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Gas Companies Accused Of Ripping Off California At The Pump

Photo by J. Bicking via Shutterstock
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As drivers in California continue to pay well over $4 per gallon at the pump, the state's oil refineries are raking in record profits, raising a few eyebrows.

For the first half of this year, the California Energy Commission says the refiners have almost doubled the amount of profits they make per gallon, according to the L.A. Times. From 1999 to 2014, refineries made an average of 49.3 cents per gallon, but from the beginning of 2015 they've made an average 88.8 cents, with profits spiking at $1.17 per gallon back in May. The profit spike comes at a time with oil prices falling and gas prices relatively stable across the rest of the country.

"Is it unusual? Absolutely," Gordon Schremp, an analyst at the California Energy Commission, told the Times.

According to the report, the main catalyst for the spike was the explosion at Exxon's Torrance refinery back in February. That incident sent gas prices back on an upward trend after drivers had enjoyed relatively-low prices as the pump at the time. The Torrance refinery produced one-fifth of Southern California's gasoline and isn't expected to be back online until at least Christmas. "As long as Exxon Mobil is offline, the whole market is going to be at an elevated price point," said Schremp.

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Last month, Santa Monica-based Consumer Watchdog, a non-profit consumer advocacy organization, accused the gas companies of price gouging and manipulation. The group forwarded a study (.pdf) to the office of the attorney general, in which they wrote, "Industry insiders have told Consumer Watchdog that this is an unprecedented pricing strategy to keep California gasoline prices artificially high."

"There is no good reason for the latest outrageous runup at the pump other than oil refineries manipulating inventories to drive gas prices artificially high," Consumer Watchdog president Jamie Court told L.A. Weekly. "Californians should be outraged."

The industry says that, duh, it's just a simple matter of economics. "The function of supply and demand work very efficiently to make sure that there's fuel at that pump," said Tupper Hull of the Western States Petroleum Association.

It's not unusual for California to have higher-than-average gas prices due to taxes, a special low-pollution blend required in the state, and the relatively-low number of refineries in the state. Although Los Angeles County saw a week-long spike of gas prices that shot up 75 cents a gallon, City News Service says they're on their way back down, slowly but surely. The average price at the pump is 3.5 cents cheaper than it was a week ago.