September saw an unprecedented record high for gas prices in California after a number of refineries across the state postponed maintenance — so as to remain open after the Russo-Ukrainian war saw American gas stores being sent to Eastern Europe.
Subsequently, the California Energy Commission (CEC) submitted a letter to energy executives after the CEC called gas prices into question, demanding an answer as to why the issue has not been solved. The letter was sent to executives from Chevron, Marathon Petroleum, PBF Energy, Phillips 66 and Valero.
In the letter, CEC Chair David Hochschild stated, “Crude oil prices are down and industry profits are up, yet gas prices have increased by a record $0.84 per gallon in 10 days in California — a $2.50 difference compared to U.S. prices. This degree of divergence from national prices hasn’t happened before, regardless of planned or unplanned refinery maintenance, and no explanation has been provided. The oil industry owes Californians answers.”
Hochschild proceeded to accuse the energy executives of lacking transparency and not providing an adequate explanation for the rising prices on their end, further making the accusation that price gouging was taking place.
Further, the CEC letter demanded industry leaders explain the rise in prices despite “a sharp downturn in global crude prices, no significant unplanned refinery outages in the state and no increases in state taxes or fees.”
Valero responded to Hochschild in a release under the name of Scott Folwarkow, VP of State Government Affairs for the company. The CEC letter requested a response within one business day, which Valero delivered upon, issuing said response the following business day.
Folwarkow begins the letter explaining that the market drivers of supply and demand, coupled with government-imposed costs and specifications, determine market price in the energy sector. Addressing one of CEC’s accusations that the energy company was the one responsible for neglecting maintenance at the refineries, he also explained that planned maintenance activity was already underway at one of its California refineries, further elaborating that said maintenance is required to meet the regulatory expectations the very same state government has mandated.
“We have made appropriate arrangements to source supply and/or intermediates to keep our refinery at as close to full rate as possible,” Folwarkow said. “We also either built inventory or arranged for additional supply to assure we meet our contractual obligations to our customers. Valero does this when we have the opportunity to plan for a significant outage. This maintenance turnaround was handled no differently.” Valero’s statement also explained that inventories are low at the moment due to post-COVID-19 demand rising while supply has yet to rise to accommodate the demand. He stated Valero has been keeping its refineries at full production and “no one has produced more low carbon renewable fuel for the California market than Valero.”
Folwarkow added, “As to separation between California prices and the prices in the rest of the U.S., we can offer the following information: For Valero, California is the most expensive operating environment in the country.”
Visit efiling.energy.ca.gov to read Valero’s full response. CEC has not issued further rebuttal to Valero’s letter.
