gas prices are declining. These are the same market conditions that drove retail gas price spikes in 2022 and 2023.

The Governor's proposal, ABx2-1, authored by Assemblymembers Cecilia Aguiar-Curry and Gregg Hart, allows the state to require oil refiners to manage a minimum inventory of fuel to avoid supply shortages that create higher gas prices for consumers – and higher profits for the industry. It would also authorize the CEC to require refiners to plan for resupply during scheduled refiner maintenance.

As expected, the oil industry is wasting no time to define and distort the Governor's plan. Here are Big Oil's top lies debunked:

California's gas tax and fees are the reason for high gas prices.

FALSE: State taxes and fees are fixed and don't change when gas prices spike.

At the peak of the 2022 and 2023 gas price spikes, Californians were being charged a record $2.61 and $2.25 more per gallon, respectively, than people in other states. California's gas tax and fees added up to less than half of that difference and didn't change during those spikes. Industry couldn't explain where the additional charge came from.

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Suspending California's gas tax is the best way to bring prices down.

FALSE: Suspending the gas tax would give oil companies a huge tax break and more profits. There's no guarantee they'd pass down the savings to people at the pump. Instead, it would amount to a $7 billion annual cut in essential services like schools and health care.

Look at what happened in Florida – they had a gas tax "holiday" (25.3 cents/gallon), and it was reported that "most of the Florida gas tax holiday savings were pocketed by fuel companies."

Phasing out gas-powered cars and accelerating the clean energy transition is causing price spikes.

FALSE: The relationship between refinery outages and price spikes dates back to at least 2000 – long before California's most significant climate policies accelerating our transition were in effect.

Big Oil claims this transition is difficult yet they make more money than ever – billions of dollars just in California. Last year the state's oil refining companies made more than $50 billion in net profit. California is creating a regulatory environment to incentivize new technologies and Big Oil has the opportunity to be part of the future.

This will further restrict supply and potentially lead to gas shortages.

FALSE: Right now, Big Oil can and does let supply dip, artificially creating higher prices at the pump and letting oil companies reap the profits. This proposal ensures the opposite – it would require companies to keep supply on hand so they can draw it down during outages, to avoid shortages.

Thanks to new transparency measures, we know the real story. Refiners let supplies dwindle over the summer, restrain output through maintenance, and sell at inflated prices.

This proposal requires oil companies to responsibly manage their fuel inventory and backfill supply when refineries are offline – just as many countries already do. This will help prevent gas price spikes.

Building new storage tanks is costly and will only drive more refineries out of the state and increase prices more.

FALSE: This proposal does not require the oil industry to build new storage tanks. There is already enough storage.

The oil industry regularly stores more gasoline in the winter months, so they can maintain extra supply without building new storage tanks.

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