Why refinery problems have led to big gasoline price spikes in California
Tesoro's profit per barrel in the first quarter jumped by 20 cents, amounting to California profits of $119 million in the first quarter for the company.
California gasoline prices have gone up 57 cents during the last month and are $1.05 cents higher than the US average. Consumer Watchdog has called on the State Senate to subpoena Goff and other oil company CEOs, who refused to testify at recent state oversight hearings.
Gasoline consumption has dropped by 8 percent since 2005, but the price of gas in 2014 averaged 51% higher than in 2005.
"California's oil refiners are the only industry in America that make a fortune when their factories break down," said Jamie Court, president of Consumer Watchdog.
"The oil companies are acknowledging to investors that that they have been getting fat off the shutdowns in their own refineries even as they refuse to appear before legislators in Sacramento."
Goff said on the call, answering a question from a Bank of America analyst, "There's no question that during the first quarter with what happened to Tesoro as a result of the disruption at the Martinez refinery because of the labor disruption and then with other operating and planned maintenance things across the whole system, it was very supportive to the margin environment there."
He reiterated, "In California, crack spreads [the difference between crude oil prices and price of gasoline] have improved related to the unplanned and planned refinery maintenance activities."
Tesoro is the state's second largest refiner, behind Chevron. Together they control 55% of the state's refining capacity. Jeff Gustavson, a Chevron general manager made a similar comment on an investors call last week, "Margins increased earnings by $435 million driven by unplanned industry downtime and tight product supply on the US West Coast."
The statement reinforces questions posed by Consumer Watchdog, state senators, and Tom Steyer, who have questioned why refinery problems have led to such big gasoline price spikes.
Consumer Watchdog released a report on Tuesday, Refining Profits: How Californians Get Fleeced at the Pump, that analyzed the annual and quarterly filings of California's top refiners, including Tesoro.
The report found that over the last ten years, price spikes have corresponded with huge profits for Tesoro and Valero. Valero's operating income (refining profit after expenses) per barrel increased in the first quarter of 2015 by a whopping $1.55 per barrel, leading to $82 million in California refining profit for the company, the best 1st quarter operating income since 2009.
Valero has averaged $100 million in profit per quarter over the last ten years. During seven quarters with spiking gas prices, the refiner averaged $220 million per quarter – an increase of 120%. Price spikes increased Tesoro average quarterly operating income of $142 million per quarter up to an average of $231 million.
Tesoro, despite claiming a labor dispute was crippling their operations, increased its profits per barrel by 20 cents in the first quarter, adding to California's huge price spikes. ■