California Governor Accused of Policing on Gasoline Prices

(Bloomberg) — Refiner PBF Energy Inc. declined a request by California energy regulators to testify at a hearing next week on gasoline price spikes, citing the “politicization of this issue” by Gov. Gavin Newsom and the failure to heed a year of warnings about the state’s fuel supply.

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In a letter to Newsom, the refiner said it would only provide written comments to the California Energy Commission, in light of the governor’s approach to the matter and what the company called “misleading information” about its third-quarter earnings. “Refining is a capital-intensive activity,” PBF said, and “California’s regulatory environment is putting future refining and fuel production investments in the state at risk.”

Marathon Petroleum Corp. also declined to testify, saying it is concerned about the possibility of information sharing amid federal antitrust laws. Phillips 66 cited the same concern by instead recommending testimony from the Western States Petroleum Association, which has volunteered to represent the invited refiners and participate in the hearing.

“It’s no surprise that oil companies want to sidestep questions about their record profits while Californians pay the price at the pump,” said Alex Stack, a spokesperson for Newsom. “Californians have been held hostage by the oil industry and the gas prices they charge us, and now that we’re asking them to answer basic questions they won’t show up.”

The planned hearing comes amid persistently high gasoline prices in California, where the average for a gallon of unleaded gasoline on Wednesday was $5,157, according to AAA. Newsom singled out PBF accusing oil companies of being “greedy” and making “record profits”.

PBF is on track to make nearly $3 billion in profits this year, according to median analyst estimates compiled by Bloomberg. But like other oil companies, the recent profits come after shortages during the pandemic, when fuel demand plummeted and refineries lost billions. For example, PBF’s $1.4 billion loss in 2020 erased all previous annual earnings accumulated since 2012 and brought the company to the brink of bankruptcy. Now, the company said in its letter to Newsom, it is using 2022 earnings to pay down “exorbitant debt” taken on to survive the pandemic lockdowns.

In previous meetings and correspondence with California officials, PBF warned that by 2023 the state was on track to lose 20% of its 2019 gasoline production — even if demand is only set to decline by 8%. – due to the closure of the refinery, the halt of gasoline production at a Phillips 66 plant and challenged crude oil imports.

–With assistance from Gerson Freitas Jr..

(Updates with comment from Newsom’s office in fourth paragraph.)

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