Valero reported US$294 million in 2Q15 California profits, more than ten times higher than the US$24 million recorded in the same quarter last year. In addition, there was a notable increase in per barrel profits for the quarter. Last year the company made just US$0.99/bbl in California; that number reached US$11.23/bbl this year.
"Californians know they are being gouged at the pump and these windfall profits are an offense to the hard working people of this state," said Consumer Watchdog's Cody Rosenfield.
Over the last few months, Consumer Watchdog has chronicled exports leaving the state to Mexico. During an earnings call on 30 July, Valero executives acknowledged the exports that they have refused to admit to the news media. Valero Executive Gary Simmons stated, "Some of these export markets in particular, Mexico, we are seeing a lot of good demand from Mexico for gasoline."
Despite claims that production was down across the state, Valero increased the amount of barrels it refined per day in California from 266 000 last year to 288 000 in 2015. Across the nation the company doubled operating earnings to US$2.2 billion.
In California, four oil refiners control 78% of the state's refining capacity, creating an oligopoly. In a competitive market, when profits skyrocket, a competitor will offer lower prices and steal market share from other companies that charge too much. In this state, when one refinery has a problem, all other companies raise their prices across the board.
"In California the cosy relationship between the refining companies means they don't undercut each others' prices," said Advocate Liza Tucker. "This reflects a market that is not competitive and doesn't benefit consumers the way a healthy market would."
Valero executives stated on the earnings call that the appeal of the West Coast market hinged on whether refineries continued to have problems.
Exports on top of those problems have helped refiners in California. The profit report verifies California Energy Commission data publicised by Consumer Watchdog that showed that refiners were receiving more money per gallon of gasoline than ever before. The state data showed that refiners were getting an all time record of US$1.17/gal of gasoline, almost triple their usual returns of US$0.45/gal. The cost of running refinery operations is included in that figure and not broken out.
Adapted from press release by Rosalie Starling
Read the article online at: https://www.hydrocarbonengineering.com/refining/04082015/consumer-watchdog-reports-on-californian-refiners-results-1233/