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Consumers Demand Accountability as California Gas Prices Spike

A research report published by Consumer Watchdog confirms that oil refiners are making big profits as a result of the recent spike in gas prices. The research analyzed profit data of the last ten years and concluded that California’s two major oil refiners have benefitted from the recent increase in gasoline prices.

Valero, which is California’s fourth largest oil refiner, almost quadrupled its profits in the first three months of 2015. Valero has an oil-refining capacity of nearly 2 million barrels per day. The report shows that the company made profits of $82 million in the first quarter of 2015, whereas the average quarterly profit of the company over the past five years was $25 million.

Tesoro, which is one of the largest independent refiners of petroleum products in the US, closed its oil refinery in February, but still managed to make a first quarter profit of $222 million. The company’s average quarterly income was $142 million over the past ten years, which rose to almost $231 million as gas prices increased.

The General Manager of Chevron Corporation, Mr. Jeff Gustavson, told that his company’s profits for the first quarter almost doubled to $435 million. In a conference call with investors, the Chevron GM explained that unpredicted oil and gas industry downtime and tight product supply has lead to increased earnings for the company.

Jamie Court, who is President of Consumer Watchdog, feels that oil refineries are intentionally limiting their inventories in order to cause supply disruptions that can increase the prices. He further said that California’s oil refineries are getting richer day by day due to increasing gas prices.

According to GasBuddy.com, a company that reports fuel prices to the public, gas prices in Los Angeles have increased to $3.83 per gallon, which is 31 cents more from a week earlier and 63 cents more from a month ago.

The consumers have no choice because they have to fuel their cars, only oil refineries have the control over gasoline prices. Consumers have been paying $4.10 for a gallon at Chevron gas stations and $4.93 at Arco gas stations.

The report also shows that California refineries keep a gas supply of almost 11 days as opposed to the national average of 18 days. According to Jamie Court, the refineries are trying to disrupt the supply so that they can make profits when the gas prices go up as a result of shut down of other refineries.

The disparity between gas prices in California and rest of the country is irrational. California refineries argue that increased gas prices in California are due to environmentally stringent gas blends. Senior editor of Bakken Oil Business Journal Mr. Bob van der Valk explained that refineries face regular maintenance issues because of continual adjustments in gas blends.

A refinery in Torrance went inoperational due to equipment failure earlier this year and is not expected to start its operations until July. Similar issues are being faced by other refineries as well. Another refinery in Carson is undergoing planned maintenance and is expected to return to full operation in four to six weeks.

Government intervention is required to regulate gasoline prices throughout the country. California refineries should keep at least two weeks supply on hand and adapt alternative technologies to make their operations efficient and sustainable.

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