San Diego gas prices drop slightly as Newsom calls for special session to tax oil companies

As the Gov. Gavin Newsom convened a special session of the Legislature to discuss the imposition of a windfall tax on oil companies in the wake of rising gas prices in California, the price of a gallon fell for the second day in a row.

The average in the regular San Diego area dropped nearly a cent on Thursday and nearly three cents a gallon on Friday, settling at $6,395, according to the Southern California AAA. That’s not much, but it marked the first time since September 1st and 2nd that prices have dropped for two consecutive days.

Statewide, the average price has also dropped slightly over the past two days, opening Friday morning at $6.392 a gallon.

“It looks like (prices) have gone up for now, and we expect to start seeing some drops at the pump,” said Southern California Auto Club spokesman Doug Shupe.

One reason for the drop, Shupe said, was as refiners in California slowly ramped up production after a series of at least five planned and unplanned outages that pushed West Coast gasoline inventories to levels not seen in years.

But David Hackett, president of Stillwater Associates, a transportation energy consulting firm in Irvine, said a more direct reason stems from sudden, sharp drops in the wholesale price of gasoline.

Citing figures from the Oil Price Information Service, a price reporting agency, Hackett said the spot price in California dropped about 25 cents a gallon on Monday and dropped another 25 cents on Tuesday. On Wednesday, the price dropped $1.20 and then dropped 5-10 cents on Thursday.

That’s about $1.80 total, Hackett said. “It comes out very, very strong,” he explained, in large part due to Governor Gavin Newsom’s decision to shift California’s annual shift from California’s summer blended gasoline to less expensive winter blended gas to help bring prices down.

Typically, the winter mix arrives in gas station supplies starting November 1, but Newsom last week directed the Air Resources Board to speed up the transition.

The winter mix has yet to reach supply, but the spot market has dropped “mainly in anticipation” of the move, Hackett said. “So while it takes a few days for gasoline (blended in winter) to show up, in practice this has burst the bubble in the spot market.”

But even with the slight reversal on Thursday and Friday, California drivers are paying an average of $1.11 more for regular gas than they were a month ago — up 21.1 percent — and $1, 96 more than a year ago.

“We are predicting that prices will start to fall from here. How much lower? That’s the big question,” said AAA’s Shupe. “We don’t know how quickly they will drop, but we expect prices to approach what we saw over the summer when they were in the $5 range.”

An earlier increase this year saw the average price in the Golden State exceed $6 a gallon at the end of May. A steady decline followed before the recent run surpassed this summer’s record prices.

Following the price hike, Newsom announced Friday afternoon that he will convene a special session of the California Legislature, directing lawmakers to Sacramento on Dec.

“I am calling a Special Session to address the greed of oil companies,” Newsom said via Twitter. “Gas prices are very high. It’s time to enact a windfall tax directly on the oil companies that are ripping you off at the pump.”

NEW: I’m calling a Special Session to address the greed of oil companies. Gas prices are very high. It’s time to enact a windfall tax directly on the oil companies that are ripping you off at the pump.

According to the governor’s office, companies that extract, produce and refine oil would pay a higher tax rate on earnings above a certain amount each year. Any surplus income would go to California taxpayers in the form of discounts or refunds, the Sacramento Bee reported.

Newsom’s announcement comes just two days after the California Energy Commission fired on the oil industry. President David Hochschild sent a press release saying that “the recent sudden increases in prices at the pump are unacceptable” and calling the response from an oil and gas trading group “misleading”.

The commission – whose five commissioners were appointed or renamed by Newsom – sent a letter last week to the top five refiners that dominate the California refining market, asking for explanations.

As of Friday, the commission had released responses from two refiners — Valero and PBF Energy, each operating one refinery in Northern California and one in Southern California.

The PBF said that since 1980, about 1 million barrels a day of refining capacity has been closed in California and “there are only a few refineries outside of California” that can import gasoline that meets state regulations for their specific fuel blends. .

As for questions the commission asked about drops in gasoline inventories, the PBF said that state and federal antitrust laws “will not allow us to discuss existing or planned inventories” and added that these laws already prevent refiners from coordinating planned maintenance between yes.

Valero, in his response, said that California “is the most expensive operating environment in the country and a very hostile regulatory environment for refining. California policymakers have consciously adopted policies with the express intention of eliminating the refinery sector.”

The energy commission in its press release on Wednesday suggested repercussions but did not specify them.

“All options are on the table to ensure that Californians do not pay higher gas costs to the whims of the oil industry,” Hochschild said in his statement. “Furthermore, the CEC will use all tools at its disposal to obtain responses, and refusal to respond will take into account necessary corrections.”

On Friday, state officials began handing out what is called the Middle Class Tax Refund, which will send direct payments of up to $1,050 — depending on income status — to state residents. Payments will go to all Californians who qualify, whether they are registered drivers or not. Electric vehicle owners also qualify.

Internationally, the Organization of Petroleum Exporting Countries and a coalition of select nations that produce crude oil – what is called OPEC+ – announced earlier this week a cut of 2 million barrels a day on the global market.

California typically imports more than half of its crude oil from foreign countries, which include OPEC+ members and non-OPEC countries such as Brazil and Colombia. However, fuel analysts predicted the production cut won’t have much of an immediate impact on California gas prices.

“Right now, what’s happening is that the price of gasoline has been disconnected from crude oil because of refinery problems” in California, said Hackett of Stillwater Associates. “Prices have a long way to go before they get to the point where they will be impacted by crude oil prices.”