Debunking the Myth of Oil Refiner Price Gouging in California

In 2022, California Governor Gavin Newsom signed , the , into law. The legislation was hailed as a major step toward transparency, requiring refiners in California to report detailed monthly data on their gasoline profit margins. Specifically, refiners must disclose: , including consumer advocacy groups like , argued that SB-1322 would expose “excessive profits” earned by refiners and hold them accountable amid California’s notoriously high gasoline prices. In fact, as captured in this recent , Gavin Newsom continues to claim that oil companies are fleecing California consumers. However, a little over two years after signing the bill into law, the data tells a different story. Far from uncovering windfall profits, the disclosures reveal razor-thin — and often negative — margins for refiners in the state. Earlier this year, pointed to (CEC) showing that refiners earned (which these groups mischaracterized as “gross profits”) exceeding $1 per gallon in 2023. They urged the CEC to impose a price-gouging penalty ahead of the summer driving season. But this interpretation missed a critical point: do not equal net profits. The CEC defines Gross Gasoline Refining Margin as the wholesale gasoline price minus the cost of crude oil. To derive the , refiners must subtract operational costs, which averaged just over $1 per gallon during the reporting period. Since California began reporting net margins in June 2023, the data paints a very different picture than that promoted by supporters of anti-gouging measures. Over the past 11 months that have been reported, refiners posted a positive net margin in only six months. The average net profit margin from June 2023 to April 2024 was just $0.09 per gallon — hardly the excessive profits that critics claim. If refiners are not the primary cause of California’s sky-high gasoline prices, where does the money go? According to , Californians pay roughly $1.40 per gallon in taxes and fees — the highest in the nation. Here’s the breakdown: These taxes and regulatory fees combined with California’s stringent fuel standards — which mandate unique summer and winter gasoline blends — drive up prices far more than the refiners’ net margins. SB-1322 may have been designed to shine a light on oil refiners, but its findings reveal a fundamental truth: California itself profits more from gasoline sales than the refiners do. When operational costs are factored in, the profits earned by refiners are minimal. If policymakers and consumer groups are serious about tackling high gasoline prices in the state, they would be better served scrutinizing California’s tax and regulatory structure instead of targeting the refiners. By