ALRIGHTY EVERYBODY WELCOME AND
APOLOGIZE FOR THE LATE START.
UH, WE APPRECIATE ALL OUR GUESTS
, UH, PATIENTS GOOD AFTERNOON
AND WELCOME TO TODAY'S
INFORMATIONAL HEARING FOR THE
SELECT COMMITTEE ON GASOLINE.
SURPRISE, UH SUPPLY AND PRICING.
FIRST A COUPLE OF NOTES MASKS
ARE ENCOURAGED FOR ALL
INDIVIDUALS IN THE BUILDING AND
PUBLIC TESTIMONY WILL BE TAKEN
AT THE END OF THE HEARING FOR
PEOPLE WHO ARE IN ATTENDANCE. AS
YOU KNOW, THIS COMMITTEE WAS
FORMED BY THE SPEAKER. AS A
RESULT OF THE FINANCIAL PAIN
THAT'S CALIFORNIANS HAVE BEEN
FEELING AT THE PUMP. GASOLINE
PRICING IS A COMPLICATED ISSUE
WITH A MULTITUDE OF FACTORS
CONTRIBUTING TO THE PRICE THAT
WE PAY AT THE PUMP, WHICH IS WHY
IT IS OF THE UTMOST IMPORTANT TO
HEAR FROM DIFFERING PERSPECTIVES
ON GASOLINE PRODUCTION, PRICING
AND THE CONSUMPTION CHAIN.
DURING OUR FIRST HEARING WE
HEARD FROM ACTIVE RESEARCHERS
AND REGULATORS THAT HAVE BEEN
LOOKING INTO THESE ISSUES TO
UNDERSTAND WHAT INFORMATION HAS
ALREADY BEEN FOUND AND WHERE
THIS COMMITTEE CAN LOOK FOR
ADDITIONAL ANSWERS. WHEN THIS
COMMITTEE WAS FORMED ON JUNE
20TH THE AVERAGE PRICE PER
GALLON OF GAS IN CALIFORNIA WAS
$6.22. AND WE HAVE BEEN SO
SUCCESSFUL AFTER THAT HEARING
THAT GAS PRICES HAVE BEEN
DROPPING, WITH THE AVERAGE PRICE
PER GALLON DROPPING TO 5 29. AS
OF AUGUST. 8TH. WE'RE EXPECTING
THAT, UM, TO CONTINUE. THE GOAL
OF THIS COMMITTEE HAS REMAINED
THE SAME TO CUT THROUGH THE
RHETORIC AND FIND ANSWERS THAT
WILL SPARK LONG TERM SOLUTIONS,
WHICH IS WHY TODAY WE INVITED
REPRESENTATIVES FROM THE WESTERN
STATES PETROLEUM ASSOCIATION,
THE CALIFORNIA FUELS AND
CONVENIENCE ALLIANCE AND
CONSUMER WATCHDOG TO JOIN US
JUST LIKE OUR FIRST HEARING. I
LOOK FORWARD TO CONTINUING TO
LEARN ABOUT THESE ISSUES, AND I
HOPE THE SAME IS TRUE FOR THE
MANY CALIFORNIANS THAT ARE
WATCHING TODAY. NEXT I WOULD
LIKE TO INVITE, UM
ASSEMBLYMEMBER'S DAVIS TO SAY A
FEW WORDS. THANK YOU. I'M
LOOKING FORWARD TO THE MEETING
TODAY AND I'M VERY GRATEFUL TO
HAVE THE OPPORTUNITY TO BE PART
OF THIS COMMITTEE. THANKS. THANK
YOU SO MUCH AGAIN FOR JOINING
US. I THINK EVERYBODY ELSE HAS
HOPPED ON A PLANE AND HIS HOME
AND I KNOW YOU DELAYED YOUR
PRICE AND YOUR YOUR FLIGHT AND
REALLY APPRECIATE IT. NOW WE'LL
MOVE ON TO THE SECOND ITEM ON
OUR AGENDA. PERSPECTIVES ON
GASOLINE PRODUCTION, PRICING AND
CONSUMPTION. I WOULD LIKE TO
WELCOME KATHERINE REECE BOYD,
PRESIDENT OF THE WESTERN STATES
PETROLEUM ASSOCIATION FOR YOUR
TESTIMONY. OH, YES. WHEREVER YOU
FEEL COMFORTABLE. YEAH. AND YOU
CAN START WHENEVER YOU'RE READY.
CAN YOU HEAR ME? THANK YOU.
THANK YOU. THANK YOU VERY MUCH.
GOOD AFTERNOON AND THANK YOU.
ASSEMBLYMEMBER'S IRWIN AND ALSO
ASSEMBLY WOMAN DAVIS FOR HAVING
ME TODAY AND MEMBERS OF THE
COMMITTEE. IT'S A SMALLER
COMMITTEE THAT EXPECTED BUT NICE
. NICE TO BE HERE. SO THANK YOU
FOR HAVING US, UH, COME AND TALK
ABOUT A PRETTY IMPORTANT ISSUE,
WHICH IS BASICALLY, UM,
DISCUSSING ENERGY AND FUEL
COSTS, AND THAT'S NOT ONLY
CRITICAL. FOR THE NATION, BUT
IT'S CERTAINLY A CONCERN FOR OUR
STATE TODAY AND FOR OUR STATE IN
THE FUTURE, SO UM, YOU HAD A
VERY GOOD HEARING ON THE
SPECIFICS, BUT FUEL COSTS ARE
DIFFICULT FOR EVERYONE. I THINK
WE KNOW AS FAMILIES TRAVEL AS
STUDENTS HEAD BACK TO SCHOOL AS
WORKERS GET TO AND FROM THEIR
JOBS EVERY DAY AND THE FACTORS
THAT DETERMINE GASOLINE AND
DIESEL COSTS ARE CERTAINLY
INFLUENCED BY AS YOU SAID, BY
MANY COMPLICATED FACTORS, AND
THAT INCLUDES THINGS LIKE SUPPLY
AND DEMAND UNCERTAINTY CREATED
BY GLOBAL EVENTS, TAXES, FEES,
CONSUMER CHOICE, AND, OF COURSE
, IT'S JUST MORE EXPENSIVE TO
MAKE THE CLEANEST BURNING
GASOLINE ON THE PLANET HERE IN
CALIFORNIA. UM I THINK WE ALSO
TALKED LAST TIME. THE COST OF
CRUDE OIL IS THE NUMBER ONE
FACTOR THAT IS REALLY IMPACTING
THE COST OF GASOLINE AND DIESEL
AT THE PUMP. IT'S 60% OF THE
COST THE DRIVER'S SEAT AT THE
PUMP. AND OF COURSE, WE'RE
FINDING COSTS AND MARKETING AND
DISTRIBUTION ALSO AFFECT THAT.
AND ALL THESE FACTORS MAKE IT
MORE DIFFICULT AND MORE
EXPENSIVE TO PRODUCE GASOLINE
AND DIESEL IN CALIFORNIA, AND
GENERALLY INCREASED COSTS TO
BUSINESSES. I KNOW YOU TALKED
ABOUT ALL THAT IN DETAIL AT THE
LAST SELECT COMMITTEE HEARING.
YOU DID IT WITH ECONOMISTS AND
EXPERTS. AND SO TODAY, I'D LIKE
TO FOCUS A LITTLE BIT ON THE
PUBLIC POLICY BECAUSE IT IS AS
THE COST IMPACTS OF PUBLIC
POLICY WILL BE FELT BY THE
PUBLIC REGARDLESS OF ANY OF THE
MARKET CONDITIONS, AND SO
THEY'RE THEY'RE IMPORTANT TO
NOTE. SO THESE ARE POLICY
DECISIONS THAT GOVERNOR NEWSOM
AND CERTAINLY THE LEGISLATURE
HAVE MADE THEIR DECISIONS THAT
CONTINUE TO HAVE A DIRECT IMPACT
ON THE COST OF FUEL FOR
CALIFORNIA'S FAMILIES AND FOR
CALIFORNIA BUSINESSES.
CALIFORNIA BANDS ENERGY
LEGISLATION, REGULATIONS. UM ALL
OF THOSE HAVE ADDED ABOUT A
DOLLAR 28 A GALLON TO THE COST
OF GASOLINE TODAY, ACCORDING TO
THE CALIFORNIA ENERGY COMMISSION
AND THE OPUS WEST, AND WE ARE ON
A PATH THAT WILL DRIVE THAT COST
MUCH, MUCH HIGHER. AND THESE ARE
SEVERAL KEY POLICY ORDERS THAT
WILL TALK ABOUT, UM THAT YOU CAN
CERTAINLY INFLUENCE AND MAKE
DECISIONS THAT AFFECT YOUR
CONSTITUENTS. UM I'D ALSO IF I
COULD, IF THE COMMITTEE WOULD
INDULGE ME. I'D LIKE TO PASS OUT
ONE, UM, GRAPHIC IF I COULD. AND
BASICALLY, IT'S THE IT'S THE
PICTURE OF THE GASOLINE PUMP,
AND IT BEAKS THOSE COSTS DOWN.
WE HAVE A PICTURE IN OUR NOTES,
BUT NOT AS IN COLOR COLOR, SO WE
DEFINITELY PRESS IT LIKE A COPY
OF THAT. GREAT. THANK YOU. UM SO
THE FIRST, UM, ISSUE THAT I'D
LIKE TO JUST TOUCH ON HIS
BANNING THE INTERNAL COMBUSTION
ENGINE. UM, AS YOU KNOW, CARB IS
CURRENTLY DEVELOPING RULES AND
REGULATIONS THROUGH ITS ADVANCED
CLEAN CARTOON RULEMAKING. AND
THAT'S TO IMPLEMENT THE
GOVERNOR'S WHAT WE FEEL IS AN
UNREALISTIC EXECUTIVE ORDER
BANNING THE INTERNAL COMBUSTION
ENGINE SALE BY 2035. THAT IS,
DESPITE THE FACT THAT LIFE CYCLE
GREENHOUSE GAS EMISSIONS FROM
TODAY'S FUELS AND THE VEHICLES
CONTINUE TO DECREASE. AND THIS
WILL HAVE A SEVERE IMPACT AND
LEAD TO HIGHER COSTS ON MIDDLE
AND LOWER INCOME CALIFORNIANS.
SO RECENT ANALYSIS DONE BY
STILLWATER ASSOCIATES FOUND THAT
THIS WILL LIKELY LEAD TO AN
INCREASE OF 35 CENTS A GALLON IN
2035 90 CENTS PER GALLON. 2050
THIS IS BEYOND ANYTHING YOU'RE
LOOKING AT ON THE GRAPHIC THE
SECOND ONE IS INCREASING CAP AND
TRADE COSTS. AND TODAY
CALIFORNIA'S UNIQUE CAP AND
TRADE PROGRAM ADS. AS YOU SEE,
THERE ARE PROBABLY 26 CENTS A
GALLON TO EVERY GAS MEETING IN
CALIFORNIA, ACCORDING TO THE
OPUS WEST DATA. AND WHILE THIS
INDUSTRY HAS WORKED VERY HARD
WITH YOU AND THE LEGISLATURE TO
ENSURE APPROPRIATE COST
CONTAINMENT MECHANISMS THAT ARE
IN PLACE IN CAP AND TRADE
POLICIES CONTINUE TO BE PROPOSED
THAT REMOVED CONSUMER
PROTECTIONS AND SEEK TO
ARBITRARILY DRIVE UP PROGRAM
COST WHEN YOU HEAR OTHER PEOPLE
SAY OR YOU HEAR PEOPLE SAY WE
NEED TO SEND MORE PRICE SIGNALS
TO THE MARKET. WHAT THEY'RE
REALLY SAYING IS THEY WANT YOUR
CONSTITUENTS TO PAY MORE. SO IS
THE COST OF CARBON GOES UP. THE
COST TO YOUR CONSTITUENTS GO UP.
IT'S THAT SIMPLE. THE OTHER ONE
IS INCREASING, LOW CARBON FUEL
STANDARD THAT YOU SEE THERE.
IT'S ANOTHER PROGRAM UNIQUE TO
CALIFORNIA CURRENTLY ADDS
ANOTHER 16 CENTS, UM OF EVERY
GALLON OF FUEL. AND, AS CAN CARB
CONTINUES ITS RULEMAKING TO BAN
THE INTERNAL COMBUSTION ENGINE.
STILLWATER ASSOCIATES DID AN
ANALYSIS AND FOUND THAT THE
RULEMAKING WILL ADD COSTS OF 60
CENTS IN 2035 A DOLLAR 42 PER
GALLON AT 2050. THESE ARE COSTS
THAT COULD BE MINIMIZED FOR THE
SAME CARBON REDUCTIONS IF ALL
TECHNOLOGIES WERE ALLOWED TO
PARTICIPATE. NOT JUST A SINGLE
ELECTRIFICATION TECHNOLOGY, BUT
ALL TECHNOLOGIES HYDROGEN,
RENEWABLE, DIESEL, RENEWABLE
NATURAL GAS. ALL OF THESE SHOULD
BE ON THE TABLE IN AND ALL OF
THE ABOVE DIVERSIFIED ENERGY
PORTFOLIO, WHICH WOULD MINIMIZE
COSTS. SO THESE ARE WHY THESE
POLICIES BECOME IMPORTANT WHEN
THEY RELATE BACK TO THE COST OF
WHAT IT TAKES TO PRODUCE A
GALLON OF GASOLINE AND DIESEL.
THE OTHER ONE IS LIMITING
RETAIL, FUELING SITES AS A
RESULT OF STATE AND LOCAL POLICY
DECISIONS. CALIFORNIANS AND
CALIFORNIA DRIVERS HAVE FEWER
CONVENIENT CHOICES FOR GASOLINE
STATIONS IN THE CITY OF LOS
ANGELES, AND ORDINANCES BEING
CONSIDERED TO ELIMINATE NEW
STATIONS. EVEN THOUGH CALIFORNIA
HAS HALF THE NUMBER OF GASOLINE
STATIONS PER LICENSED DRIVER.
THAN THE REST OF THE COUNTRY. SO
AS THE STATE MOVES TOWARDS
BANNING THE INTERNAL COMBUSTION
ENGINE, THE NUMBER OF FUELING
SITES COULD DECREASE BY 50% BY
2035. AND 80% BY 2050 AGAIN,
ACCORDING TO THE STILLWATER
ANALYSIS, FEWER STATIONS MEAN
MORE CALIFORNIANS WHO CAN'T
READILY AFFORD ELECTRIC VEHICLES
WILL DRIVE FURTHER AND PAY MORE
TO FUEL THEIR VEHICLES. AND
LET'S ALL REMEMBER THAT EVEN
THOUGH THE SALE OF INTERNAL
COMBUSTION ENGINES IS BANNED IN
2035, THERE WILL STILL BE CLOSE
TO 30 MILLION OF THEM THAT NEED
TO BE FUELED BY SOMEONE. AND
THAT IS OUR JOB IS TO MEET THE
DEMAND OF THE STATE OF
CALIFORNIA. SO THESE TYPES OF
POLICIES RESULT IN LESS
COMPETITION, THE RESULT IN LESS
CHOICES FOR CONSUMERS WHEN THEY
NEED TO FILL UP. AND THEN
PERHAPS THE LARGEST POLICY ON
IMPACT ON COSTS THAT I WOULD
NOTE, ESPECIALLY FOR THE YEARS
AHEAD. ARE THE EFFORTS TO
ELIMINATE IN STATE OIL
PRODUCTION. CALIFORNIA CONTINUES
TO PURSUE A VERY AGGRESSIVE
AGENDA TO BAN ALL IN STATE
PRODUCTION OF FOSSIL FUELS
THROUGH WITHHOLDING PERMITS AND
REGULATORY POLICY. THIS IS AT
THE SAME TIME WHEN PRESIDENT
BIDEN IS SEEKING CRUDE
PRODUCTION FROM OTHER PARTS OF
THE WORLD TO ADDRESS THIS DEMAND
AND KEEP COSTS DOWN. THIS IS AN
UNFORTUNATE CONFLICT IN AN
APPROACH AND IT HAS BIG
IMPLICATIONS FOR CALIFORNIA
CONSUMERS. AN ANALYSIS BY
CAPITAL MATRIX CONSULTING AND
AGAIN WE'RE HAPPY TO SUBMIT ANY
OF THESE TO THE COMMITTEE. FOUND
THAT THE CALIFORNIA POLICIES TO
ELIMINATE PRODUCTION WILL
POTENTIALLY INCREASE THE COST OF
PRODUCING GASOLINE BETWEEN ONE
AND $2 PER GALLON. SO AND NOW
THREE WEEKS BEFORE THE END OF
SESSION, GOVERNOR NEWSOME WANTS
YOU TO INCREASE COSTS ON YOUR
CONSTITUENTS AGAIN WITH A PRETTY
EXPENSIVE CLIMATE PLAN. HE WANTS
MORE AGGRESSIVE CLIMATE GOALS,
EVEN THOUGH THERE IS REALLY NO
AFFORDABLE, RELIABLE PLAN TO
ACHIEVE THE EXISTING ONES. MORE
AGGRESSIVE GOALS SIMPLY MEAN
HIGHER COSTS FOR YOUR
CONSTITUENTS FURTHER BANNING
LOCAL ENERGY PRODUCTION BY
INSTITUTING SETBACKS, WHICH, BY
THE WAY THIS LEGISLATURE HAS
REJECTED MULTIPLE TIMES AND
AGAIN, CONSTRAINING SUPPLY AND
IMPACTING YOUR CONSTITUENTS. YOU
DO NOT WANT TO CONSTRAIN SUPPLY
. YOU WANT TO INCREASE SUPPLY.
IT'S A BASIC SUPPLY AND DEMAND
DYNAMIC. WE HAVE IT HERE IN
CALIFORNIA. IT'S UNDER THE MOST
STRICTEST ENVIRONMENTAL
REGULATIONS. WE SHOULD BE
UTILIZING THAT, INSTEAD OF
LOOKING TO IMPORTING MORE CRUDE
OIL FROM FOREIGN SOURCES THAT
DON'T SHARE OUR MORALS, DO NOT
SHARE OUR ENVIRONMENTAL GOALS
AND WANT TO PUT IT ON A TANKER
AND INCREASED GREENHOUSE GAS
EMISSIONS TO GET HERE AND YOU
LOSE EMPLOYMENT TAXES REVENUE.
AND ENERGY SECURITY AND THE
ABILITY TO MINIMIZE IMPACT ON
THE COST. IT MAKES THE FUELS AT
THE PUMP. SO THESE ARE OBVIOUSLY
MAJOR POLICY ISSUES THAT SHOULD
BE DEBATED THROUGH NORMAL
LEGISLATIVE PROCESS. WE DON'T BE
JAMMING THEM THROUGH THE FINAL
WEEKS OF THE LEGISLATIVE
SESSION. CALIFORNIA CONTINUES TO
BE A GLOBAL LEADER IN ADDRESSING
CLIMATE AND HAS BEEN FOR DECADES
SO DO NOT BELIEVE THE RHETORIC
THAT WE ARE FALLING BEHIND
BECAUSE WE ARE NOT. THERE'S A
BETTER WAY. THERE'S A BETTER
PATH THAN THE ONE WE'RE ON, AND
THE GOVERNOR AND LEGISLATURE WE
HOPE WILL FOCUS ON EFFORTS ON
REMOVING THESE HURDLES BEING
POSED ON THIS INDUSTRY. THE VERY
INDUSTRY THAT'S GOING TO HELP
YOU TO REACH THE GOALS SO WE CAN
FOCUS ON PROVIDING ENERGY TO ALL
CALIFORNIANS WHILE WE MEET THE
CLIMATE CHANGE GOALS. SO AGAIN,
WE JUST BELIEVE THE STATE SHOULD
REALLY FOCUS ON ON ALL OF THE
ABOVE TRANSPORTATION FUEL
PORTFOLIO. LIKE MANY OF US DOING
OUR STOCKS WE DON'T DIVEST.
INVEST IN ONE THING. WE INVEST
IN A MULTITUDE OF THINGS. UM AND
WE SHOULD DO THAT HERE TO
ADDRESS CLIMATE GOALS AND LOWER
THE COST FOR CALIFORNIANS, AND
WE ARE HERE AS AN INDUSTRY TO
HELP YOU DO THAT. THESE ARE THE
FACTS ABOUT THE ENERGY MARKET.
THESE ARE THE FACTS ABOUT THE
POLICIES AND OVER THE YEARS THIS
INDUSTRY HAS UNDERGONE SEVERAL,
IF NOT MULTIPLE INVESTIGATIONS.
I THINK AT ONE POINT IT WAS 37.
NONE OF THEM RESULTED IN
ALLEGATIONS OF WRONGDOING AND WE
ARE CONFIDENT THIS EFFORT WILL
RESULT IN THE SAME SO AS I CLOSE
I'D JUST LIKE TO DISCUSS A
LITTLE BIT ABOUT THE WOMEN AND
MEN OF OUR INDUSTRY. 150,000
HARDWORKING PROBLEM SOLVING.
INNOVATIVE FOLKS IN THIS
INDUSTRY WHO WORK IN COMMUNITIES
THROUGHOUT OUR STATE, MANY OF
THEM WHO ARE CERTAINLY MEMBERS
OF ORGANIZED LABOR. THESE FOLKS
COME FROM ALL WALKS OF LIFE, AND
THEY HAVE BUILT CAREERS
IMPORTANT TO THEIR FAMILIES AND
THEIR COMMUNITIES. THESE ARE THE
PEOPLE WHO WORK HARD TO PROVIDE
RELIABLE. AFFORDABLE ENERGY TO
OUR STATE, AND THEY INNOVATE AND
WORK TOWARDS A SUSTAINABLE
ENERGY FUTURE EVERY SINGLE DAY.
THEY CARE ABOUT CLIMATE THEY
CARE ABOUT THEIR COMMUNITIES,
AND THEY CARE ABOUT OUR FUTURE,
SO I AM ENCOURAGED BY THE
THOUGHTFUL WORK OF THIS
COMMITTEE. I WOULD URGE YOU TO
CONTINUE TO SET AN EXAMPLE TO
OTHER POLITICAL LEADERS AND
FOCUS ON THE FACTS FOCUS ON THE
DATA. AND THE FALSE NARRATIVES
AND ACCUSATIONS BECAUSE WE ARE
IN THIS TOGETHER AND BRINGING
DOWN COSTS ACROSS THE ECONOMY.
ENSURING AN AFFORDABLE AND
RELIABLE ENERGY FUTURE. AND
MEETING OUR CLIMATE CHANGE GOALS
CAN BE DONE COOPERATIVELY. WE'RE
READY TO DO THAT. THERE'S A
BETTER WAY. UM, I WOULD
ENCOURAGE THIS COMMITTEE AT SOME
POINT TO REALLY TAKE UP A SELECT
COMMITTEE ON THE VARIOUS
SCENARIOS THAT ARE BEING UM, PUT
OUT THERE TO DEAL WITH THE
ADVANCED CLEAN CAR TO RULE.
BECAUSE THERE'S FIVE THERE'S YOU
KNOW, FOUR OR 54 OF THEM IN
PARTICULAR. AIR B HAS CHOSE ONE.
THEY NOW HAVE TO LOOK AT
SOMETHING MORE AGGRESSIVE TO
MEET THESE GOALS AND EVEN TO
EVEN TO BEGIN TO MEET A MIDDLE
OF THE ROAD SCENARIO, YOU WOULD
HAVE TO BAN ALL, UM INTERNAL
COMBUSTION ENGINES. YOU WOULD
HAVE TO BAN IN STATE PHASE OUT
ALL IN ST REFINING, YOU WOULD
HAVE TO RELEASE OR ACTUALLY
REDUCED VEHICLE MILES TRAVELED
THROUGH BY 22% BY 2045. YOU'D
HAVE TO HAVE ALL ELECTRIC
APPLIANCES. YOU'D HAVE TO HAVE
ALL ELECTRIFIED OCEANGOING
VEHICLE, OUR VESSELS. SO IT IS.
IT IS ABSOLUTELY IMPERATIVE THAT
THIS COMMITTEE LOOK AT THESE
SCENARIOS ASKED THE RIGHT
QUESTIONS. WHAT IS WHAT ARE WE
SAYING? IT'S GOING TO TAKE TO
MEET THESE GOALS. WHAT DO THOSE
SCENARIOS SAY? AND IS THERE A
BETTER WAY TO MEET THE
REDUCTIONS THAT DO NOT TANK THE
ECONOMY WHILE YOU'RE TRYING TO
MEET THESE GOALS? BECAUSE WE
BELIEVE THERE IS WE HAVE
SCENARIOS WE'D LIKE TO PRESENT
THAT DO AND SO IF THIS COMMITTEE
WAS INTERESTED IN DOING THAT,
THAT'S HOW WE SOLVE THIS PROBLEM
. THAT'S HOW WE GET TO THE COST
OF THE IMPACT OF FUEL PRICES IN
THE STATE. WHICH IS THIS HEARING
IS ALL ABOUT SO AGAIN. THANK YOU
VERY MUCH FOR THE OPPORTUNITY TO
SPEAK WITH YOU. THANK YOU VERY
EXPLOIT. UH, ASSEMBLYMEMBER'S
DAVIES. DO YOU HAVE QUESTIONS? I
JUST WANT TO SAY THANK YOU. UM
YOU KNOW, I GREATLY APPRECIATE
IT. AND THE BREAKDOWN I THINK
WAS VERY IMPORTANT BECAUSE I
THINK THAT WE'VE SEEN THIS A FEW
TIMES. AND I MEAN, THIS IS
SOMETHING I THINK IS IMPORTANT
IS THAT WE'RE TALKING FACTUAL
AND I DO BELIEVE THAT AGAIN. WE
NEED TO MAKE SURE THAT ANYTHING
THAT WE PLAN ON DOING IS
OBTAINABLE. AND WHEN YOU WANT TO
SOLVE A PROBLEM, YOU NEED TO
MAKE SURE THAT THERE'S ACTUALLY
A SOLUTION THAT'S ATTAINABLE
BEFORE YOU GO AND TRIED TO START
MOVING IT. SO THANK YOU VERY
MUCH FOR YOUR TIME. THANK YOU.
ALRIGHT AND SINCE MY APPRECIATE
, UM APPRECIATE YOU COMING TODAY
, AND A LOT OF WHAT YOU'RE
MENTIONING IS OBVIOUSLY UPCOMING
LEGISLATION AND WE WERE REALLY
TRYING TO FOCUS ON WHAT WE'VE
BEEN DEALING WITH OVER THE LAST
FEW MONTHS. CERTAINLY YES
POLICIES HAVE HAVE PLAYED INTO
WHAT THE CURRENT PRICES BUT I
KIND OF WANT TO SEE WHERE WE ARE
AND WHERE YOU ARE RIGHT NOW. SO
I JUST WANTED TO ASK YOU. YOU.
YOU HAVE MENTIONED IT, UM A
LITTLE BIT ABOUT WHAT'S WHAT'S
GOING TO BE COMING UP IN THE
FUTURE. BUT CALIFORNIA IS TRYING
TO GO TO CARBON NEUTRAL IN 2045
. HOW ARE OIL PRODUCERS LOOKING
AT THE KIND OF SHORT TERM MID
TERM AND LONG TERM? UH WHAT ARE
THEIR GOALS? AND THOSE, UM CLIMB
RANGES. UM ABSOLUTELY THANK YOU
FOR THE QUESTION, AND FIRST AND
FOREMOST, YOU KNOW OUR JOB EVERY
DAY IS TO MAKE SURE WE MEET THE
DEMAND OF THE STATE. I THINK
PRETTY MUCH YOU WOULD WANT US TO
DO THAT BECAUSE YOU STILL HAVE
ALMOST 40 MILLION PEOPLE WHO AT
LEAST TOMORROW ARE GOING TO WAKE
UP AND DRIVE FOR ME TO BE AND
HEAT AND WHO COOL THEIR HOMES
AND, YOU KNOW, TURN THEIR LIGHTS
ON. SO OUR JOB IS TO MEET THAT
DEMAND, AND WE CAN MEET THAT
DEMAND IN A WAY THAT ALSO TAKES
INTO FACT INTO ACCOUNT BALANCING
THE ENVIRONMENTAL GOALS. THE
CLIMATE CHANGE GOALS. AND SO
EVERY DAY OUR COMPANIES NOT ONLY
MEET THE DEMAND THAT IS REQUIRED
FOR GASOLINE, DIESEL JET FUEL,
UM, BUT ALSO LOOK AT WAYS TO DE
CARBONIZED TO MEET THAT DEMAND.
SO INVESTING IN THINGS LIKE
HYDROGEN INVESTING IN THINGS
LIKE CARBON CAPTURE,
SEQUESTRATION. MY GOD, I HOPE WE
DO SOMETHING ON THAT THIS YEAR.
BECAUSE THAT IS THE WAY YOU
REDUCE GREENHOUSE GAS EMISSIONS
WHILE YOU STILL MEET THE DEMANDS
OF THE STATE IN THE MOST COST
EFFECTIVE WAY YOU CAN, BECAUSE
THAT'S THE BALANCE. THAT IS THE
BALANCE. HOW DO WE GET THERE IN
A WAY THAT REDUCES THESE
EMISSIONS MEETS THE GOALS AND
STILL ALLOWS THE ECONOMY TO
SURVIVE AS WE ARE ON THAT
PATHWAY, SO OUR COMPANIES ARE
LOOKING AT EVERYTHING THEY CAN
TO DE CARBONIZED, AND THEY ARE
AND CCS IS A CRITICAL TOOL FOR
THAT. WE HAVE COMPANIES WHO ARE
INVESTING IN RENEWABLE NATURAL
GAS. I NEVER THOUGHT IN MY
LIFETIME I'D SEE. TWO OF OUR
COMPANIES SWITCHED COMPLETELY
FROM A FOSSIL FUEL DRIVEN
REFINERY TO RENEWABLE DIESEL.
THAT'S EXTREMELY EXCITING. UM
WE'RE LOOKING AT HOW DO WE
INVEST MORE IN BIOFUELS BECAUSE
THIS IS ABOUT REDUCING EMISSIONS
. IT'S NOT ABOUT ELIMINATING AN
INDUSTRY. RIGHT WAS THE LAST, UM. IF YOU CAN REMIND ME THE LAST
REFINERY THAT CLOSED THAT WAS
ONE THAT SWITCH TO RENEWABLE
DIESEL. WE HAVE TWO PHILLIPS 66
MARATHON ARE TWO COMPANIES IN
THE BAY AREA WHO ARE SWITCHING
COMPLETELY TO RENEWABLE DIESEL
GOING THROUGH THE PERMITTING
PROCESS. OF COURSE. UM BUT
THAT'S GOING TO BE VERY, VERY
IMPORTANT TO MEET THE DEMANDS
THE DIESEL DEMANDS OF THE STATE.
AS YOU KNOW, WE HAVE HI DIESEL
DEMANDS WITH GOODS AND MOVEMENTS
FROM OUR WONDERFUL PORTS AND
SOUTHERN CALIFORNIA AND
CERTAINLY IN THE BAY AREA AND
OTHERS AND SO TO MEET THAT
DEMAND. YOU WANT TO DO IT IN A
WAY THAT IS THE LEAST CARBON
INTENSIVE POSSIBLE, SO RENEWABLE
DIESEL IS A WONDERFUL DROP IN
FUEL. WHAT'S NICE ABOUT IT IS
YOU USE EXISTING INFRASTRUCTURE
, EXISTING ENGINES, TRUCKS. NO
CHANGES REQUIRED TO DO RENEWABLE
DIESEL. IT IS A WONDERFUL WAY TO
REDUCE GREENHOUSE GAS EMISSIONS
IN A WAY THAT STILL MEETS THE
DEMAND DIESEL DEMANDS OF THE
STATE. SAME WITH JET FUEL. MANY
ANNOUNCEMENTS OF OUR COMPANIES
TEAMING UP ON JET FUEL, UM, TO
MAKE A LOWER CARBON JET FUEL.
EXCITING VERY EXCITING BIOFUELS
. VERY EXCITING, BUT THESE ARE
LIQUID FUELS. WE ARE NOT AGAINST
THE ELECTRIC VEHICLES WE ARE WE
ARE FOR AND ALL OF THE ABOVE
ENERGY STRATEGY. THEY HAVE THEIR
PLACE. THEY WILL HAVE MORE OF A
PLACE AS TIME GOES ON. BUT IN
THE INTERIM LET US TAKE
ADVANTAGE OF EVERY TECHNOLOGY.
WE HAVE TO REDUCE GREENHOUSE GAS
EMISSIONS AND NOT LEAVE THOSE ON
THE TABLE SIMPLY BECAUSE WE ARE
ONLY FOCUSED ON A SINGLE
TECHNOLOGY. SO GOING BACK TO THE
CHALLENGES THAT YOU KNOW,
OBVIOUSLY, IT'S BEEN IN THE LAST
24 MONTHS THAT WE'VE REALLY SEEN
THESE STEADILY INCREASING
PRICES. OBVIOUSLY YOU FACED A
LOT OF, UM CHALLENGES WITH THE
PANDEMIC. HOW HAVE THESE
CHALLENGES IMPACTED PRODUCTION?
WELL I THINK YOU KNOW WHEN IT
HIT. OBVIOUSLY WE WERE ALL
FOCUSED ON ESSENTIAL SERVICES
AND KEEPING THE STATE RUNNING
AND WE JUMPED INTO THAT BIG
TIME. UM AS AS DID MANY OTHERS,
OBVIOUSLY, AND SO WHAT'S BEEN
CHALLENGING IS TO NOT HAVE A
RECOGNITION BY THE
ADMINISTRATION. AND IN SOME
CASES, THE LEGISLATURE AS TO THE
HURDLES THAT ARE PLACED BEFORE
US TO DO OUR JOB. AND OUR JOB
AGAIN IS TO THE MEET DEMANDS OF
THIS STATE IN DE CARBONIZED, WHY
WE DO IT. SO WHAT I'D LOVE TO
SEE IS THINGS THAT REDUCE THE
HURDLES TO DO THAT NOT INCREASE
THEM. UM BRINGING MORE SUPPLY TO
MARKET IS ONE OF THE EASIEST
WAYS TO DEAL WITH MARKET
VOLATILITY OR SUPPLY MEANS MORE
CRUDE OIL IN OUR OWN BACKYARD
BECAUSE WE HAVE IT. WE CAN
ACCESS IT. WE CAN INCREASE IT.
IF THE STATE HAS AN INTEREST IN
DOING SO WE CAN EVEN PRODUCE
CRUDE OIL IN A CARBON NEGATIVE
WAY WITH CCS. WHY WOULD WE NOT
WANT TO DO THAT? BECAUSE IF WE
DON'T REFINERS TOMORROW HAVE TO
PRODUCE GASOLINE, DIESEL JET
FUEL, AND THEY CAN ONLY DO IT BY
PURCHASING CRUDE OIL FROM
OUTSIDE THE STATE. IF WE DON'T
DO IT HERE, THE STATE LOSES IN
THAT EQUATION COMPLETELY.
INCREASED GREENHOUSE GAS
EMISSIONS BY STICKING ON A
TANKER OVER MANY, MANY MILES TO
GET IT HERE BECAUSE WE HAVE NO
PIPELINES THAT BRING CRUDE OIL
HERE. MARINE TANKERS ARE REAL,
THAT'S IT. AND THEN WHAT YOU DO
IS, YOU KNOW YOU END UP LOSING
TAX REVENUE JOBS, AND YOU ALSO
INCREASED GREENHOUSE GAS
EMISSIONS IN THE PROCESS. SO IS
IT'S NOT A POLICY THAT SHOULD BE
IMPLEMENTED AND YET WE SEE
OURSELVES. FACED WITH
ELIMINATION OF OIL PRODUCTION IN
THIS STATE AND TO PHASE OUT
REFINING CAPACITY. WHICH MEANS
IN THE INTERIM, IF YOU DID BOTH
OF THOSE, IT'S ALL COMING
THROUGH THE PORTS OF L, A AND
LONG BEACHES AND THE BAY AREA IS
FINISHED PRODUCT. THE STATE
LOSES IN THAT EQUATION. THERE'S
NO THERE THAT IS NOT A GOOD
PATHWAY. IT DOES NOT SAY THAT
YOU DON'T MOVE TOWARDS
SUSTAINABLE ENERGY THAT YOU
DON'T DIVERSIFY THAT. YOU DON'T
LOOK AT ALL OF THE THINGS THAT
WE ARE LOOKING AT. BUT WHAT IT
DOES SAY IS THAT YOU DON'T STOP
FUELING THE ECONOMY OF THE STATE
IN THE MOST COST EFFECTIVE,
CLEAN MANNER WE POSSIBLY CAN. I
MEAN, THIS IS THE CLEANEST
BURNING GASOLINE ON THE PLANET.
NOBODY MAKES IT BETTER AND
CLEANER THAN CALIFORNIA. SO AT
LEAST IN THE INTERIM, WE SHOULD
BE HAVING CONVERSATIONS ABOUT
HOW DO WE KEEP DOING THAT? HOW
DO WE KEEP THE CARBONIZED? HOW
DO WE KEEP LOWERING EMISSIONS?
BUT HOW DO WE STAY? STILL KEEP
THE LIGHTS ON. PEOPLE GROWING
FOR ME TO BE AND HAVING THE
CONSUMER CHOICES THAT THEY
DESERVE. AND THESE POLICIES
ELIMINATE CONSUMER CHOICE.
ELIMINATE YOUR VEHICLE. CHOICE
YOUR FUEL CHOICE WHERE YOU LIVE,
HOW YOU LIVE. YOU KNOW HOW MANY
MILES YOU DRIVE? ALL OF THAT IS
TAKEN OFF THE TABLE WITH THESE
PROPOSALS. I JUST GOTTA THINK AT
SOME POINT THAT'S NOT GOING TO
GO OVER REALLY WELL. BUT
SPECIFICALLY THE CHALLENGES WITH
THE PANDEMIC WHERE YOU HAD
REALLY DECREASED DEMAND AT AT
THE BEGINNING, AND, UM, SUPPLY
CHAIN ISSUES, I PRESUME HOW
THOSE TYPES OF CHALLENGES HOW
DID THEY AFFECT THE COSTS THAT
WE'VE SEEN OVER THE LAST FEW
MONTHS? AS WE KNOW NO ONE SEEMS
TO CALL US WHEN WE LOSE MONEY.
SO YOU KNOW, IN 2020. WE HAD
FIVE INTEGRATED SUPER MAJOR
COMPANIES WHO LOST $76 BILLION
DURING THAT TIME. SO HUGE.
LAYOFFS, CONCERNS DOWNSIZING
BUDGET CUTS RIGHT BECAUSE YOU
CAN'T YOU CAN'T SUSTAIN A BIT A
BUSINESS ANY BUSINESS, NOT JUST
OURS, BUT ANY BUSINESS WAS TOUGH
TIME. IT WAS A VERY TOUGH TIME
FOR EVERY BUSINESS IN THE
STATES. SO YEAH, THAT WAS REALLY
CHALLENGING AND SO YOU KNOW, BUT
WE ROSE TO THE OCCASION. WE MET
THE CHALLENGE. WE BECAME
ESSENTIAL SERVICES. WE MADE SURE
EVERYTHING CONTINUED TO GO
SMOOTHLY. UM BUT IT WAS
DIFFICULT AND, YOU KNOW, NOW
WE'RE COMING OUT OF THAT
PANDEMIC AND YOU KNOW, DEMAND
HAS BEEN ON THE RISE, WHICH
MEANS WE'VE GOT TO PRODUCE MORE
TO MEET THAT DEMAND. AND WE CAN
EITHER DO THAT. BY HAVING
SUPPLIES IN OUR STATE OR
IMPORTING AN EVENT, BUT THE
DEMAND HAS TO BE MET. AND WE
WANT TO DO IT IN THE MOST, YOU
KNOW, IN A WAY THAT WE CAN DE
CARBONIZED AS WE DO IT, AND
THAT'S THAT'S WHAT I'M EXCITED
ABOUT IS I'VE NEVER SEEN SUCH
INNOVATION IN THIS INDUSTRY. AND
I'VE BEEN DOING THIS NOW FOR 42
YEARS, SO I'VE SEEN A LOT. THEY
ARE THE MOST INNOVATIVE GROUP OF
INDIVIDUALS I'VE EVER HAD THE
PLEASURE OF REPRESENTING AND I'M
VERY PROUD OF THE THINGS THAT
THEY ARE INVESTING IN THE
RESEARCH AND DEVELOPMENT IN IN
NEW TECHNOLOGIES AND LITHIUM ION
BATTERIES IN BETTER BATTERIES IN
ALGAE SOURCES AND YOU NAME IT.
THEY'RE IN IT. WIND SOLAR THERE
IN IT ALL, AND THEY'RE IN IT.
MORE THAN ANYONE ELSE IS IN THE
IN THE STATE GOVERNMENT OF THE
FEDERAL GOVERNMENT. WHY BECAUSE
WHY NOT? BUT THEY ALSO HAVE
THEIR EYE ON THE BALL THAT
TOMORROW THEY ARE GOING TO BE
DEMANDED TO MEET. THE
REQUIREMENTS OF THIS STATE. AND
SO THEY DON'T HAVE THE LUXURY OF
SAYING THEY'RE NOT GOING TO DO
THAT. I DON'T THINK YOU'D GIVE
THEM THE LUXURY OF SAYING
THEY'RE NOT GOING TO DO THAT.
AND SO WE'VE GOT TO DO THAT. WHY
WE DID. CARMEN IS WE GOT TO DO
BOTH. SO THAT'S THAT'S A BIG
CHALLENGE, AND THAT'S A HUGE
CHALLENGE. IT'S MORE COSTLY.
IT'S MORE DIFFICULT AND THEN YOU
GOT EVERY A LOT OF OTHE STATES
WHO DON'T HAVE THOSE
REQUIREMENTS. AND SO YOU KNOW,
IT'S A GLOBAL COMMODITIES VERY
COMPETITIVE, MAKES IT VERY
TOUGH, VERY DIFFICULT. SO WHEN
THAT AGAIN WITH COVID WHEN THE
DEMAND WENT WAY DOWN, UM, THE
SUPPLY DECREASED SOMEWHAT. IS IT
MORE DIFFICULT TO RAMP UP THE
SUPPLY TO THE PRE COVID LEVELS?
YOU KNOW, REFINERIES DON'T TURN
ON AND OFF ON A DIME, RIGHT? SO
YOU YOU HAVE TO MEET THE DEMAND
AND YOU HAVE TO MAKE SURE YOUR
FACILITIES CAN DO THAT. AND YOU
HAVE TO MAKE SURE YOU'VE GOT
ENOUGH CRUDE OIL TO MEET THE
DEMAND. AND SO THERE'S MANY,
MANY DECISIONS TO MAKE THAT ALL
HAPPENED. UM BUT THAT'S YOU KNOW
, THAT'S WHAT WE DO. YOU KNOW,
WE MAKE SURE THAT WE CAN MEET
THE DEMAND EITHER BY IN STATE OR
OUT OF STATE. HOWEVER, WE HAVE
TO OUR PREFERENCE IS TO DO
EVERYTHING WITHIN THE STATE. OUR
PREFERENCE IS TO BE COURT MARK
CORPORATE PARTNERS AND
PARTICIPANTS IN THE STATE. UM
AND WE HOPE TO CONTINUE TO BE,
BUT THESE POLICIES ARE GOING TO
CONTINUE TO MAKE IT MORE AND
MORE DIFFICULT FOR THAT TO
HAPPEN. AND IN MY OPINION, THE
STATE LOSES IN THAT EQUATION.
AND THEN TALKING ABOUT
REFINERIES. WHAT ARE THE
INCREASE IN COSTS THAT
REFINERIES HAVE SEEN SO SUPPLY
CHAIN LABOR SHORTAGES? THOSE
TYPE OF THINGS ALL OF THOSE
THINGS. THANK YOU, ASSEMBLYWOMAN
. ALL OF THOSE THINGS ARE ARE
CRITICAL COST POINTS OF WHAT
REFINERS FACE AND PRODUCERS FACE
EVERY SINGLE DAY. WHETHER IT'S
BEEN LABOR SHORTAGES, WHETHER
IT'S BEEN TIGHT SUPPLIES.
OBVIOUSLY WE HAVE ALL BEEN FACED
WITH THE IMPACTS OF THE RUSSIA
UKRAINE SITUATION AND KEEPING
SUPPLY. UH YOU KNOW, MAKING IT
DIFFICULT TO GET SUPPLY ALWAYS
MAKES MARKET VOLATILITY A VERY
DIFFICULT THING. SO UM ALL OF
THOSE ISSUES HAVE CONTRIBUTED,
LET ALONE ALL OF THE POLICIES
THAT ARE AGAIN. PUT IN PLACE.
WE'LL GET CLIMATE CHANGE. LOOK
AT LOW CARBON FUEL STANDARD LOOK
AT CAP AND TRADE. THOSE ARE ALL
COSTS ON OUR INDUSTRY. I'M NOT
SAYING THAT CALIFORNIA THAT'S
WHAT CALIFORNIA CHOSE TO DO.
THAT'S BECAUSE CALIFORNIA WANTS
TO BE A LEADER IN CLIMATE
CHANGE. THOSE CHOICES WERE MADE
, BUT THERE IS A COST TO IT THAT
HAS TO BE RECOGNIZED AND CAN'T
BE IGNORED. WHICH IS WHY WE
POINTED OUT THERE. IT'S JUST IT
IS A IT IS WHY A DOLLAR 28 IS
MORE IN CALIFORNIA THE REST OF
THE NATION. IT'S JUST A FACT.
IT'S NOT OUR NUMBERS. IT'S THE
ENERGY COMMISSION. IT'S OPUS.
IT'S THE AGENCIES WHO COME UP
WITH THESE NUMBERS, SO IT'S AN
IMPACT TO THE COST OF EVERY
GALLON OF GASOLINE IN THE STATES
, SO GIVEN THAT LET'S DO THINGS
THAT MINIMIZE COST. LET'S NOT
LET'S GIVE INCENTIVES LET'S
ALLOW CCS TO BE COUNTED TO MEET
COMPLIANCE SO THAT WE CAN
CONTINUE TO MEET THE CLIMATE
CHANGE GOALS. WHY WE'RE
PRODUCING FUEL TO MEET THE
DEMAND. IT'S IT JUST MAKES
LOGICAL, GOOD SENSE. SO WE'RE
NOT AGAINST LOOKING AT AT THAT
WHOLE ARRAY. BUT WE DO BELIEVE A
DIVERSIFIED ENERGY PORTFOLIO.
AND ALL OF THE ABOVE STRATEGY.
WHICH YES, INCLUDES TRADITIONAL
OIL AND GAS, BUT ALSO INCLUDES
ELECTRIC HYDROGEN, RENEWABLE
DIESEL, RENEWABLE NATURAL GAS,
BIOFUELS, EVERYTHING BECAUSE
WHEN YOU DO THAT, YOU MINIMIZE
COST AND YOU STILL REDUCE THE
EMISSIONS THAT YOU'RE GOING
AFTER. THE ONLY TIME IT DOESN'T
WORK IS WHEN YOU JUST JUMP UP
OVER ALL OF THOSE, AND JUST AND
JUST FOCUS ON ONE, WHICH HAPPENS
TO BE THE MOST EXPENSIVE. THAT'S
WHEN IT DOESN'T WORK. UM
CHANGING SUBJECTS SLIGHTLY. CAN
YOU TELL US, UH, UM, IF IT'S
ACCURATE, WHAT WE HEARD AT THE
LAST HEARING THAT THERE REALLY
ISN'T THAT MUCH OF A DIFFERENCE
IN THE QUALITY OF GAS, UH, SOLD
AS AT BRANDED STATIONS VERSUS
UNBRANDED STATIONS IN THE 19
NINETIES. UH CAN'T REMEMBER
EXACTLY THE NAME OF THE LAW, BUT
IT WAS PASSED THAT ALL GASOLINE
EVERY GASOLINE EVERY GALLON OF
GASOLINE SOLD IN THE STATE OF
CALIFORNIA HAS GOT TO MEET
SPECIFICATIONS FOR CLEAN.
PROVIDING FOR CLEAN ENGINES.
REQUIRED. EVERY GIRL AGAINST THE
BITES IN THE STTE OF CALIFORNIA
REQUIRES THAT OKAY? WHY DO
PEOPLE GO PAY MORE FOR THE SAME
IT? IT'S A LOT OF REASONS RIGHT
SOME OF ITS BRAND LOYALTY. SOME
OF ITS I LIKE YOUR RESTROOMS ARE
CLEANER. SOME OF ITS I LIKE THE
LITTLE TOYS I GET WITH MY FOR MY
KIDS WHEN I DRIVE UP TO THE TO
THE TEST, SOME OF IT SO I'D LIKE
YOUR CONVENIENCE STORES. BUT
PEOPLE CHOOSE. CHOOSE WHERE THEY
GO WHEN YOU LOOK AT GAS BUDDY,
YOU SEE PEOPLE MAKE CHOICES OF
WHERE THEY GO TO BUY THEIR
GASOLINE. BUT EVERY GALLON OF
GASOLINE IS REQUIRED TO HAVE THE
SAME CLEAN ADDITIVES. NOW EVERY
COMPANY AS A DIFFERENT MIXTURE
OF THOSE ADDITIVES. YOU KNOW,
YOU'VE HEARD SHARON'S TECHTRONIC
. OTHERS HAVE OTHER NAMES. SO
THOSE ARE THEIR VERSION OF THAT
THOSE ADDITIVES. SOME PEOPLE
FEEL THAT THOSE ARE CLEANER
ADDITIVES THAN OTHERS. IT'S
AGAIN IT'S A CONSUMER CHOICE.
BUT BUT BASIC GASOLINE SOLD
EVERYWHERE BY EVERYONE HAS TO
HAVE THE SAME. SPECIFICATIONS
AND REQUIREMENTS TO ENSURE CLEAN
ENGINES AND CLEAN SYSTEM
PERFORMANCE. SO REALLY, WHAT WE
DID HERE AT THE LAST HEARING IS
THAT CALIFORNIANS DON'T THEY
SEEM TO BE MORE ATTRACTED TO
THEIR BRANDS AND IN OTHER AREAS
OF THE COUNTRY WHEN THEY REALLY
COULD GO TO THESE JUST SAID TO
THE THESE UNBRANDED STATIONS AND
GET THE SAME HIGH QUALITY GAS
THAT HAS THE HIGHEST STANDARDS
IN THE WORLD THAT ACCURATE
CONSUMER BEHAVIOR IS VERY
INTERESTING. I HAVE FOUR GAS
STATIONS ON HOW I DON'T HAVE I
MEAN GOODBYE TO FORCE GAS
STATIONS ON BARRACKS AND HOW FOR
GAS STATIONS, ALL IN THE SAME
CORNER. ABSOLUTELY FASCINATING
THAT PEOPLE CHOOSE TO GO TO A
GAS STATION AND PAY HIGHER
PROCESS. CONSUMER CHOICE. THEY
HAVE MANY REASONS I'M NOT EVEN
GOING TO PUT, YOU KNOW. TRY TO
SAY THAT I KNOW WHAT THEY ALL
ARE. BUT CONSUMERS MAKE THOSE
CHOICES. UM AND YOU KNOW, PEOPLE
ALSO MAKE CHOICES TO GO TO
COSTCO. YOU KNOW, AND YOU LOOK
AT COSTCO, WHICH IS A HIGH
VOLUME RIGHT HIGH VOLUME. THEY
SELL IT CLOSER TO COST. WHY
BECAUSE THEY WANT PEOPLE TO GO
INTO COSTCO AND BUY 405 $100
WORTH OF STUFF. SO THAT'S THAT'S
A MARKETING POSITION FOR COSTCO
. IT'S A IT'S A DECISION THEY
MAKE AND IT SEEMS TO WORK FOR
THEM. BUT IT IS ACCURATE THAT
THE QUALITY IS THE SAME. IT IS.
IT IS ACCURATE THAT ALL GASOLINE
HAS HAS A REQUIRED
SPECIFICATION. WHETHER OR NOT
YOU BELIEVE THAT TECH CRON OR
SOME OTHER ADDITIVE IS A IS A
HIGHER LEVEL. UM YOU KNOW,
THAT'S CERTAINLY IS WHY YOU PAY
MORE FOR IT SO, BUT YOU CANNOT.
YOU CANNOT PUT A GALLON OF
GASOLINE IN YOUR CAR IN THE
STATE. THAT DOESN'T ENSURE THAT
IT IS, UH UM TESTED LAB TESTED
CLEAN SYSTEM. AH GASOLINE FOR
YOUR VEHICLE AND YOUR ENGINE. DO
YOU HAVE A NUMBER ON WHAT THE
DIFFERENCE IN PRICES BETWEEN
BRANDED AND UNBRANDED GAS ON
AVERAGE IN CALIFORNIA? NO I
DON'T REALLY HAVE IT OFF THE TOP
OF MY HEAD. I MEAN, I HAVE. I'VE
SEEN 2030 CENTS DIFFERENCES AT
TIMES, BUT NO, I DON'T
NECESSARILY HAVE AN AVERAGE
NUMBER. UH CALIFORNIA IS ONE OF
THE TOP TWO OR IS IT TOP 10 OIL
PRODUCING STATE? BUT PRODUCTION
HAS GENERALLY DECLINED SINCE THE
19 EIGHTIES. CAN YOU TELL US WHY
ONE OF THE REASONS IS THE STATE
DOESN'T WANT TO PRODUCE IT. IT'S
NOT THAT WE DON'T HAVE THE OIL
THERE. CURRENT COUNTY IS THE
LARGEST OIL PRODUCING COUNTY OR
IT'S EVEN COUNTED AS ONE OF THE
STATES IN THE NATION BECAUSE IT
PRODUCES A VERY LARGE AMOUNT OF
OIL OR COULD PRODUCE A VERY
LARGE AMOUNT OF OIL SO THAT OIL
CAN BE PRODUCED THAT OIL IS
THERE. IF YOU LOOK AT THE TAXES
THAT ARE COMPANIES PAY AND
CURRENT COUNTY IT IS BASED ON
RESERVES IN THE GROUND, SO THE
TAX ASSESSOR, BASES IT ON OIL IN
THE GROUND. AND THAT OIL IN THE
GROUND ARE LARGE RESERVES. IF
IT'S NOT ENCOURAGED BY THE STATE
TO PRODUCE THEM EITHER
ECONOMICALLY, OR THE FACT THAT
YOU CANNOT GET A PERMIT. WE ARE
UNABLE TO GET NEW, WELL DRILLING
PERMITS IN THIS STATE FOR QUITE
SOME TIME. WE ARE ANXIOUS TO
BRING MORE SUPPLY TO MARKET. WE
CAN BRING MORE SUPPLY TO MARKET
AND WE'RE IN DECLINE BECAUSE THE
STATE HAS POLICIES THAT
ELIMINATE US FROM DOING IT. SO
IT'S IN DECLINE BECAUSE THIS
STATE HAS CHOSEN NOT TO PRODUCE
IT. UM SO I'M GONNA SWITCH OVER
TO ZONAL PRICING. UM WHEN WE'RE
DISCUSSING THE RISE IN GAS
PRICES. CAN YOU EXPLAIN WHY THIS
ZONAL PRICING EXISTS? AND HOW
DOES IT AFFECT THE RETAIL PRICE
OF GAS IN CALIFORNIA? AND I
GUESS WE'VE SEEN YOU KNOW WHAT
THE BOUNDARIES OF ONE CITY GO
ACROSS THE STREET FROM THE
BOUNDARY OF ANOTHER CITY AND A
BIG DIFFERENCE IN THE PRICE OF
GAS OR GAS THAT'S CLOSE TO THE
FREEWAY, MUCH MORE EXPENSIVE
THAN GAS. THAT IS A FEW BLOCKS
IN, UM SO. WHAT WHAT? ONE THING
I WILL SAY ABOUT THAT. YOU
SHOULDN'T HAVE POLICIES THAT
ELIMINATE THE LOCATION OF GAS
STATIONS. BECAUSE THE BIGGEST
THING THAT CAN BENEFIT PRICE IS
COMPETITION. WHEN YOU HAVE NO
COMPETITION, AND YOU'RE THE ONLY
GAME IN TOWN. YOU HAVE THE
ABILITY TO PRICE DIFFERENTLY
THAN IF YOU HAD COMPETITION. SO
I THINK ONE OF THE MAIN THINGS
THAT WE ARE CONTINUALLY AMAZED
AT IS LIKE POLICIES IN LOS
ANGELES THAT ARE ELIMINATING THE
LOCATION OF NEW GAS STATIONS.
THIS IS NOT GOING TO BE HELPFUL.
WHEN YOU LOOK AT THE IMPACT TO
THE PRICE OF THE PUMP. MORE
COMPETITION IS BETTER. SO YOU
SHOULD NOT HAVE. YOU SHOULD NOT
ELIMINATE THE ABILITY TO HAVE
COMPETITION. FROM A RETAIL
STANDPOINT, THE OTHER ISSUE THAT
IMPACTS IT IS JUST WHERE YOU'RE
LOCATED. OBVIOUSLY THE COST IN
SAN FRANCISCO IS A LOT HIGHER
THAN PERHAPS IN DOWNTOWN
BAKERSFIELD OR FRESNO. SO SOME
OF ITS PROPERTY VALUE SOME OF
ITS LOCATION. AND A LOT OF ITS
COMPETITION. SO WHO, WHO,
ACTUALLY, UH, SETS THE ZONES. I
DON'T KNOW. I ACTUALLY DON'T
KNOW THE ANSWER TO THAT. UM AND
YEAH, I. UH WHEN YOU'RE TALKING
, I GUESS WE CAN PROBABLY ASKED
THE, UH THIS WE CAN ASK THE NEXT
SPEAKER THERE, BUT CERTAINLY
THAT EXISTS, AND, UM, IF YOU'RE
TALKING ABOUT L A THAT YOU'RE
YOU'RE SAYING THAT THERE'S LESS
GAS STATIONS THAT ARE OPENING
THEIR WE CAN. THAT'S SORT OF A
BROAD AREA, BUT WE WERE VERY
INTERESTED IN IS THE SMALLER
ZONES THAT REALLY SEEMED TO
AFFECT THE PRICE OF GASSING IN
GAS IN AREAS THAT ARE CLOSE
TOGETHER AS OPPOSED TO SAN
FRANCISCO VERSUS BAKERSFIELD. DO
YOU HAVE ANY COMMENTS ON UM
MAYBE IF I HAVE A LITTLE MORE
SPECIFICS ON WHAT LOCATIONS? UM
NOT NOT GENERALLY SPEAKING. WE
WILL. FOLLOW UP WITH YOU LATER
ON THAT. UH AS WE MENTIONED
BEFORE THE GAP, THERE IS A
SIGNIFICANT GAP BETWEEN THE
PRICE FOR BRANDED AND UNBRANDED
GASOLINE DO. HOW DOES IT WORK
WITH YOUR REFINERIES OR IN
GENERAL, THE REFINERIES DO THEY
STILL TWO STATIONS AT DIFFERENT
PRICES, DEPENDING ON WHAT THE
BRAND IS OR WHETHER THEY'RE
UNBRANDED. THERE ARE CONTRACTED
AMOUNTS OF GASOLINE THAT ARE
SOLD TO VARIOUS ENTITIES. THERE
ARE ENTITIES WHO BY ON THE SPOT
MARKET LIKE EVEN COSTCO, A
PERCENTAGE OF THEIR GASOLINE
THAT IS NOT CONTRACTED. THEY BUY
ON THE SPARK MARKET. WHY BECAUSE
USUALLY THEY CAN FIGURE OUT YOU
KNOW, MAYBE THERE'S A WAY TO GET
A BETTER PRICES ON THE SPARK
MARKET SO THEY CAN GET A BENEFIT
FROM THAT. SO THERE'S MANY
FACTORS THAT GO INTO INTO THAT.
I'M CERTAINLY NOT A TRAITOR, SO
I DON'T KNOW. I DON'T KNOW THE
INS AND OUTS OF THAT. UM BUT YOU
KNOW, WE IN THE PAST, UM, WE
USED TO OWN I EVEN REMEMBER THIS
BECAUSE I'VE BEEN DOING IT SO
LONG. WE USED TO OWN A LOT OF
THE RETAIL STATIONS AND WE DON'T
ANYMORE AND I THINK THE NEXT
SPEAKERS CAN AND PROBABLY SPEAK
TO THAT QUESTION MORE ACCURATELY
, BECAUSE NOW THEY'RE BASICALLY
OWNED INDEPENDENTLY, AND THEY
MAKE THOSE DECISIONS ON WHETHER
THEY BUY UNBRANDED BOOK GAS ON
WHETHER WE Y BRANDED GAS AND
UNBRANDED GAS CAN TYPICALLY BE
THINGS LIKE COSTCO, YOUR BIG BOX
COMPANIES OR IT CAN BE PLACES
LIKE, YOU KNOW, FLYING J OR
ROTTEN ROBBIE OR SOME OF THE
OTHER, YOU KNOW, INDEPENDENT
STATIONS AND SO THEY CAN MAKE
THE DECISION IF THEY WANT TO BUY
UNBRANDED UNDER THEIR OWN BRAND
, OR IF THEY WANT TO BUY
SOMETHING AND FLY IT UNDER A
CHEVRON ARE SHELL OR EXXON BRAND
OR VALERO BRAND. THOSE ARE
CHOICES THAT THEY CAN MAKE, AND
THEY MAKE THOSE CHOICES BASED ON
WHERE THEY'RE LOCATED WITH THE
MARKET IS WHO THEY THINK WILL
BUY IT. UM, SO ALL OF THOSE
FACTORS SO IF YOU HAVE ONE
REFINERY OF IS THERE A SHELL
REFINERY IF IT USED TO BE, WELL
, EXXON OR USED TO BE ABOUT
MARATHON OR PHILLIPS VALERO.
ALRIGHT LET'S SAY VALERO
REFINERY, ONE SINGLE REFINERY IN
ONE AREA. ARE THEY SELLING AT
DIFFERENT PRICES TO THEIR BRAND
NAMES VERSUS THE UNBRANDED
STATIONS THAT ARE IN THE SAME
AREA? YEAH, AND YOU KNOW, I
PROBABLY DON'T KNOW. I DON'T
KNOW THE SPECIFICS ON HOW
COMPANIES DO THEIR PRICING OR OR
HOW THEY DO THAT SO I'M NOT
REALLY QUALIFIED TO ANSWER THAT
QUESTION. I'M HAPPY TO LOOK INTO
IT FOR YOU. UM BUT USUALLY ALL
OF THOSE DECISIONS ARE MADE
BETWEEN THE REFINER AND THE
INDEPENDENT RETAILER OR TRADER
OR WHOMEVER IS MAKING THOSE
TRANSACTIONS AND FOR WHATEVER
REASON THEY'RE MAKING THEM.
ALRIGHT YEAH. WE WOULD LIKE TO
LOOK FURTHER INTO IT BECAUSE IT
IT COULD BE A COST SAVINGS IF
THESE UNBRANDED STATIONS ARE
ABLE TO PURCHASE, UM AH
PURCHASED GAS FOR THE SAME PRICE
AS THE NAME BRAND AT THE
REFINERY. POTENTIALLY. UM HOW DO
REFINERIES PLANT PLAN FOR
CHANGES IN DEMAND IN BOTH THE
SHORT AND LONG TERM? OH, THEY
HAVE MANY THINGS TO CONSIDER IN
THAT, DON'T THEY? IT'S HOW THEY
ARE NOT ONLY GOING TO MEET THE
DEMAND, BUT ALSO, HOW ARE THEY
GOING TO BE ABLE TO MANAGE? THE
MANY HURDLES THAT ARE PLACED ON
THEM FROM A REGULATORY OR
LEGISLATIVE STANDPOINT AND THEN
STILL BE IN BUSINESS WHEN
THEY'RE COMPETING WITH OTHER
STATES AND OTHER COUNTRIES WHO
DON'T HAVE THESE REQUIREMENTS.
THOSE ARE VERY TOUGH DECISIONS.
THEY ALL HAVE THEIR OWN VIEW OF
HOW TO DO THAT. THEY HAVE THEIR
SHORT TERM VIEWS THEIR MID VIEWS
THEIR LONG VIEWS. UM I CERTAINLY
AS A TRADE ASSOCIATION DON'T
KNOW WHAT THOSE ARE. THOSE ARE
VERY COMPETITIVE IN NATURE. I'M
NOT ALLOWED TO KNOW WHAT THEY
ARE FROM ANTITRUST LAW. AND SO
THOSE ARE DIFFICULT DECISIONS
THAT THEY ALL MAKE IS THEY PLAN
? UM THEIR FUTURE EXISTENCE IN
THIS STATE ON PROBABLY A WEEKLY
MONTHLY YEARLY FIVE YEAR 10 YEAR
20 YEAR PLAN. AND THERE HAVE
BEEN THOSE THAT HAVE ELECTED TO
LEAVE. UM BECAUSE THEY HAVE
OTHER OPPORTUNITIES ELSEWHERE
THAN TO DEAL WITH THE
REQUIREMENTS OF THE STATE. AND
SO THAT'S WHEN THOSE REFINERIES
ARE SOLD IN THOSE CHANGES ARE
MADE AND THEN OTHERS TRY TO MAKE
A GO. SO UM, WE WOULD HAVE TO
TALK TO YOU KNOW, WE WERE VERY
SPECIFICALLY AGAIN LOOKING AT
DURING COVID HOW THE PRICES HAVE
INCREASED SO MUCH, AND YOU CAN
CERTAINLY SEE THERE WAS A HUGE
DIFFERENCE IN IN DEMAND AT THE
BEGINNING AND DEMAND AS PEOPLE
STARTED TO GO BACK TO WORK, SO
WE REALLY WANTED TO KNOW LIKE
HOW EASY OR TIME CONSUMING. IS
IT TO RAMP DEMAND UP AFTER YOU
HAVE SHUT IT DOWN? BUT IS THAT
SOMETHING THAT WE SAW? IT IS
NOT. I MEAN, IT IS NOT AN EASY
THING TO TURN A REFINERY ON AND
OFF AS YOU CAN IMAGINE, AND
WE'VE OBVIOUSLY TALKED ABOUT
WANTING TO GET ALL OF YOU OUT TO
A TOUR TO ACTUALLY SEE WHAT IT
TAKES TO RUN A REFINERY WITH
HIGH PRESSURE IS HIGH
TEMPERATURES, YOU KNOW,
PRODUCING THESE KINDS OF VOLUMES
TO MEET DEMAND IS NOT AN EASY
THING. SO AND THEN WHEN YOU'RE
DESIGNED YOUR REFINERY TO TAKE
CALIFORNIA CRUDE OIL. AND THEN
WHEN CALIFORNIA CRUDE OIL CAN BE
PRODUCED, THAT'S ANOTHER, YOU
KNOW, DIFFICULTY ON HOW HOW DO
YOU DEAL WITH REVAMPING YOUR
REFINERY TO TAKE OTHER TYPES OF
CRUDE THAT YOU DIDN'T DESIGN IT
FOR? SO THOSE ARE ALL DIFFICULT
DECISIONS AND TIME CONSUMING
DECISIONS? UM ESPECIALLY WHEN
YOU HAVE A PANDEMIC WORD DEMAND.
UM IS DROPPING SIGNIFICANTLY AND
THEN YOU WERE COMING OUT OF THAT
PANDEMIC, AND NOW YOU HAVE
DEMAND INCREASING AND SO YOU'VE
YOU KNOW, YOU ARE OBLIGATED TO
MEET THAT DEMAND. YOU EITHER DO
IT WITH YOUR OWN REFINERY OR YOU
DO YOU DO IT WITH A COMBINATION
OF HAVING YOUR OWN REFINERY,
PLUS IMPORTING OR WHATEVER IT
TAKES TO MEET THAT DEMAND,
BECAUSE THAT'S THAT'S OUR JOB.
THAT'S WHAT WE DO. AND HOW LONG
WOULD IT TYPICALLY TAKE TO RAMP
UP TO THIS? NO BIG INCREASE IN
DEMAND. IS IT MONTHS DAYS? UM I
THINK AGAIN, WE SHOULD PROBABLY
TALK TO THE INDIVIDUAL COMPANIES
AND WE WOULD LIKE TO DO THAT. UM
ACCORDING TO THE CDC, JUST 11
REFINERIES PRODUCED 90% OF THE
STATE'S GAS AND DIESEL. WITH SO
FEW PRODUCERS. DISRUPTION AT ONE
REFINERY COULD AFFECT SUPPLY. UM
SIGNIFICANTLY. HOW DO REFINERS
SEEK TO PREVENT DISRUPTIONS? SO
IT IS NOT OUR JOB TO DO THAT.
BUT IT IS THE ENERGY
COMMISSION'S JOB. AND AS YOU
KNOW, THAT IS WHY YOU HAVE
PROTECTED INFORMATION UNDER
PRIOR A THAT GOES TO THE ENERGY
COMMISSION SO THAT THEY CAN MAKE
SURE THAT THEY ARE COMMUNICATING
INDEPENDENTLY WITH REFINERS TO
MAKE SURE THAT SUPPLY IS
AVAILABLE TO MEET DEMAND AND
THAT THEY ARE THEY UNDERSTAND
WHEN THOSE TURNAROUNDS ARE WHO
THEY ARE AND MAKE SURE THEY ARE
PLANNED IN A WAY THAT IS NOT
DISRUPTIVE TO THE MARKETPLACE.
THAT'S THE CCS JOB. THAT'S WHY
WE PROVIDE INFORMATION TO THEM.
UM WHY ARE COMPANIES PROVIDE
INFORMATION TO THEM? SO UM,
THAT'S THE JOB OF THE C E. C AND
THAT'S WHAT THEY MAKE SURE IT
DOESN'T HAPPEN. NOW YOU HAVE
UNPLANNED OUTAGES THAT OBVIOUSLY
BUT PLANNED OUTAGES WHICH ARE
TURNED AROUND. UM ALL OF THAT IS
LOOKED AT BY THE C E. C, AND
IT'S MADE SURE THAT UM,IT'S
DONE IN A WAY THAT DOESN'T
IMPACT THE MARKET. THE, UM I
THINK WE HEARD AT THE LAST
HEARING THAT WASHINGTON STATE
MAKES CALIFORNIA UM, GRADE GAS
IS THAT ACCURATE? UM THERE IS A
LITTLE BIT THAT CAN COME DOWN
FROM WASHINGTON BY TANKER AGAIN
. UM AND SO, BUT THE HOPE IS
THAT YOU CAN ACTUALLY, UM IN THE
MOST CASES, YOU CAN MEET YOUR
DEMAND BY, UM, WHAT WE HAVE HERE
IN THE STATE OF CALIFORNIA AS
LONG AS WE'RE ALLOWED TO PRODUCE
IT. SO IF YOU'RE NOT ALLOWED TO
PRODUCE IT, THEN YOU HAVE TO GET
THAT CRUDE OIL FROM SOMEWHERE.
SO YOU'RE EITHER GOING TO GET IT
FROM MARINE TANKER BRINGING IT
IN OR YOU'RE GONNA GET IT FROM,
UM, NORTH DAKOTA BY RAIL, OR, UM
, THOSE ARE REALLY RAIL AND
MARINE ARE THE TWO THE TWO WAYS
TO GET CRUDE OIL HERE.
OTHERWISE, YOU'RE BRINGING IN
FINISHED PRODUCT BECAUSE YOU
DON'T HAVE CRUDE OIL. YOU'VE GOT
TO BRING IN FINISHED PRODUCT AND
THAT'S WASHINGTON. STAY UP. AND
YOU DO YOU HAVE ANY IDEA OF WHAT
THE HOW MUCH THAT WOULD ADD PER
GALLON OF AH, NOT OFF THE TOP OF
MY HEAD. I DON'T OKAY. AND THEN
DO YOU HAVE IN SEEING IN THE
PAPERS, OF COURSE ABOUT THE
PROFITS. UM. THE PROFITS OVER
THE LAST FEW MONTHS OF THE OIL
COMPANIES. IS THERE A GENERAL
METRIC THAT YOU CAN SHARE ABOUT,
UH THAT YOU CAN SHARE FOR
REFINERIES ABOUT TARGET PROFIT
MARGINS. IF YOU WOULD INDULGE
HIM AGAIN. CAN I HAND YOU ONE
MORE GRAPHIC? CERTAINLY. SO WHEN
WE TALK ABOUT EARNINGS, UM WE
ARE REALLY TALKING ABOUT NET
REVENUE NET INCOME OVER REVENUE
AND WITH THIS CHART IS SHOWING
YOU IS WHAT ARE THE EARNINGS OF
THE NATURAL OIL AND GAS
COMPANIES COMPARED TO OTHER FIVE
S AND P 500 COMPANIES AND AS YOU
CAN SEE, UM, OUR EARNINGS ARE
VERY MUCH IN LINE ACTUALLY LOWER
THAN THE AVERAGE EARNINGS OF
OTHER S AND P 500 COMPANIES. UM
AND SO I THINK, YOU KNOW. THAT'S
PRETTY TELLING STORY THAT THIS
IS. THE ALLEGATION THAT, UM WE
ARE MAKING ENORMOUS AMOUNTS OF
PRODUCT PROFIT. IS BECAUSE
NUMBERS ARE PER PER NUMBERS ARE
REPORTED IN TOTAL VOLUME. AND
WHEN YOU'RE THAT 40 MILLION
PEOPLE DRIVING AROUND YOUR TOTAL
VOLUME NUMBERS, PER, YOU KNOW,
NUMBERS OF GALLONS OF GASOLINE
IS HIGH. BUT THAT'S NOT WHAT
EARNINGS ARE AND SO WHEN YOU
LOOK AT EARNINGS AND NET NET
INCOME OVER REVENUE WE ARE RIGHT
IN LINE, IF NOT LOWER THAN ANY
OF THESE OTHER COMPANIES. YOU
SEE HERE, SO IF YOU'RE CONCERNED
ABOUT PROFITS, I'D SUGGEST
BRINGING THEM IN AND ASKING THEM
WHY THEY AREN'T AS LOW AS WE
ARE. ALL RIGHT. AND THEN I
APPRECIATE YOU'VE BEEN THEN. AH,
VERY GOOD. SO WE WILL END WITH
THIS, UH, IN THE LAST, UH OH, I
DIDN'T SEE. OH MY GOSH, I DIDN'T
EVEN SEE YOU WERE THERE, MR.
MURATSUCHI UM, I WILL END WITH
THIS QUESTION. AND THEN I WILL
TURN IT OVER TO MR MURATSUCHI.
UH, WE HEARD AT THE LAST HEARING
ABOUT THE 30 TO 50 CENTS, UM, A
GALLON MYSTERY SURCHARGE, WHICH
I THINK, UH, STARTED AND 2016
WHEN ONE OF THE REFINERIES WENT
DOWN. DO YOU HAVE ANY THEORIES
ON THAT BEYOND WHAT BEYOND THE
STATES TAXES AND ENVIRONMENTAL
MENTAL FEES. I REALLY DON'T HAVE
ANY EVIDENCE OF A MYSTERY CHARGE
. MYSTERY SURCHARGE. WHAT I DO
KNOW IS WHAT GOES INTO THE COST
OF EVERY GALLON OF GASOLINE IN
THE STATE. UM I KNOW THAT IT'S
IMPACTED BY SUPPLY AND DEMAND BY
TAXES AND FEES AND REGULATIONS
AND THINGS THAT WE'VE PLACED ON
IT. I KNOW IT'S IMPACTED BY
CONSUMER CHOICE AND THE NUMBER
OF GASOLINE STATIONS AND STORAGE
CAPACITY AND ALL KINDS OF
THINGS. BUT I HAVE NO EVIDENCE
OF A MYSTERY SURCHARGE. ALRIGHT.
MR MURATSUCHI. WELCOME THANK YOU
VERY MUCH. I'M SORRY. I'M LATE
TO MADAM CHAIR. UM BUT I THINK I
DID HAVE A CHANCE TO, UH YOU
HEAR MUCH, IF NOT MOST OF IS RE
HIS VOIDS TESTIMONY AS WELL AS
RESPONSES TO EARLIER QUESTIONS.
UM I DO HAVE SOME ADDITIONAL
QUESTIONS. UM GOOD TO SEE YOU.
UM I WOULD LIKE TO, UH I WAS
GOING TO START BY ASKING ABOUT
THE MYSTERY SURCHARGE. I KNOW
WE'RE GOING TO HEAR FROM MR
MCCARTY LATER ON. AND I KNOW I
ALSO BELIEVE THAT THERE IS
ONGOING. INVESTIGATION BY THE
ATTORNEY GENERAL'S OFFICE. UM
UH, IN TERMS OF THE UM.
ALLEGATION OF THIS MYSTERY
SURCHARGE. BUT BE THAT AS IT MAY
, UM MS REEVES BOYD. I WANTED TO. I ALWAYS WONDERED. AM I
PRONOUNCING THAT RIDE? REALLY
CLOSE TIES? VOIGTS OKAY, SPORT.
UM SO IT'S OKAY. CAN CALL ME
ANYTHING. I KNOW YOU WERE
TALKING EARLIER ABOUT. THE
GOVERNOR'S EXECUTIVE ORDER. T.
UH REQUIRE THAT ALL NEW LIGHT
DUTY VEHICLE SALES BY 2035 B.
ZERO MISSION. UM. HOW IS, UH,
WHISPER PLANNING FOR THAT. AND
TERMS OF, YOU KNOW, THE MARKET
AND IN TERMS OF SUPPLY, UH, IN
TERMS OF AMEN. WELL AS YOU KNOW
, ARE AND AS WE DISCUSSED A
LITTLE EARLIER, OUR JOB IS TO
MEET DEMAND. SO HOW ARE WE
PLANNING FOR IT? WE'RE PLANNING
TO MEET DEMAND. THERE WILL STILL
BE HIGH DEMAND IN 2035, BECAUSE. IT IS ONLY THE BANNING OF THIS
SALE OF INTERNAL COMBUSTION
ENGINES, SO THERE WILL BE A
LARGE AMOUNT THAT STILL NEED TO
BE FUELED. UM AND IT WILL BE. I
THINK THE STATE'S DESIRE FOR US
TO DO THAT. SO UM, WE ARE
DEFINITELY PLANNING FOR THAT.
BUT WE ARE ALSO LOOKING TO HOW
DO WE MEET? THE REQUIREMENTS OF
THE EXECUTIVE ORDER FROM A
CLIMATE CHANGE STANDPOINT AND SO
D CARBON IZING. ANYWAY, WE CAN,
UM BECOMES VERY IMPORTANT SO
THAT WE CAN CONTINUE TO MEET
DEMAND AND STILL MEET THOSE
OTHER REQUIREMENTS. AND SO
THAT'S WHY THINGS LIKE CCS ARE
SO IMPORTANT AS A COMPLIANCE
TOOL TO DE CARBONIZED, SO WE
STILL HAVE THE ABILITY TO MEET
THE DEMANDS OF THE STATE, WHICH
WILL WE WILL STILL BE HIGH
POPULATION WILL STILL BE GROWING
. UM PEOPLE WILL STILL BE
DRIVING THEY WILL BE HOLDING ON
TO THEIR VEHICLES. UM AND THERE
IS CONCERN THAT THE REDUCTION IN
RETAIL STATIONS WILL ONLY
EXASPERATE THE PROBLEM AND WILL
ADD ADDITIONAL COST. TO EVERY
GALLON OF GASOLINE AND DIESEL
THAT IS SOLD AT THAT TIME.
THAT'S A CONCERN. IT SHOULD BE A
CONCERN. UM AS WE LOOK TO HOW
WE'RE GOING TO MANAGE THIS FROM
A COST STANDPOINT, FROM AN
AFFORDABILITY STANDPOINT, GOING
FORWARD. I THINK THE EASY PART
IS TO DEAL WITH. HOW DO YOU
REDUCE GREENHOUSE GAS EMISSIONS?
I THINK THE TOUGH PART IS HOW
CAN WE DO IT AFFORDABLY. AND WE
SAID EARLIER THAT, UH, I HOPE
THIS COMMITTEE TAKES UP A SELECT
HEARING TO UNDERSTAND THE FOUR
SCENARIOS THAT ARE BEING
PROMOTED BY THE CALIFORNIA AIR
RESOURCES BOARD AND THAT THERE'S
INTEREST IN HEARING 1/5 SCENARIO
THAT WE THINK CAN GET THEIR
BETTER, CHEAPER, FASTER AND NOT
TANK THE ECONOMY AND HELP US
MOVE TOWARDS MEETING THESE GOALS
. I HOPE THAT'S A GREAT
CONVERSATION TO HAVE. THAT'S A
CONVERSATION ABOUT, UM, ACTUALLY
SOLVING THE PROBLEM. UM RATHER
THAN A LOT OF THINGS WE TEND TO
SPEND TIME ON. OKAY BUT I WANT
YOU TO FOCUS ON ANSWERING MY
QUESTION, WHICH IS, WHAT ARE THE
WHAT IS WHISPER PLANNING IN
TERMS OF LIKE, FOR EXAMPLE, YOU
KNOW, IF IN FACT WE DO. AH, YOU
KNOW, ACHIEVE. THE GOAL OF ALL
NEW LIGHT DUTY VEHICLES BEING
SOLD BY 2035 BEING ZERO EMISSION
VEHICLES. WHAT IS GOING TO BE
THE REDUCTION IN THE GAS DEMAND
BY 2035? WHAT IS THE PROJECTED
REDUCTION IN DEMAND? THINK
THAT'S A GREAT QUESTION FOR THE
ENERGY COMMISSION WHO DOES ALL
OF THOSE PROJECTIONS OR THE
ENERGY INFORMATION
ADMINISTRATION? UM THEY MAY THEY
DO THEIR BEST PROJECTIONS
RELATIVE TO WHAT THAT DEMAND
WILL BE EACH COMPANY. I'M SURE
DOES THAT THEMSELVES. UM SO I'M
NOT GOING TO EVEN BEGIN TO
SUGGEST THAT I KNOW WHAT THOSE
ANSWERS ARE. UM BUT I DO BELIEVE
THAT EVERYBODY IS TRYING TO
FIGURE OUT HOW THEY'RE GOING TO
MEET THAT DEMAND, UM, AS THE
REST OF THE WORLD'S DEMAND IS
INCREASING. AND THESE COMPANIES
WILL CONTINUE TO MEET THAT
DEMAND AS WELL. SO REGARDLESS OF
WHAT CALIFORNIA DECIDES TO DO,
THEY WILL MEET THAT DEMAND AND
THEY'LL MEET THE DEMANDS THAT
THE REST OF THE WORLD IS
EXPERIENCING AS WELL. WHICH
TENDS TO LOOK A LITTLE DIFFERENT
THAN THE STATE. SO YOU WANT TO
PRODUCE AND REFINED GAS IN
CALIFORNIA AND SEND IT OVER BY
TANKERS TO OTHER COUNTRIES. NO,
WE WILL. NO, ACTUALLY, WE WOULD
DO THAT IN A MUCH MORE EFFICIENT
WAY. BUT IF WE ARE PRODUCING IN
THIS STATE AND ALLOWED TO
CONTINUE TO PRODUCE AND REFINE
IN THIS STATE. WE WILL MEET
THOSE DEMANDS OF THE STATE IN A
WAY HOPEFULLY THAT WE CAN
DECOUPLE DE CARBONIZED AND MAKE
IT UM, YOU KNOW, PROFITABLE TO
REMAIN HERE. UM OTHERWISE YOU
WILL HAVE INPUT. YOU JUST HAVE
UM, PRODUCTS SHIPPED IN AND AS
I'VE SAID BEFORE, THAT EQUATION
, IN MY OPINION IS, UM TO THE
DETRIMENT OF CALIFORNIA BECAUSE
YOU STILL YOU STILL FUEL THE
ECONOMY, BUT YOU DO IT IN A WAY
THAT YOU LOSE JOBS AND TEXAS AND
MS WRITE HIS BOY. I KNOW YOU'RE
GOOD AT ADVANCING YOUR TALKING
POINTS I WOULD APPRECIATE IF YOU
JUST STICK TO ANSWERING MY
QUESTION. UM SO WHAT I HEARD IS
THAT WHISPER DOESN'T UH, HAVE
INFORMATION IN TERMS OF WHAT
PLANS ARE BEING MADE IN TERMS OF
THE REDUCTION IN DEMAND FOR
GASOLINE WITH THE IT IS NOT. WE
DON'T REDUCE DEMAND. DEMAND IS
WHAT DEMAND IS. WHAT I'M SAYING
, IS, IS YOU I ASSUME YOU MUST
BE PLANNING FOR IT. IF THE STATE
OF CALIFORNIA ACHIEVES ITS GOAL
OF NOT HAVING ANY AH, ANY ANY
GASOLINE LIGHT DUTY VEHICLES
BEING SOLD BY 2035. I UNDERSTAND
THAT THERE'S GOING TO BE THE
DEMAND FROM FROM. THE GAS
POWERED CARS THAT ARE ALREADY ON
OUR ROADS AND FREEWAYS. BUT I
IT'S HARD. I CANNOT IMAGINE THAT
ALL OF YOUR, YOU KNOW VERY
SOPHISTICATED COMPANIES ARE NOT
ENGAGED IN SOME KIND OF A
PLANNING EXERCISE IN TERMS OF
WHAT THE REDUCTION IN THE DEMAND
FOR GASOLINE WOULD BE AND HOW
YOUR COMPANIES WILL RESPOND TO
THAT. YOU'RE SAYING THAT YOU'RE
NOT AWARE OF ANY PLANS? NO I'M
NOT SAYING THAT ASSEMBLYMAN AT
ALL. I'M SAYING THAT EACH
COMPANY WHO IS EXTREMELY
INNOVATIVE AS THEY LOOK TO THE
FUTURE AND HOW THEY'RE GOING TO
NOT ONLY MEET EXISTING DEMAND OR
WHATEVER THE CALIFORNIA POLICIES
ARE ON DIVERSIFYING THE
PORTFOLIO AND WHAT THEY HAVE TO
DO TO MEET THAT, WHETHER IT'S
HYDROGEN, WHETHER IT'S WHETHER
IT'S RENEWABLE DIESEL, WHETHER
IT'S RENEWABLE, NATURAL GAS,
THEY'RE ALL THEY'RE INVOLVED IN.
ALL OF THAT THEY'RE INVOLVED IN
WHEN THEY'RE INVOLVED IN SOLAR.
THEY'RE INVOLVED IN ALL OF THAT.
SO AS THEY EACH LOOK TO THE
FUTURE AND FIGURE OUT WHERE
THEY'RE GOING TO POSITION
THEMSELVES AND NOT ONLY MEETING
THE EXISTING DEMAND AND BUT
MEETING WHATEVER THE STATE OF
CALIFORNIA'S PORTFOLIO MIX LOOKS
LIKE, UM, THEY WILL BE INVOLVED
IN THAT, TOO. THEY ARE INVOLVED
IN ELECTRIC CHARGING STATIONS
ARE INVOLVED IN ALL OF IT. BUT
THEY'RE ALSO INVOLVED, ENSURING
THAT THEY STILL CAN MEET A VERY
LARGE DEMAND OF TRADITIONAL OIL
AND GAS NOT ONLY IN 2035 BUT IN
2040 AND 2015 AND 2016 AND 2017
, WHERE IT'S STILL PREDICTED TO
BE 60 TO 70% SO I DON'T I THINK
THEY HAVE ALL OF THAT IN THEIR
LANDS. AND I THINK EACH OF THEM
HAVE DIFFERENT IDEAS ABOUT HOW
TO APPROACH THAT WHICH IS, YOU
KNOW. CREATIVE OKAY, BUT AGAIN
FOR THE THIRD TIME, DO YOU HAVE
ANY INFORMATION AS TO ANY
PROJECTED REDUCTION IN DEMAND
FOR GASOLINE AS A RESULT OF THE
GOVERNOR'S EXECUTIVE BOARD? I
THINK THE CEO HAS THOSE THOSE
NUMBERS OF WHAT THEY'VE
PROJECTED. AND SO I WOULD ASK
HIM. BUT YOU'RE A MEMBER
COMPANIES DO NOT HAVE AN
INFORMATION THAT YOU'RE WILLING
OR ABLE TO SHARE. TODAY I AM I
DO NOT HAVE ANY INFORMATION. UM
YOU, UH. I KNOW THAT THERE'S
BEEN MUCH DISCUSSION ABOUT, UH,
ABOUT CARBON CAPTURE AND
SEQUESTRATION AS PART OF YOU'RE. YOUR HOPES AND YOUR YOUR YOUR
YOUR FUTURE PLANS IN TERMS OF,
UH AH, MEETING THE ENERGY DEMAND
HERE IN CALIFORNIA, AND I KNOW
THAT THE FOCUS OF THIS SELECT
PANEL IS TO FOCUS ON GASOLINE
SUPPLY AND PRICING. AND SO I
DON'T WANT TO GO TOO DEEP INTO
THE WHOLE DEBATE ABOUT UH,
WHETHER MUCH OF THE PROMISE OF
CARBON CAPTURE AND SEQUESTRATION
HOW REALISTIC IT IS WHETHER
THEY'RE WHETHER IT'S MUCH MORE
COMPLICATED THAN AH, YOU AND
OTHERS MAY PRESENT BUT THAT
AGAIN IS A SEPARATE
CONVERSATION. UM, I. UM WELL, I
THINK YOU BRING UP A GREAT POINT
ASSEMBLYMAN THAT, UM, AS WE
KNOW, LAWRENCE LIVERMORE
NATIONAL LABS HAS DONE EXTENSIVE
WORK MAPPING OUT THE STATE OF
CALIFORNIA AND WE ARE REALLY
WELL POSITIONED IN HIS INDUSTRY
TO KNOW, UM, WHERE ONE COULD
TAKE ADVANTAGE OF PLACING CARBON
UNDERGROUND AND SEQUESTERING IT
FOR THE BENEFIT OF MEETING OUR
CARBON NEUTRALITY GOALS. UM
WE'RE EXCITED ABOUT THAT. BUT I
ALSO KNOW THAT THAT THE CARBON
CAPTURE AND SEQUESTRATION
PROJECTS THAT HAVE OPERATED
WHETHER AND THIS COUNTRY OR IN
IN OTHER COUNTRIES THAT THE
CARBON CAPTURE RATE IS ACTUALLY
MUCH LOWER, PROBABLY MORE THAN
HALF LESS THAN HALF OF WHAT SOME
OF THE PROJECTIONS ARE PROVIDED
BY WHISPER OR EVEN BY, UH BY
CARBON AND IN THE SCOPING PLAN.
UM BUT AGAIN, TRYING TO KEEP THE
FOCUS ON YES. SUPPLY AND
PRICING. UM. WELL. I KNOW. UH
OKAY, SO YOU I DON'T HAVE ANY
EVIDENCE ABOUT THIS MYSTERY
SURCHARGE. UM WHAT I WAS HOPING
TO ASK IS, IF THERE IS ANY KIND
OF A UH, PLANNING GOING ON IN
TERMS OF IF THERE IS, I MEAN,
YOU KNOW, EVEN WHEN I TALKED TO
THE. STATE BUILDING AND
CONSTRUCTION TRADES. THEY SAY
THAT THEY THEY SEE THE WRITING
ON THE WALL. THEY SEE THAT THE
DIRECTION OF THE STATE IS TO
REDUCE OUR RELIANCE ON FOSSIL
FUELS. UM I'M JUST TRYING TO GET
AT WHAT INFORMATION YOU'RE
WILLING TO SHARE IN TERMS OF YOU
KNOW WHAT WESTBOURNE AND YOUR
MEMBER COMPANIES ARE PLANNING
WHETHER IN TERMS OF THE
PROJECTIVE REDUCTION IN REFINING
CAPACITY PROJECTION PREDICTED
PROJECTED REDUCTION IN AND GAS
STATIONS. AH! YOU KNOW HOW THAT
WOULD IMPACT WHAT IT'S SUPPOSED
TO BE THE FOCUS OF THIS SELECT
COMMITTEE. THE GAS SUPPLY AND
PRICING WELL, WHAT I WOULD BE
HAPPY TO SHARE WITH THE
COMMITTEE IS, UM, WHAT WE HAVE
PUT TOGETHER ON ALL OF THE
INNOVATIONS THAT ARE COMPANIES
ARE DOING BECAUSE IT IS CLEAR.
THAT THEY ARE INVOLVED IN ALL OF
THESE ACTIVITIES. UM,
INTERESTING ENOUGH. THEY HAVE
DIFFERENT IDEAS ABOUT EACH OF
THEM, AND THEY AREN'T FOCUSED IN
JUST ONE PARTICULAR AREA. SOME
OF THEM FEEL IT'S MUCH MORE
IMPACTFUL IN THE BIOFUEL SIDE
VERSUS THE ELECTRICITY SIDE
VERSUS THE RENEWABLE SIDE VERSUS
THE HYDROGEN SIDE. BUT THE
EXCITING THING IS THEY ARE
INNOVATING AND ALL OF THOSE
AREAS AS WE ALL TRY TO DE
CARBONIZED, UM AND AS WE AGAIN.
TO MAKE A POINT HERE. WE STILL
WHATEVER THE DEMAND IS, WHATEVER
THE ENERGY COMMISSION PROJECTS
THE DEMAND TO BE, WE HAVE GOT TO
MEET IT OR YOU WILL NOT BE
HAVING PEOPLE ABLE TO DRIVE FROM
A TO B TURN THEIR LIGHTS ON OR
HEAT AND COOL THEIR HOLES, WHICH
WOULD NOT BE A GREAT PLACE FOR
US TO BE WHILE WE'RE TRYING TO
MEET OUR CLIMATE CHANGE GOALS,
SO, UM, I THINK ALL THOSE THINGS
ON THE TABLE I THINK ALL THE
COMPANIES ARE LOOKING AT THOSE
THINGS. BUT ONE THING IS VERY
CLEAR. THEY HAVE STILL GOT TO
MEET. DEMAND THROUGH TRADITIONAL
OIL AND GAS AND LOOKING AT
RENEWABLES AND BIOFUELS AND
EVERYTHING ELSE TO DRIVE THOSE
EMISSIONS DOWN BECAUSE IT SHOULD
BE ABOUT REDUCING GREENHOUSE GAS
EMISSIONS. IT SHOULDN'T BE ABOUT
ELIMINATING THE OIL AND GAS
INDUSTRY. THANK YOU. THANK YOU,
MR MURATSUCHI, AND THANK YOU,
MISS. REHABS BOYD. VERY GOOD.
THANK YOU VERY MUCH FOR YOUR
TIME. UH NEXT UP. WE HAVE SAMUEL
BAYLISS, DIRECTOR OF POLICY FOR
THE CALIFORNIA FUELS AND
CONVENIENCE ALLIANCE. PLEASE
PROCEED WHENEVER YOU'RE READY.
HELLO THANK YOU FOR HAVING ME,
AS WAS SAID. MY NAME IS SAM
BAYLESS. I'M THE DIRECTOR OF
POLICY FOR THE CALIFORNIA FEELS
INCONVENIENCE ALLIANCE CFC
REPRESENTS THE FUEL SUPPLY CHAIN
BELOW THE REFINERY LEVEL,
INCLUDING FUEL, TRANSPORT AND
RETAIL GAS STATIONS. THANK YOU
VERY MUCH FOR THE INVITATION
TODAY. AS WITH NEARLY ALL
CONSUMER GOODS, UTILITY ILLS
AND HOUSING COSTS, FUELS MORE
EXPENSIVE IN CALIFORNIA. THIS IS
DUE TO A WIDE VARIETY OF FACTORS
OUTSIDE THE CONTROL OF GAS
STATION OPERATORS. DURING THE
LAST HEARING, THE CALIFORNIA
ENERGY COMMISSION AND OTHER
SPEAKERS COVERED THE EASILY
UNDERSTOOD COST OF EACH GALLON
OF GASOLINE, WHOLESALE PRICE OF
FUEL, STATE AND FEDERAL TAXES,
PLUS CAP AND TRADE IN LOW CARBON
FUEL STANDARD FEES, BUT DID NOT
GO INTO THE OTHER OVERHEAD COSTS
OF DOING BUSINESS THAT
CONTRIBUTE TO THE PRICE PER
GALLON. I JUST WANT TO, UH
EDUCATE YOU A LITTLE BIT ABOUT
SOME OF THE HIGHEST COST FOR GAS
STATIONS LABORS THE HIGHEST
BUSINESS EXPENSE FOR GAS
STATIONS ALL ACROSS THE NATION,
BUT ESPECIALLY IN HIGH COST OF
LIVING STATES LIKE CALIFORNIA AS
THE COST OF LIVING CONTINUES TO
RISE IN INFLATION CONTINUES TO
BE A SUBSTANTIAL ISSUE. LABOR
COSTS WILL CONTINUE TO CLIMB.
THIS WEEK, THE DEPARTMENT OF
FINANCE ANNOUNCED THAT THE
MINIMUM WAGE WILL BE INCREASING
AGAIN NEXT YEAR, AND THIS IS
GOING TO BE FACTORED INTO THE
PRICE OF FUEL NEXT YEAR. THE
SECOND HIGHEST OPERATING COST,
WHICH IS ACTUALLY SOMETHING THAT
WASN'T A RESULT OF CALIFORNIA
POLICIES IS CREDIT CARD SWIPE
FEES. THE BULK OF FUEL HAS SOLD
VIA CREDIT CARD TRANSACTIONS IN
THE FIRST QUARTER OF 2022 SWIPE
FEES OF INCREASED 33. LIKE SALES
, TAX SWIPE FEES OR A PERCENTAGE
BASED AND WHEN PRICES SPIKE,
THESE FEES MULTIPLY RAPIDLY. US
RETAILERS PAID $137.8 BILLION IN
SWIPE FEES IN 2021, DOUBLE THE
AMOUNT OF 2011 CFC IS NATIONAL
PARTNERS HAVE LONG PUSHED FOR
MORE COMPETITION IN THIS MARKET
, AND WE HOPE CALIFORNIA'S
CONGRESSIONAL REPRESENTATIVES
AND SENATORS WILL SUPPORT THE
CREDIT CARD COMPETITION ACT OF
2022 BIPARTISAN BILL TO ADDRESS
THIS ISSUE, AND THESE FEES ARE
COSTING ANYWHERE BETWEEN 10 AND
$20,000 EVERY SINGLE MONTH FOR
THESE GAS STATIONS. OUR
UTILITIES, OR THE THIRD HIGHEST
OPERATING COSTS FOR GAS STATIONS
OVER THE LAST YEAR, CALIFORNIA'S
GASOLINE PRICES WERE 36% MORE
THAN THE NATIONAL AVERAGE.
CALIFORNIA'S COMMERCIAL
ELECTRICITY PRICES WERE 85% MORE
EXPENSIVE THAN THE NATIONAL
AVERAGE, AND THAT SAME TIME
SPAN. HOUSING IN CALIFORNIA,
SOME OF THE HIGHEST IN THE
COUNTRY. RENT AND LAND COSTS FOR
BUSINESSES ARE NO DIFFERENT AND
COMPETE WITH UTILITIES FOR THE
THIRD OR FOURTH HIGHEST EXPENSE
FOR RETAIL GAS STATIONS. FINALLY
WE REACHED CALIFORNIA
REGULATIONS, WHICH CONTINUED TO
DRIVE UP THE COST OF FUEL. AS
COVERED IN THE PREVIOUS HEARING
. CALIFORNIA'S BLEND OF GASOLINE
IS MORE EXPENSIVE TO REFINE ON
TOP OF STRINGENT AND COSTLY
REGULATIONS ON OIL EXTRACTION.
BY CREATING A FUEL ISLAND,
CALIFORNIA INCREASED VOLATILITY
AND AN ALREADY VOLATILE MARKET
WHEN PRICES BY GLOBALLY THEY'RE
EVEN WORSE IN CALIFORNIA, AND
COMPOUNDED BY OUR ALREADY HIGH
OPERATING COSTS. BUT DECADES OF
POLICIES TARGETING EVERYTHING
FROM THE TRUCKS AND CARGO TANKS
USED TO MOVE FUEL TO STATIONS
AND THE DIESEL THAT POWERS THOSE
TRUCKS TO THE CALIFORNIA
CERTIFIED HOSES AND NOZZLES WE
MUST USE ALL ADD TO THE PRICE OF
GASOLINE. AND I KNOW IT, UH, IN
PAST MEETINGS, IT SEEMED FUNNY
ABOUT THE NOZZLES AND HOSES, BUT
THE NOZZLES CERTIFIED FOR USE IN
CALIFORNIA, 5 TO 7 TIMES MORE
EXPENSIVE THAN THE ONES USED IN
OTHER STATES. HOSES CERTIFIED
FOR USE IN CALIFORNIA AREN'T
ROBUST AS THE ONES THAT
PREVIOUSLY USED ARE THE ONES
CURRENTLY USED IN OTHER STATES.
THEY NEED TO BE REPLACED EVERY 5
TO 8 MONTHS AS OPPOSED EVERY
THREE OR FOUR YEARS. EVERY SMALL
CHANGE OR COSTS FURTHER
CONTRIBUTES TO THE HIGH PRICES
IN CALIFORNIA WHEN COMPARING
FUEL TO OTHER STATES FUEL PRICES
, OTHER STATES, I SUGGEST TAKING
A LOOK AT THE THINGS THAT
CALIFORNIA OPERATORS MUST DO
THAT OTHERS DO NOT. UM AND LOCAL
GOVERNMENTS HAVE TAKEN ACTIONS
THAT HAVE INCREASED THE PRICE OF
FUEL OR NEGATIVELY IMPACTED THE
COMPETITIVE MARKET OR INCREASE
THE PRICE OF DOING BUSINESS OR
REMOVING PRODUCTS WHOLLY FROM
THE MARKET BANNING FLAVORED
TOBACCO PRODUCTS REMOVED A
REVENUE GENERATOR FOR GAS
STATIONS. SOME CITIES ARE NOW
BANNING GAS STATIONS, WHICH IS
NEW IN NAME ONLY ZONING
RESTRICTIONS THAT MAKE IT
IMPOSSIBLE TO BUILD NEW STATIONS
OR TRANSPORTATION ORIENTED
DEVELOPMENT HAS BEEN AROUND FOR
DECADES. LIMITING SUPPLY AND
COMPETITION ONLY CONTRIBUTES TO
HIGHER PRICES. IN ADDITION,
THESE BANDS CAN INCLUDE
ALTERNATIVE LOW CARBON FUELS
LIKE HYDROGEN, RENEWABLE NATURAL
GAS AND RENEWABLE DIESEL. THESE
FIELDS ARE SUPPORTED BY STATE
PROGRAMS LIKE THE LOW CARBON
FUEL STANDARD AND VEHICLE
INCENTIVE PROGRAMS. SOME OF
THESE REGULATIONS AND LAWS
INCREASED PRICES THROUGHOUT THE
UNINTENDED CONSEQUENCES, BUT
SOME ARE TRULY INTENDED TO
INCREASE THE PRICE OF GASOLINE
LIKE TO QUOTE THE FORMER CHAIR
OF THE AIR RESOURCES BOARD,
SPEAKING TO THE SENATE
ENVIRONMENTAL QUALITY COMMITTEE
IN 2019 BOTTOM LINE, YES,
THERE'S PROBABLY ROOM TO RAISE
THE PRICE OF GASOLINE TO THE
CONSUMER. THOSE POLICIES ARE
WHERE THIS COMMITTEE'S ATTENTION
AND CONSUMERS IRS SHOULD BE
DIRECTED. THANK YOU OPEN TO
QUESTIONS. WE HAVE QUESTIONS
FROM THE COMMITTEE MEMBERS. I
JUST WANTED TO BRING UP A 0.1 OF
THE QUESTIONS THAT YOU HAD
BEFORE IS YOU KNOW WHY IS THAT
THE ONE GAS STATION HAS HIGHER
PRICES AND THE OTHER AND COMING
FROM A MASTER PLANNED CITY. UM
THAT'S WHERE WE DECIDE HOW MANY
GAS STATIONS WE'RE GOING TO HAVE
SOMETHING. EACH CITY IS
DIFFERENT, BUT THAT'S ONE OF THE
BIG REASONS WHY, PERHAPS YOU
YOU'RE ALLOWED TO HAVE, LIKE,
ONE IN THIS CORNER AND ONE IN
THIS CORNER, AND, YOU KNOW,
DRIVE TO VEGAS AND YOU KNOW
THERE'S GOING TO BE ONE GAS
STATION THERE, AND THEY'RE GOING
TO CHARGE A LOT BECAUSE AGAIN,
THERE'S NO COMPETITION THERE.
UH, I DID HAVE A QUESTION,
THOUGH. IF YOU CAN TALK ABOUT I
KNOW YOU TALKED ABOUT A LOT OF
DIFFERENT REGULATIONS. ALL OF
THIS, WHICH MAKES SENSE,
OBVIOUSLY, WHEN WE LOOKED AT THE
COST OF LABOR MINIMUM WAGE GOING
UP IN THE LAST SIX YEARS QUITE A
BIT WITH ALL THESE CARS. HOW
MUCH DOES THAT TOTAL UP TO?
BECAUSE WE KNOW WE'RE LOOKING AT
A DOLLAR 28 FOR ALL THE
BREAKDOWN THAT WE HAD, BUT NOT
INCLUDING THESE. HOW MUCH WOULD
YOU SAY THAT IS TRULY GOING TO
VARY BETWEEN FROM COMPANY TO
COMPANY. SOME OF THESE ARE JUST
SINGLE STATION OPERATORS. SOME
OF THESE ARE PEOPLE WHO OWN ONE
OR 200 STATIONS. SO THE THEIR
BUYING POWER WHEN THEY'RE
WORKING WITH VENDORS, WHETHER
IT'S FOR EQUIPMENT OR GOODS SOLD
IN THE CONVENIENCE STORE THEIR
ABILITY TO HIRE AND BE ABLE TO
SHARE THOSE COSTS AMONGST OTHER
GAS STATIONS THAT THEY OWN. IT'S
ALL VERY VARIABLE, INCLUDING
WHERE YOU LIVE. THE COST OF
LIVING IS GOING TO BE HIGHER IN
LARGER CITIES LIKE LOS ANGELES
AND OTHERS. COULD YOU GIVE ME
COULD YOU JUST PICK ONE LIKE AND
I UNDERSTAND THAT I'VE ASLEEP,
UM WHEN YOU'RE LOOKING AT THE
COST OF RENTING AGAIN, DEPENDING
ON THE CITY, YOU GO TO ONE CITY,
AND IT'S A LOT LESS OF SLEEP
BECAUSE THE COST OF THE LAND THE
LEASING IS LESS THAN PERHAPS YOU
GO TO A NEW REPORT BEACH OR
SOMETHING LIKE THAT. THAT HAS A
LITTLE BIT HIGHER. UM, COST. I'M
JUST TRYING TO GET AN IDEA LIKE
COULD THIS BE 50 CENTS PER
GALLON? COULD THIS BE 20 CENTS
PER GALLON? MAYBE THAT'S WHERE
30 CENTS MYSTERIES. IT'S HIGHLY
VARIABLE FROM COMPANY TO COMPANY
WHEN THEY'RE TALKING ABOUT
PURCHASING FUEL AT A WHOLESALE
PRICE. WHEN YOU SEE THAT OPUS
LOW NUMBER, NOT EVERYBODY IS
GOING TO BE ABLE TO GET THAT
NUMBER. IT DEPENDS ON THEIR
RELATIONSHIPS WITH WHO THEY'RE
BUYING THE FUEL FROM WHO'S
DELIVERING THE FUEL. UH ALL OF
THESE THINGS ARE FACTORING INTO
THE VARIABLE COST OF GASOLINE.
AND THEN I APPRECIATE THIS
BECAUSE YOU KNOW, THOSE ARE THE
THINGS THAT YOU KNOW WE'VE
ALWAYS LOOKED AT THIS, BUT I
THINK SOMETIMES WE FORGET ABOUT
THESE ADDITIONAL COSTS. THANK
YOU. SO UM, WHEN YOU TALK, YOU
MENTIONED A LOT OF THE OBSTACLES
WITH, UH, OPENING GAS STATIONS
ARE ARE THERE EVEN ANY IN
CALIFORNIA YOU SEE SIGNIFICANT
SIGNIFICANT NUMBER OF GAS
STATIONS OPENING OR HAVE ARE WE
REALLY JUST GENERALLY SEEING A
BIT HAS BEEN TRENDING DOWN,
ESPECIALLY SINCE SOME OF THE
NEWER REGULATIONS THAT HAVE COME
IN UH, THINGS LIKE ENHANCED
VAPOR RECOVERY WHERE WE WERE
TOLD BY THE AIR BOARD. IT WILL
BE ABOUT $40,000 A SITE. I DON'T
THINK ANYBODY IS PAYING LESS
THAN $70,000 TO GET THESE
INSTALLED. AND THESE ARE THINGS
THAT WE'RE USED NATIONWIDE
BECAUSE THEY WERE NEEDED TO
CAPTURE A FUGITIVE EMISSIONS
DURING REFUELING. BUT SINCE THE
EARLY TWO, THOUSANDS WE SEE, UH
AUTOMAKERS PUTTING IN THE
ONBOARD REFUELING VAPOR RECOVERY
SYSTEMS, WHICH ARE ACTUALLY
COUNTERACTING WITH THE SYSTEMS
THAT ARE ONLY MANDATED ALL OVER
THE STATE OF CALIFORNIA. UH AND
THAT IS TRIGGERED THE CHANGES TO
THE NOZZLES AND THE HOSES THAT
WE SAW AT THE AIR RESOURCES
BOARD. SO WHEN WE'RE HAVING TO
CHANGE EQUIPMENT EVERY TWO YEARS
BECAUSE AH AH AND OUTDATED
SYSTEM IS COUNTERACTING THE, UH
NEWER SYSTEMS THAT ARE ON THE
VEHICLES AND CAUSING I SD ALARMS
IN STATION DIAGNOSTIC ALARMS AND
CAUSING THESE STATIONS TO SHUT
DOWN AND WAITING FOR SOME SORT
OF REPAIR OR RESET COMPANY TO
COME OUT AND PERFORM THAT WHEN
THERE WAS REALLY NO PROBLEM, UM
IT. I DON'T THINK THAT ANYBODY
WOULD REALLY BE WANTING TO GET
INTO THE BUSINESS OF BUILDING
STATIONS IN SOME OF THE AREAS OF
CALIFORNIA WHERE THEY ARE.
ZONING YOU OUT OF OUT OF BEING
ABLE TO DO SO OR OUTRIGHT
BANNING YOUR ABILITY TO BUILD A
STATION. THERE WAS STATIONS THAT
WERE IN DEVELOPMENT IN THE
CITIES THAT HAVE GONE THROUGH
WITH THESE BANDS. BUT LIKE I
SAID, THEY'RE THEY'RE BANNING
THESE ALTERNATIVE FUELS THAT ARE
SUPPORTED BY THE STATE OF
CALIFORNIA. AND SO WHEN WE LOOK
TO THE FUTURE, AND WE THINK,
WHAT ARE WHAT ARE OUR STATIONS
GOING TO BE SELLING IN THE
FUTURE? THEY'RE ALREADY REMOVING
THOSE OPTIONS. SO WE'VE HEARD
THIS THEORY ALREADY THAT LESS
GAS STATIONS WILL DRIVE UP THE
COST OF GAS. AND I MEAN IS THERE
EVIDENCE OF THAT, BECAUSE
CERTAINLY I CAN SEE IF THERE'S
ONE GAS STATION IN A TOWN. BUT
IF YOU ARE CHANGING FROM GAS
STATIONS ON ALL FOUR CORNERS TO
TWO CORNERS, THERE'S YOU KNOW,
THAT DOESN'T CHANGE THE
COMPETITION. UM MODEL MARKET
PARTICIPANTS, WHICH DECREASES
COMPETITION. IF THERE'S IF YOU
CAN STILL JUST GET IN LINE AT
THE GAS STATION ACROSS THE
STREET, THAT'S NOT NECESSARILY
SUPPLY AND DEMAND THERE. DO IS
THERE EVIDENCE THAT THERE'S A
CRITICAL AMOUNT OF GAS STATIONS
THAT YOU NEED TO HAVE PERPS?
WHERE MILE TWO. UM NOT
NEGATIVELY FURTHER. YOU INCREASE
SUPPLY, THE MORE YOU CAN DO
MEET. MEET THE MAN IN THE LOWER
THE PRICE IS GONNA GO. IF THERE
IS A IF THERE IS A CONCENTRATION
OF GAS STATIONS AND YOU MOVE,
REMOVE HALF OF THEM. PEOPLE WILL
STILL BE ABLE TO GO TO OTHER GAS
STATIONS WERE NOT NECESSARILY
THAT, SEEING THAT FOUR GAS
STATIONS ARE REALLY DRIVING DOWN
PRICES EITHER, RIGHT? WHAT WE
HAVE SEEN THAT PRICES HAVE GONE
UP OVER THE LAST 10 YEARS IS THE
NUMBER OF STATIONS IN CALIFORNIA
HAS DECLINED, BUT I WOULD IT
WOULD BE GREAT TO SEE THOSE
NUMBERS. I'M NOT SAYING IT'S NOT
THE FACT THAT I WOULD I'D LIKE
TO SEE BECAUSE I DON'T SEE
COMPLETELY SUPPLY AND DEMAND
BEING A FACTOR IN IN CASES. IT
DEPENDS ON WHAT THE DENSITY IS
OF THE STATIONS IN CERTAIN AREAS
. BUT IF YOU COULD SHARE THAT
INFORMATION WITH US, CERTAINLY
LOOK FOR THAT. O, UM, AS WE
MENTIONED BEFORE. UH GENERALLY
WE SEE THAT THE BRANDED GAS
STATIONS IN CALIFORNIA CHARGE
HIGHER PRICES THAN NON BRANDED
STATIONS. CAN YOU EXPLAIN THAT
FROM YOUR PERSPECTIVE FROM MY
PERSPECTIVE, I DON'T HAVE ANY
INSIGHT INTO THE CONTRACTUAL
AGREEMENTS WITH THE BRANDED
STATIONS AND THEIR SUPPLIERS.
BUYING IT THAT WHOLESALE COST SO
THAT THAT'S SOMETHING THAT IS
NOT DICTATED BY THE GAS STATION.
OKAY. SO THEN, UM, CAN CAN YOU
TALK ABOUT HOW GASSES PURCHASED
AT THE INDEPENDENT GAS STATIONS?
CERTAINLY THEY GENERALLY HAVE
ONE SUPPLIER OR MULTIPLE
SUPPLIERS CAN VARY IF YOU'RE IF
YOU'RE A SINGLE STATION OPERATOR
WITHOUT A WHOLE LOT OF CORPORATE
BANDWIDTH IS JUST A ONE FAMILY
RUNNING THAT STORE THEY LIKE. WE
JUST HAVE THAT ONE SUPPLIER.
THEY'RE BUYING THROUGH ONE
DISTRIBUTOR. AND SO THEY'RE
LIKELY JUST GETTING THAT SET
PRICE. THEY'RE NOT. THEY DON'T
HAVE THE ABILITY TO GO AND SHOP
AROUND LIKE A LARGER CHAIN MIGHT
AND SO HOW DO AGREEMENTS WITH
SUPPLIERS WORK? SO YOU KNOW, I
WAS ASKING THE QUESTION BEFORE.
DO IF YOU HAVE A VALERO REFINERY
, FOR INSTANCE, UM DO THE NON
BRANDED STATIONS HAVE TO PAY?
ARE THEY PAYING HIGHER AMOUNTS
THAN LET'S SAY THE STATE THE
VALERO STATIONS THAT ARE BUYING
FROM THE VALERO REFINERY? I'M
UNSURE. OKAY AND, UM, BUT BUT
THESE THERE'S DIFFERENT
AGREEMENTS WITH THE REFINERIES
FOR BRANDED AND NON BRANDED,
RIGHT. YEAH. BRANDED GAS STATION
IS GOING TO BE USING THAT
BRANDED FUEL. AND WHEN ADJUSTING
PRICES. GOING TO YOUR YOUR
COMPETITION STATEMENT. TO WHAT
EXTENT DO REALTOR RETAILERS
CHARGE BASED ON PRICES AT NEARBY
STATIONS? WELL, EVERYBODY IS
GOING TO BE WANTING TO BE
COMPETITIVE, SO THEY ARE LOOKING
AT TRYING TO MAKE SURE THAT THEY
CAN SELL OUT OR BELOW AND BE
COMPETITIVE IN THE MARKET. OKAY?
IT'S JUST I DON'T NECESSARILY
SEE IF WITH THE FOUR GAS
STATIONS ONE ON EACH CORNER, I
DON'T OFTEN SEE THAT THERE'S A
BIG AH! DRIVE TO DRIVE DOWN
PRICES. WELL THERE'S A LOT OF
FIXED COSTS THAT ARE ASSOCIATED
WITH THIS. THE WHOLESALE COST OF
GASOLINE TAXES, REGULATIONS,
LABOR AND THEN ON THAT SAME AREA
IS GOING TO BE FAIRLY FAIRLY
STANDARD FOR WHO? HOW MUCH
YOU'RE PAYING YOUR EMPLOYEES.
UH, YOUR THROUGHPUT. HOW MANY
PEOPLE ARE COMING TO YOUR
STATION? UH YOU TALKED ABOUT
SWIPE FEES BEING ONE OF THOSE
THE LARGEST FEES OF WHAT? WHAT
PERSON? WHAT DO YOU PAYING PER
GALLON ON THAT? SO I'M NOT SURE
ON A PER GALLON PRICE, BUT A
TYPICALLY A HIGH THROUGHPUT
STATION IS PAYING $20,000 OR
MORE EVERY SINGLE MONTH. BUT SO
WHAT IS THE PERCENTAGE OF THE
BILL THAT'S GOING TO SWIPE FEES?
SO THE SWIPE FEES ARE 2.2% I'M
NOT SURE WHAT THE PER GALLON
BREAKDOWN OF THAT IS. AND ANDREW
SAY THAT THAT'S SOMETHING THAT
REALLY YOU HAVE TO DEAL WITH. AT
THE FEDERAL LEVEL. YES AND,
YEAH, I'M REALLY HAPPY TO SEE
THAT THERE WAS LEGISLATION
INTRODUCED THIS YEAR TO DO THAT.
ARE THERE OTHER OTHER, YOU SEE A
LOT OF OTHER WAYS TO DO
TRANSACTIONS? YES, VENMO OR.
DIRECTLY WITH BANKS ARE AND HAVE
YOU LOOKED AT ANY OF THOSE WAYS.
NOT THROUGH. NOT THROUGH VENMO.
UM, BUT USING THAT AS AN EXAMPLE
. OBVIOUSLY THERE'S A FEE THERE
. YEAH NO, SO THAT THAT IS PART
OF OPENING UP. THE CREDIT CARD
MARKET IS GIVING MORE OPTIONS
FOR BANKS TO BE USING. SO IT WAS
DONE IN. I BELIEVE IT WAS THE
MID TWO THOUSANDS. FOR DEBIT
CARDS, AND SO WE'RE JUST HOPING
THAT THE SAME CAN BE DONE FOR
CREDIT CARDS, JUST OPENING UP
MULTIPLE OPTIONS FOR BANKS AND
FOR MERCHANTS TO BE USING. ALL
RIGHT. THANK YOU. AND UM I AT
THIS WAS THE LAST QUESTION. I
ASKED LAST TIME. NOT YOUR LAST
QUESTION. BUT DO YOU HAVE ANY
IDEA ABOUT THIS MYSTERY
SURCHARGE, WHICH WE'VE BEEN
HEARING IS BETWEEN 30 AND 50.
CENTS A YEAR ABOVE WHAT CAN BE
EXPLAINED BY THE HIGHER TAXES
AND ENVIRONMENTAL FEES. HAVE YOU
LOOKED INTO THAT AT ALL? YES SO
I DON'T THINK IT'S MUCH OF A
MYSTERY WHEN WE START LOOKING AT
THE LABOR COSTS THAT ARE PAID IN
CALIFORNIA, THE UTILITY COST
PAID IN CALIFORNIA THE HIGHER
COST OF LIVING, SO WE'RE PAYING
THOSE HIGHER WAGES, BUT WE'RE
ALSO PAYING HIGHER LAND COSTS
FOR THE EACH STATION. THAT'S
THAT'S OUT THERE. ALRIGHT AND,
UM SO YOU DON'T HAVE. WE WOULD
LIKE TO FIND THAT 50 CENTS AND
GIVE IT TO OUR CONSUMERS. BUT SO
FAR WE HAVE NOT BEEN, I THINK
THINK THAT IT'S GOING TO
CALIFORNIA REGULATIONS AND
PAYING FOR OUR HIGHER UTILITY
BILLS AND EVERYTHING ELSE THAT
EVERYBODY'S PAYING MORE FOR,
LIKE, HANG MORE FOR BREAD AND
CALIFORNIA THAN ANYWHERE ELSE.
SO FINALLY, UM, WE HAVE ALWAYS
HEARD, BUT WE ESPECIALLY SOUGHT
DURING THE PANDEMIC. THAT'S AS
CRUDE PRICES FLUCTUATE WHEN THE
PRICE GOES UP THE PRICE OF A
GALLON OF GAS GOES UP VERY
QUICKLY AND WHEN THE PRICE OF
CRUDE GOES DOWN THE PRICE OF A
GALLON OF GAS REALLY LAGS. IS
THAT DETERMINED BY THE
INDIVIDUAL GAS STATIONS. IS THAT
COST IS THIS. WHAT HAPPENS
THROUGH THE REFINERIES? HOW? HOW
CAN YOU EXPLAIN YOUR SET AT THE
AT THE RETAIL GAS STATION, BUT I
WOULD DISAGREE THAT THEY GO UP
PEG DIRECTLY TO OIL PRICES. BUT
I CAN'T ANSWER THE WHY THEY TAKE
LONGER TO GO DOWN WHEN YOU'RE
PURCHASING A LOAD OF FUEL AT A
HIGHER PRICE. YOU CAN ONLY SELL
IT AT THAT HIGHER PRICE UNTIL
YOU ARE ABLE TO COMPLETE THAT
TANK AND PURCHASE A NEW LOAD OF
FUEL AT THE LOWER PRICE WHEN THE
REFINING PROCESS HAS MOVED THAT
LOWER COST OF CRUDE THROUGH T
THE WHOLESALE LEVEL, AND THAT
CAN TAKE BECAUSE CERTAINLY WE'VE
YOU KNOW, THERE'S THERE HAVE
BEEN IT LOOKS LIKE AT LEAST A
MONTH OR TWO LAG BETWEEN THE
CRUDE PRICES GOING DOWN AND
STARTING TO SEE SOME RELIEF AT
THE PUMP. IS THAT HOW LONG SO
THERE? THERE'S A LAG FROM WHEN
THE OIL PRICE GOES DOWN FROM THE
CREW THAT WAS PURCHASED AT THAT
PRICE BEING REFINED. AND THEN
DISTRIBUTED AND THEN SOLD AT THE
RETAIL LEVEL. SO HOW MUCH OF THE
LEG WOULD YOU THINK THAT IS? AS
LONG AS IT TAKES TO SELL SELL
THROUGH THAT TANK OF FUEL IT.
OBVIOUSLY PEOPLE DRIVE LESS WHEN
YOUR PRICES ARE HIGH, WHICH IS
WHY I WOULD PREFER THEM TO BE
MUCH LOWER. WELL I APPRECIATE
YOU JOINING US TODAY AND YOUR
PATIENTS BECAUSE I KNOW WE
STARTED MUCH LATER THAN WE
THOUGHT WE WERE GOING TO THANK
YOU VERY MUCH. NO OTHER
QUESTIONS. ALL RIGHT. THANK YOU.
AND THEN FINALLY WE WOULD LIKE
TO INVITE JAMIE COURT
REPRESENTING COMMUNE ER CONSUMER
WATCHDOG. WELCOME, MR COURT.
THANK YOU. GOT SOME SLIDES FOR
YOU TO MAKE IT A LITTLE MORE
INTERESTING. UM I APPRECIATE YOU
TAKING THE TIME TO LOOK IN THIS
MATTER AND YOU'RE INVITING ME TO
TALK ABOUT IT. I'VE BEEN LOOKING
AT GAS PRICES SINCE THE YEAR
2000. WHEN ANTONIO VIEIRA GOES,
WHO WAS SPEAKER ASKED ME TO
REPRESENT THE ASSEMBLY ON BILL
LOCKYER'S GAS PRICING TASK
FORCE. I KNEW NOTHING ABOUT GAS
PRICES. SO I'VE GOTTEN UP TO
SPEED OVER THE YEARS AND BEEN
ASKED TO COMMENT ON THEM. THIS
FIRST SLIDE THE NEXT JUST QUICK
COMMENT. THE MEMBER SHOULD HAVE
THIS, UH THE SLIDES IN THEIR
PACKAGE, CAN I? HOW DO I JUST
DIDN'T KNOW WHAT I WANTED TO GO
TO NEXT YEAR? GO NEXT LINE.
THANKS. CONTROLLED, SO YOU JUST
NEED TO NEXT. THANKS. THANKS.
WELL THIS IS THE DIFFERENCE IN
GAS PRICES FROM FROM THE E I A
THE DEPARTMENT OF ENERGY, UH AND
YOU'LL SEE WHERE THE DOLLAR 26
MORE RIGHT NOW THAN THE U. S,
AND, UH ONLY ABOUT 60. CENTS OF
THAT IS JUSTIFIED BY
ENVIRONMENTAL COSTS AND TAXES,
AND I JUST WANTED TO POINT OUT
IN THE CHART THAT YOU RECEIVED
PREVIOUSLY HOW THIS ALL BREAKS
DOWN. THE CHART SAYS A DOLLAR 28
A GALLON. TAXES WERE ADDED
ENVIRONMENTAL RULES WELL,
FEDERAL TAXES. ARE PAID BY
EVERYONE. AND THERE ARE STATE
TAXES THAT ARE PAID BY EVERYONE.
AND IF YOU TAKE OUT THE FEDERAL
pAND THE 34 CENTS AVERAGE STATE
TAX THAT'S PAID IN THE UNITED
STATES. YOU COME UP TO MORE OF A
DIFFERENCE ABOUT 64 CENTS.
BETWEEN THE U. S PRICE OF GAS IN
CALIFORNIA PRICE OF GAS, SO
THAT'S WHEN WE TALK ABOUT THE
DIFFERENCE. WHERE IS THE EXTRA
40? 50 60 CENTS GOING? THE GAS
PRICES FLUCTUATE. BETWEEN A
DOLLAR $20.30 MORE THEY'VE BEEN
AS HIGH AS A DOLLAR 50 MORE IN
THE LAST TWO MONTHS. UM AND IT'S
NOT EXPLAINABLE BY. TAXES ARE
ENVIRONMENTAL RULES. YOU CAN GO
TO THE NEXT SLIDE, PLEASE. WE I
CAN'T EXPLAIN IT, HOWEVER.
THROUGH CONSOLIDATION. FIVE
REFINERS FIVE OIL REFINERS
CONTROL 96% OF THIS GAS LEAN
MADE IN THE STATE. FIVE REFINERS
MAKE 96% OF GASOLINE. IT'S
ACTUALLY 97% NOW BECAUSE OF THE
MARATHON REFINERY COMING OFF
LINE. THOSE REFINERS ARE
MARATHON, CHEVRON PBF PHILLIPS
66 IN VALERO. AND A LOT OF THE
PROBLEMS THAT I'VE WITNESSED IN
THE LAST 20. SOME ODD YEARS,
I'VE BEEN WATCHING THIS INDUSTRY
COME FROM CONSOLIDATION, THE
MYSTERY SURCHARGES ONE
PERMUTATION OF THIS, BUT IT IS
IT IS THE FACT THAT WE HAVE SUCH
A CONSOLIDATED INDUSTRY AND THE
REFINERS WORK TOGETHER. UH AND
THEY WORK TOGETHER IN A WAY THAT
MAINTAINS VERY HIGH PROFITS. IF
YOU GO TO THE NEXT SLIDE, PLEASE
. THIS IS THEIR TOTAL PROFITS IN
THE SECOND QUARTER. 2022 SO
WE'RE TALKING ABOUT? UM UH,
APRIL, MAY AND JUNE. THEIR
PROFITS WERE $26 BILLION. THAT'S
$14 BILLION INCREASE. NOW THIS
IS TOTAL PROFITS. IT INVOLVES
ALL THEIR OPERATIONS. BUT THIS
IS RIGHT OUT OF THEIR BEST
INVESTOR REPORT. THEY INCREASE
THEIR PROFITS, THEY DOUBLED
THEIR PROFITS IN THE SECOND
QUARTER. AND TWO THIRDS OF THAT
, WHERE THAT CAME FROM WAS FROM
THE REFINING OPERATIONS
INCREASES IN REFINING PROFITS.
NEXT, PLEASE. WE HAVE
INFORMATION ABOUT THESE REFINING
PROFITS. BECAUSE THERE WERE
INVESTORS REPORT QUARTERLY
THEY'RE REFINING. UH, MARGINS.
BY THE BARREL. AND THEY REPORT
THEM BY REGION BY WESTERN REGION
AND THE REST OF THE COUNTRY AND
THE REST OF THE WORLD. WHAT A
REFINING MARGIN IS, IS IT? IT IS
THE DIFFERENCE BETWEEN THE COST
OF THE CRUDE OIL GOING INTO
REFINERY. THE CREW AND OTHER
INPUTS. AND THE VALUE OF THE
GASOLINE THAT IS SOLD AT THE
REFINERY GATE TO THE GAS STATION
OWNERS OR WHOEVER. THE
DIFFERENCE IS WHAT YOU MAKE PER
BARREL THAT IS CALLED THE
REFINING MARGIN IS THE PUREST
EXPRESSION OF WHAT PROFITABILITY
OF IS IN THIS INDUSTRY. AND AS
YOU CAN SEE IN THE WESTERN
REGION IN THE SECOND QUARTER.
THE PROFITS WERE THROUGH THE
ROOF $42 A BARREL AS OPPOSED TO
$13 A BARREL LAST LAST YEAR, $9
A BARREL IN 2020. AND IN THE
FIRST QUARTER OF 2021. YOU SEE,
IT WAS ONLY $6 A BARREL. NEXT,
PLEASE. YOU ALSO CAN SEE THAT
THE PROFITABILITY, REFINING
PROFITS. REFINING MARGINS ARE
GREATEST. IN THE WEST. FROM ALL
THE OTHER, UH, REGIONS OF THE
COUNTRY AND THE WORLD. THEY ARE
HIGHEST HERE. THE PROFITS ARE
HIGHER HERE. THAT'S WHY GAS
PRICES ARE HIGHER HERE BECAUSE
THE PROFITS ARE HIGHER HERE. NOW
THE NEXT SLIDE. I BREAK IT DOWN
EVEN FURTHER BECAUSE WE'RE 42.
GALLONS IN EVERY BARREL. SO IF
YOU DO THAT MATH, YOU CAN
ACTUALLY FIGURE OUT WHAT THE
PROFITS ARE ON A GALLON OF GAS.
MARATHON MADE A DOLLAR OVER A
DOLLAR A GALLON. ON EVERY DOWN
IT REFINED. IN THE WEST. NOW
THIS IS THE WEST. THIS ISN'T
CALIFORNIA REMEMBER, THEIR
PROFITS ARE HIGHER. IN
CALIFORNIA. THE PRICES ARE
HIGHER IN CALIFORNIA. THE
REFINING MARGIN IF WE KNEW
CALIFORNIA MARGINS WOULD BE
GREATER. LIKELY GREATER. AND IF
YOU CAN SEE THE PROFITS PER
GALLON ARE AH, YOU KNOW, 34
TIMES SOME CASES FIVE TIMES WHAT
THEY ARE. UH, IN PREVIOUS YEARS.
AND IF YOU GO TO THE NEXT SLIDE
YOU'LL SEE. THEIR GREATER. NOT
ONLY IN PREVIOUS YEARS, BUT ALSO
EVERYWHERE ELSE IN THE COUNTRY.
THE GREATER IN CALIFORNIA. THESE
ARE NUMBERS RIGHT OUT OF THE
INVESTOR REPORTS. THEY MAKE THE
CASE. FOR CALIFORNIANS. PAYING
MORE AT THE PUMP SIMPLY BECAUSE
REFINERS ARE MAKING MORE AT THE
PUMP. AND THEY'RE DOING IT
THROUGH. THEIR CONSOLIDATION ON
THE MARKET. THEY'RE ABLE TO
SQUEEZE US. SO WHAT ARE OUR
SOLUTIONS? NEXT SLIDE, PLEASE.
THE ONE PENDING SOLUTION WE HAVE
RIGHT NOW IS SP 13 22 I, SENATOR
ALLEN. THIS IS A SMALL STEP IN
THE RIGHT DIRECTION. IT FORCES
ALL CALIFORNIA OIL REFINERS TO
REPORT THEIR CALIFORNIA REFINING
MARGINS. ON A MONTHLY BASIS SO
WE CAN TRACK THIS IN REAL TIME.
AND WE CAN UNDERSTAND. WHEN
THERE ARE THESE PERIODS OF
EXCESS PROFITS, AND THEN WE CAN
RESPOND. POLICY MAKERS AS
PUBLIC. UM, SUNSHINE IS THE BEST
DISINFECTANT, BUT IT ALSO HELPS
TO HAVE A COMMITTEE LOOKING INTO
THE PROBLEM. UM, SO THAT IS THE
FIRST STEP. THERE ARE OTHER
SOLUTIONS THAT HAVE BEEN
PREVIOUSLY DISCUSSED THAT I WANT
TO COMMENT ON BRIEFLY. ONE IS
CREATING AUNIFIED, CLEAN
BURNING FUEL STANDARD FOR THE
WEST COAST OF CALIFORNIA.
ACTUALLY BEFORE WE GO BACK
BEFORE WE GET OFF THE REFINING
PROFITS I DO WANT TO SAY
SOMETHING ABOUT WE CAN GO BACK
ONE SLIDE, PLEASE. I DO WANT TO
SAY SOMETHING ABOUT WHY THESE
PROFITS ARE SO HIGH IN MY VIEW.
CRUDE OIL COSTS ARE VARIABLE, IN
OTHER WORDS, WHEN THE WORLD
PRICE OF CRUDE OIL GOES UP. THE
PRICE OF GASOLINE GOES UP. WE
SEE THAT AT THE PUMP ALL THE
TIME. WHAT THE REFINERS WHO ARE
REFINING CRUDE OIL INTO GASOLINE
ARE NOT PAYING THE WORLD PRICE
OF CRUDE OIL. WE DON'T ACTUALLY
KNOW WHAT REFINERS ARE PAYING
FOR THEIR CRUDE OIL. THE C E C
DOES NOT KNOW WHAT REFINERS ARE
PAYING FOR CRUDE OIL WHEN THE C
E C CALCULATE CALIFORNIA ENERGY
COMMISSION CALCULATES ITS
MARGINS. IT IS USING THE WORLD
PRICE OF CRUDE OIL AND INDUCTING
IT FROM THE WHOLESALE PRICE OF
GASOLINE. BUT THE WAY THAT
REFINERS HAVE MADE SO MUCH
MONEY, THIS COURSE IS
UNPRECEDENTED PROFITS THE WAY
THEY'VE MADE IT IS THEY HAVE HAD
LONG TERM CONTRACTS FOR CRUDE
OIL, AND THEY'RE PAYING A LOT
LESS. THAN THE WORLD PRICE OF
CRUDE O. THE WORLD PRICE SCREWED
ALL WENT REALLY QUICKLY. BUT
THEY WERE THEY WERE HAVING
CONTRACTS FOR CRUDE OIL AND MUCH
CHEAPER COST. AND YET THE
SPECULATIVE MARKET DROVE THE
PRICE OF GASOLINE UP. THAT'S HOW
YOU GET THESE TYPE OF DOLLARS
PER GALLON PROFITS. SO WE NEED
TO KNOW NEXT SLIDE, PLEASE. NOT
ONLY THEIR REFINING, REFINING
MARGINS, THE GROSS MARGINS AND
NET MARGINS, WHICH IS WHAT
SENATE BILL 13. 22 DOES. BUT
ALSO WE WANT TO KNOW WHAT THE
PRICE OF CRUDE OIL THEY'RE
PAYING IS TE AVERAGE PRICE OF
CRUDE OIL BY MONTH. BECAUSE IF
WE UNDERSTOOD THAT WE UNDERSAND
THEIR COSTS A LOT BETTER. BUT WE
DON'T UNDERSTAND THE CC DOESN'T
UNDERSTAND IT. NO ONE IN
CALIFORNIA UNDERSTANDS, BUT THE
REFINERS UM, SO SORRY. MOVING ON
TO THE SOME OF THE SOLUTIONS
BESIDES SP 13 22 UM, PREVIOUSLY
DISCUSSED SOLUTIONS THAT HAVE
SOME MERIT. I JUST WANT TO TALK
ABOUT THEM. ONE IS CREATING A
UNIFIED, CLEAN BURNING FUEL
STANDARD FOR THE ENTIRE WEST
COAST. A LOT OF PEOPLE FEEL THAT
WOULD MAKE THE WEST COAST SUPPLY
MORE FUNGIBLE. AND THAT WOULD
ALLOW US TO IMPORT FUEL WHEN A
REFINERY WAS DOWN IN CALIFORNIA
, AND IT WOULD HAVE TO BE MADE
SPECIFICALLY FOR CALIFORNIA. IT
TAKES ABOUT THREE WEEKS TO
RETOOL THE REFINERY. THAT DOES
HAPPEN, BUT IT'S A BIG
TURNAROUND TIME. SO PEOPLE
THINK, WHY NOT CREATE ONE WEST
COAST REFINING BLEND. MAKE IT
CLEAN AS POSSIBLE. AND WE MAKE
IT FUNGIBLE. UM, I THINK THAT
HAS GOT SOME MERIT, BUT IT ALSO
WOULD REQUIRE COOPERATION OF
OTHER STATES. AND IT WOULD ALSO
YOU KNOW, IT WOULD ALSO TEST
THIS CARTEL WE HAVE OF THESE
FIVE REFINERS THERE. THE CONTROL
97% OF THE GAS AND I'M NOT SURE
THAT'S SOMETHING THAT CAN BE
BROKE. BUT I THINK IT'S
SOMETHING THAT'S WORTH THINKING
ABOUT. THERE'S ALSO AN IDEA THAT
WE WOULD CREATE A REFINING
SUPPLY OF CALIFORNIA CARB
GASOLINE. THAT'S JUST THERE FOR
WHEN THE MARKET IS SHORT. AND
YOU CAN REFILL THE GAS LIKE WE
HAVE A U. S. PETROLEUM RESERVE.
THIS THIS ONE IS A LITTLE BIT
MORE DIFFICULT TO DO
LOGISTICALLY BECAUSE WE DON'T
HAVE STORAGE CAPACITY TO
ACTUALLY HOLD GAS IN CALIFORNIA
. WE HOLD IT IN THE PIPELINES.
THE PIPELINES ARE FULL. UH WE
HOLD IT TERMINALS. THERE IS NOT
REALLY A PLACE TO DO THIS. SO I
THINK THAT THAT HAS BEEN TALKED
ABOUT AND IN LOGISTICALLY IS
VERY DIFFICULT. UM, BUT I DO
THINK THE MARKET CONDITIONS
DEMAND NEW OVERSIGHT. AND WE
NEED TO FIGURE AN OPTION BESIDES
THE CALIFORNIA ENERGY COMMISSION
THE ENERGY COMMISSION. UM THOSE
REPORT INFORMATION. I THINK IT
JUST NEEDS TO GET BETTER
INFORMATION AND REPORT MORE
INFORMATION. BUT IT IS NOT
OVERSIGHT. IT IS NOT A REGULATOR
IN THE SENSE THAT UM ALRIGHT, IT
DOES NOT. IT'S NOT ABLE TO ACT
OR EVEN TO MAKE A JUDGMENT TO
ACT IN A PERIOD WHERE SOMETHING
MAY BE GOING WRONG. UM THEN IT
WOULD MAKE A REFERRAL TO THE A
G. WE NEED SOMEONE IN THE STATE
MAY BE IN THE ATTORNEY GENERAL'S
OFFICE, MAYBE REPORT DIRECTLY
THE GOVERNOR WITH THE ABILITY TO
HAVE SUBPOENA POWER TO GET THE
TYPE OF INFORMATION THAT I'M
TALKING ABOUT ON PROFITABILITY
AND TO LOOK AT COMPANIES THE
WAYS COMPANIES WORK TOGETHER
BECAUSE THAT'S THE REAL PROBLEM.
HERE WE HAVE COMPANIES WHO ARE
WORKING TOGETHER. AND I'LL GET
TO THAT IN A LITTLE BIT, BUT
WHEN THEY WORK TOGETHER. IN WAYS
THAT SHARE INFORMATION THAT'S
DANGEROUS THAT THE MARKET
DOESN'T HAVE THEY NEED TO BE
PROSECUTED. UM, THE OTHER, UH
TWO RECOMMENDATIONS I HAVE FOR
THIS COMMITTEE. ONE IS AN EXCESS
PROFITS LAG TAX PROFITS LAW. UH
IF WE'RE MAKING SEEING THESE
TYPES OF PROFITS A DOLLAR OR
MORE A GALLON. THERE'S NO REASON
THAT THOSE OIL REFINERS SHOULD
BE ABLE TO KEEP THAT TYPE OF
MONEY WHEN THE STATE IS HAVING
TO GIVE $1000 BACK TO ITS
RESIDENTS BECAUSE THEY'RE PAYING
TOO MUCH FOR GAS. SO AN EXCESS
PROFITS LAW WOULD JUST SET A
REASONABLE RATE FOR PROFITS AND
DETER EXCESS PROFITABILITY. AND
HOPEFULLY WE WON'T HAVE TO
IMPLEMENT IT. BUT IF WE WOULD,
WE WOULD TAKE THE MONEY BACK AND
GIVE IT BACK TO THE PEOPLE. YOU
CAN ALSO DO AN UPDATE TO THE
PRICE GOUGING LAWS ARE PRICE
GOUGING LAWS NOW ARE ONLY IN
EFFECT WHEN THERE'S A STATE OF
EMERGENCY. IN A STATE OF
EMERGENCY IF PRICES RISE ABOVE A
CERTAIN AMOUNT, AND THEY'RE
OFTEN LOCAL LAWS, AND THEY
DIFFER. UM THEN YOU CAN
PROSECUTE. WELL, WE COULD HAVE A
LAW. THAT SAYS WHEN THE PRICE OF
GAS GOES OVER A CERTAIN AMOUNT,
IT'S NOT JUSTIFIED BY THE COST,
REGARDLESS OF WHETHER IT'S A
STATE OF EMERGENCY THAT WOULD
CONSTITUTE PRICE GOUGING. AND BY
THE WAY, THAT WOULD IF WE HAD
THAT LAW, WE COULD ERTAINLY DO
THAT WITH THIS LAST THREE MONTHS
BECAUSE THE LAST THREE MONTHS
THE PRICE OF GAS SKYROCKETED.
PROFITS SKYROCKETED. AND THERE'S
NOTHING WE CAN DO ABOUT IT. UM
THE LAST, UH, SUGGESTION I HAVE
IS AN UPDATE TO ANTITRUST LAWS,
AND THIS GOES TO THE WAVES THAT
REFINERS WORK TOGETHER. UM AND
IT GOES TO YOUR QUESTION ABOUT
THE MYSTERY SURCHARGE AND THE
UNBRANDED VERSUS BRANDON. ISSUE.
THE WAY THAT GAS PRICING IS SET,
IN. MY VIEW OF IT IS THE
REFINERIES. HAVE THE GAS AND
THEY SELL IT. THROUGH EITHER
THROUGH A BRANDED CONTRACT TO
THERE. FOR THE STATIONS. THEY
HAVE BRANDED CONTRACTS WITH. NOW
THAT'S ABOUT TWO THIRDS OF THE
STATIONS. THOSE FIVE REFINERS
HAVE BRANDED CONTRACTS WITH
ABOUT 66% OF THE STATIONS. THE
REST ARE UNBRANDED OR SOMETHING
CALLED THE HYPERMARKET, WHICH IS
WALMART AND COSTCO. WHEN THEY
SET THOSE PRICES FOR THE BRANDED
STATIONS. THEY HAVE BEEN SETTING
HIM. 30, OR 40, CENTS HIGHER.
THEN THE PRICE OF GAS THAT THEY
SELL TO THE UNBRANDED STATIONS.
AND IT IS THE VERY SAME GAS.
IT'S SOLD AT THE SAME TERMINAL.
IT'S THE VERY SAME GAS WHAT
HAPPENED IN THE WAKE OF THE
EXXON REFINERY DOWN EDGE INTO 15
WAS THAT WAS WHEN WE STARTED TO
SEE THE FIRST DOLLAR. OVER US
PRICES, AND IT WENT UP TO A
DOLLAR 50 AT ONE POINT, AND IT'S
BEEN SUSTAINED BETWEEN THE
DOLLAR AND A DOLLAR 50 EVER
SINCE. AND WHEN THE REFINERY
WENT DOWN, IT WAS NATURAL FOR
THE PRICE TO GO UP BECAUSE THERE
WASN'T ENOUGH SUPPLY OR THERE
WAS A PERCEPTION THAT WASN'T
ENOUGH SUPPLY. BUT AFTER A
WHILE, IT BECAME APPARENT THAT
THEY THE OIL REFINERS COULDN'T
JUST KEEP SUPPLY OUT TO KEEP
THEIR PRICES HIGHER. SO THEY
DEVELOPED THE STRATEGY. THE
STRATEGY WAS NOT IN EFFECT
BEFORE 2015 OF CHARGING THEIR
BRANDED STATIONS 30 TO 40 CENTS
MORE FOR THE VERY SAME GAS. THEY
CHARGE THE UNBRANDED STATIONS
FOR AND THEY DO IT BECAUSE IF
THEY CHARGE THEIR STATIONS, 30
40 CENTS MORE AND THE STATIONS
HAVE TO PASS ON THAT COST TO
CONSUMERS TO RECOUP THEIR COST.
THEY'RE MAKING 30 TO 40 CENTS
MORE PER GALLON. THAT STRATEGY
HAS BEEN IN EFFECT. FROM 2015
TILL I WOULD SAY THE BEGINNING
OF THIS YEAR. I AM NOT CERTAIN
IT'S STILL IN EFFECT LOOKING AT
BRANDED VERSUS UNBRANDED STATION
PRICES IN THE LAST THREE WEEKS.
I THINK IT MAY HAVE CHANGED. BUT
THAT WAS A STRATEGY THAT
COMPANIES USE. HOW DO THEY ALL
DO THAT AT THE SAME TIME, IN
OTHER WORDS, BEFORE 2015 BRANDED
STATIONS PAID THREE CENTS MORE
THAN UNBRANDED STATIONS AND THEN
ALL OF THEM AT THE SAME TIME,
HAD THE STRATEGY OF RAISING THE
PRICES. TO THEIR OWN BRANDED
STATIONS. HOW DOES THAT HAPPEN?
THIS PROPERTY THAT THEY WORK
TOGETHER. THERE IS AN ANTITRUST
CASE IN SAN DIEGO, WHICH I WILL
SHARE WITH THE COMMITTEE. CALL
OF CALLED THE PERSIAN GULF CASE,
AND THEY HAVE LITERALLY DOZENS
OF COMMUNICATIONS BETWEEN
TRADERS AND COMPANIES. SHARING
INFORMATION THAT'S NOT PUBLIC TO
THE MARKET ABOUT SUPPLIES BEING
DOWN ABOUT ONE REFINER, FILLING
ANOTHER REFINERS SUPPLY THEY
WORK TO KEEP COMPETITION OUT OF
THIS MARKET. THEY CHEAT RATHER
THAN COMPETE. AND THAT IS THE%
FUNDAMENTAL PART OF THE PROBLEM
AND WE NEED TO HAVE NEW LAWS
THAT PREVENT THAT TYPE OF
SHARING OF INFORMATION. THEY
SHOULDN'T BE ABLE TO SHARE THE
PRICE, FOR INSTANCE, THAT THEY
CHARGE THE STATIONS ON EVERY
CORNER, AND THEY DO HAVE THIS
INFORMATION SHARING AMONG THE
REFINERS THROUGH THIS DETAILED
LUNDBERG SURVEY OF EVERY GAS
STATION ON EVERY CORNER AND WHAT
IT'S PAYING FOR GASOLINE. WHEN
THEY HAVE THAT TYPE OF
INFORMATION. IT'S VERY EASY FOR
THE FIVE REFINERS TO KEEP THE
PRICES IN THE SAME PATTERN AND
MAKE AS MUCH PROFIT AS POSSIBLE
POSSIBLE. SO WE NEED TO STOP THE
SHARING OF INFORMATION THAT'S
GOING TO REQUIRE AN UPDATE TO
ANTITRUST LAWS. UM. IN ANY CASE,
I APPRECIATE YOUR TIME, AND I'M
HAPPY TO ANSWER ANY QUESTIONS
AND I FEEL LIKE IT'S I DON'T
NEED TO SAY THIS TO THE
COMMITTEE, BUT I NEED TO SAY IT.
THAT PEOPLE ARE REALLY HARD
PRESSED TO CHOOSE NOW BETWEEN
FILLING UP A TANK OF GAS AND
PAYING THEIR RENT. PAYING THEIR
MORTGAGE. AND WHEN THAT'S
HAPPENING AT $6 A GALLON AND WE
CERTAINLY SEE MARATHON MAKING A
DOLLAR A GALLON. SOMETHING'S
REALLY WRONG. SOMETHING'S REALLY
, REALLY WRONG. THIS ISN'T JUST
ANY INDUSTRY. THIS IS AN
INDUSTRY THAT PEOPLE DEPEND ON.
TO GET FROM PLACE TO PLACE IS AN
INDUSTRY THAT UNDERLIES ALL
OTHER INDUSTRIES. AND IS A REAL
MAJOR DRIVER OF INFLATION. AND
WE NEED TO LOOK AT ENFORCING, UH
SOME NEW LAWS ON IT TO MAKE SURE
THAT PEOPLE AREN'T GETTING
RIPPED OFF. AND THIS WAS A
COMPLETE RIP OFF. THIS SAYS THIS
WHOLE THIS WHOLE SITUATION WHERE
THE UKRAINE THE UKRAINIAN
SITUATION WAS AN OPPORTUNITY AND
THE OIL REFINERS TOOK IT TO MAKE
A LOT OF MONEY. AND THEY GOT
AWAY WITH IT. WE DON'T WANT TO
GET AWAY WITH IT NEXT TIME.
THANK YOU. ASSEMBLYMEMBER'S
DAVIES HAD A QUESTION. SURE
THANK YOU. AND I APOLOGIZE
BECAUSE I'M GOING TO HAVE TO ASK
THIS QUESTION. THEN LEAVE. I'VE
GOT TO CATCH A FLIGHT. SO I WANT
TO THANK EVERYONE FOR COMING. UM
JUST LOOKING AT YOUR, YOU KNOW,
DIFFERENT SOLUTIONS. YOU HAD
JUST A QUESTION ON THE EXCESS
PROFIT LAW. OBVIOUSLY IF WE'VE
GOT A WINDFALL TEXT COMING IN,
UM I'M JUST CURIOUS. LIKE
ANYTHING WHEN WE WHEN WE GO
AHEAD AND WE PUT TAXES ON
CORPORATIONS AND SO FORTH.
TECHNICALLY USUALLY IT COMES
BACK DOWN TO THE CONSUMER. UM,
HOW DOES THIS BENEFIT ON THE GAS
PRICE AND THE CONSUMER? WELL IF
WE'RE SAYING THAT 30 CENTS A
GALLON IS THE MAXIMUM PROFIT
JUST TAKING THAT THAT YOU CAN
MAKE IT REFERRED WHEN YOU MAKE
80 CENTS. THEY CAN'T CHARGE US
MORE BECAUSE WE'RE LOOKING AT
THEIR MARGINS, AND WE'RE
UNDERSTANDING. THAT'S THE
MAXIMUM PROFIT THE BRITISH
GOVERNMENT ACTUALLY IMPLEMENTED
AN EXCESS PROFITS TAX RECENTLY
IN RESPONSE TO SHELL, UH, THAT
SHELLS REFINING REPORTS AND THEY
IMPLEMENTED AN EXCESS PROFITS
TAX SO IT CAN'T INITIALLY FALL
BACK ON THE CONSUMER. WHAT THE
INDUSTRY WOULD AY, OF COURSE,
IS WELL, THAT'S GOING TO
DISCOURAGE NEW REFINERIES THAT'S
GOING TO DO IF WE CAN ONLY MAKE
30 CENTS, NOT A DOLLAR. WHY
WOULD WE WANT TO BE IN THE
REFINING BUSINESS? BUT WE CAN
PREVENT IT FROM DIRECTLY
BOOMERANG BY SIMPLY SETTING A
REASONABLE STANDARD 50 CENTS 50
CENTS A GALLON. UM YOU KNOW, 50
CENTS A GALLON. I'M JUST SAYING
IT IS 50 CENTS A GALLON. IS THAT
A REASONABLE OR, YOU KNOW APRIL
AS A PERCENTAGE OF THE OVERALL
OVERALL PRICE OF GASOLINE,
WHATEVER IT IS, IF WE IF WE SET
AN EXCESS PROFITS TAX ON THE
FACT THAT THE COMPANIES ARE, UM
ARE ARE MAKING WELL, LIKE WHEN
THEY'RE PROBABLY THEIR PROFITS
BASICALLY DOUBLED IN THIS FOURTH
QUARTER, BUT MORE GRADUALLY. TO
FOCUS ON WHAT THEY'RE MAKING.
OUT OF WHAT WE'RE PAYING FOR IT.
SO IF IT'S 50 CENTS PER GALLON,
O WHATEVER THAT TRANSLATES TO
BARREL AND WE TAKE A PERCENTAGE
OF THAT BACK THAT DISCOURAGES
THIS TYPE OF AH, BIG INCREASES
IN COSTS. IT DISCOURAGES IT, BUT
IT WOULDN'T STOP IT. CORRECT I
THINK IT WILL STOP IT. AND IN
THE SHORT TERM, I MEAN, I THINK
IT WILL STOP IT. IT WON'T WE
WON'T HAVE THE RUN UP IN THE OIL
INDUSTRY WILL SAY IS WELL,
THAT'LL DISCOURAGE, UH, NEW
REFINERIES FROM BEING BUILT.
WELL, THE REFINERS HAVE IT
PRETTY WELL. IF THEY CAN MAKE 50
CENTS A GALLON, I THINK THEY'LL
HAVE A HAVE A HAVE, AND THEY
HAVE ALL THESE CARS TO FEED IN
CALIFORNIA. I THINK THEY'LL
THEY'LL STAY IN CALIFORNIA AND
KEEP MAKING GASOLINE. I DON'T
THINK THEY NEED TO MAKE A DOLLAR
A GALLON I APPRECIATE AND THANK
YOU SO MUCH. I APOLOGIZE. I
GOTTA GO. I DO APPRECIATE YOU,
UH, LIKE, DELAYING OR FIGHT. MY
PLEASURE. THANK YOU.
ASSEMBLYMEMBER'S MURATSUCHI.
THANK YOU VERY MUCH, MR CORD. I
THINK I CALLED YOU MR MCCARTY
EARLIER IN SO I APOLOGIZE.
APPRECIATE THAT CORRECTION
BECAUSE IT OFTEN NEVER GETS
CORRECTED. IT HAPPENS ALL THE
TIME. SO THANK YOU. ALL RIGHT.
UM, SO I HAD TO LEAVE EARLY AT
THE LAST HEARING OF THE SELECT
COMMITTEE, AND SO I DID YOU
TESTIFY. LAST HEARING DID NOT
TESTIFY. AND SO, UM, I DID CATCH
THE PORTION OF THE LAST HEARING
WERE PROFESSOR SETH BORENSTEIN
FROM UC BERKELEY AT TESTIFIED
AND, UH AND HE SHOWED US THIS
CHART. IT'S PROBABLY YOU
PROBABLY CAN'T SEE IT, BUT IT'S
UH, THE IMPORTANT PART OF THIS
CHART IS THAT IT SHOWS A JUMP IN
2015 AFTER THE TORRANCE REFINERY
FIRE AND IN MY DISTRICT HAPPENED
IN FEBRUARY, 2015 AND HOW THE.
THE PRICE NEVER DROPPED BACK
DOWN TO WHERE IT WAS BEFORE
THAT, AND SO, YOU KNOW, I UM I
WISH I HAD REMEMBER THIS CHART
WHEN I WAS UM. YOU KNOW WE WERE
WITH OUR PRIOR TO WITNESSES, BUT
THIS DOESN'T SEEM TO BE
EXPLAINED BY TAXES AND
ENVIRONMENTAL FEES. I MEAN,
THERE WASN'T A DRAMATIC INCREASE
AND TAXES AND ENVIRONMENTAL FEES
IN 2015. UH, THAT DOESN'T
EXPLAIN, UH, I MEAN, DOES THAT
EXPLAIN? DOES IT EXPLAIN THIS
THIS? NO. I MEAN, THERE WERE
THERE WERE TO BE FAIR, THE LOW
CARBON FUELS STANDARD INCREASED,
BUT AGAIN, IF YOU IF YOU DO THE
BREAKDOWN AND IT'S 44. CENTS
BETWEEN THE LOW CARBON FUELS
STANDARD AND THE, UH AND THE CAP
AND TRADE CREDIT THAT WAS OPEN.
BUT YOU KNOW IT'S 40 CENTS, AND
YOU HAD THE TWENTIES SENSE MORE
AND STATE TAXES COMES OUT TO
SIXTIES. SOME ODD SENSE, MAYBE
70 CENTS, AND THAT'S ALL YOU CAN
EXPLAIN IN TAXES AND
ENVIRONMENTAL RULES. OKAY? UM SO
YES, I LOOK FORWARD TO, UH. TO
SENATOR ALLEN'S SP 13 22 MOVING
FORWARD AND THE. IN THE LAST
LECTURE, AND THE NEXT REMAIN,
YOU WILL HAVE A CHANCE TO VOTE
ON IT BECAUSE IT IS ON THE
ASSEMBLY FLOOR. SO WE APPRECIATE
THAT. THANK YOU, UM BUT, UM I'M
ALSO REMINDED OF COMMENTS MADE
BY PROFESSOR BORNSTEIN. AH WHERE
HE, UM. HE WARNED THIS COMMITTEE
NOT TO FOCUS ON OIL PROFITS. HE
SAID THAT THE OIL COMPANIES
MAKING RECORD PROFITS, IT'S LIKE
LOOKING AT CALIFORNIA'S HOUSING
MARKET. THAT YOU KNOW PEOPLE ARE
MAKING RECORD PROFITS BECAUSE
THE YOU KNOW THAT THAT THE
DEMAND IS SO HIGH AND THE SUPPLY
IS RESTRICTED. AH AH AH AND, UM
AND HE ALSO GAVE A WARNING THAT
THE YOU KNOW THAT THE LAST TIME
I MEAN, I KNOW YOU'RE NOT
TALKING ABOUT PRICE CONTROLS,
BUT HE BUT HE GAVE YOU KNOW WERE
, YOU KNOW, GIVE A CAUTIONARY
TALE ABOUT ABOUT PRICE CONTROLS
IN THE EARLY 19 SEVENTIES. WITH
THE OIL CRISIS, UH, LEADING TO
THE DISASTROUS OUTCOMES OF HUGE
GAS LINES. I MEAN, I SUSPECT YOU
DIFFER FROM PROFESSOR BERNSTEIN
. DO I HAVE COME TO RESPECT HIM,
THOUGH? BECAUSE WE WERE ON
OPPOSITE SIDE. HE WAS ON HE WAS
ON THE 2000 GAS PRICING TASK
FORCE TO TOTAL FREE MARKET. BUT
BY 2015 HE HAD TO. WELL
ACTUALLY, AFTER 2015 AND 2020.
HE WAS THE CHAIR OF THE
PETROLEUM MARKET ADVISORY
COMMITTEE, AND WE CONVINCED HIM
THAT THERE WAS THIS DIFFERENCE
BETWEEN BRANDED AND UNBRANDED
STATIONS BECAUSE BASICALLY WE
GOT WHAT'S CALLED RACK PRICING.
YOU CAN YOU CAN GET THE COST, UH
, THAT THE REFINERS SELL THE GAS
AT WHAT'S CALLED THE RACK OR A
DEALER TANK WAGONS TO TWO WAYS
AND IRAQ HAS A BRANDED PRICE AND
UNBRANDED PRICE. AND WE FOUND
THIS. PRICE DIFFERENCE AT THE
RACK AND BROUGHT IT TO THE
COMMITTEE AND SAID THIS IS A
HISTORICALLY ON ON UNPRECEDENTED
WHAT'S GOING ON, AND HE TOOK
THAT SERIOUSLY AND BASICALLY
SAID YEAH, AND I BELIEVE IN FREE
MARKETS AND BOY DOES HE BELIEVE
IN FREE MARKETS? BUTTHIS IS
STILL CRAZY. THIS IS OUT OF
WHACK. SO THE MYSTERY SURCHARGE
HE WAS IT WAS. IT WAS HIS TERM
FOR A PHENOMENON THAT WE BROUGHT
TO THEIR ATTENTION. UM BUT I
DISAGREE. I MEAN, I THINK THAT
UM, I THINK THAT GASOLINE IS
SOMETHING THAT NUMBER ONE, UM WE
DO AS A STATE WANT TO GET AWAY
FROM IT. WE WANT TO GET AWAY
FROM GASOLINE. UH AND I THINK WE
CAN AND, UH AND WE ARE GOING TO
BUT NUMBER TWO. IT IS UNTIL WE
GET AWAY FROM IT SOMETHING THAT
IS ASSESSING THE OF LIFE AND
IT'S A DRIVER OF INFLATION
CAUGHT BRIDGE. THE MORE GASOLINE
GOES UP THE HIGHER THE COST OF
ALL GOODS AND SERVICES. WE HAVE
TO FIND A WAY TO KEEP IT. WITHIN
REASONABLE BOUNDS, AND I THINK A
DOLLAR A GALLON IS OUTRAGEOUSLY
UNREASONABLE AND UM AND SEVERIN
WOULD SAY LOOK IF THE OIL AND HE
HAS SAID THIS TO ME LOOK IF THE
OIL COMPANIES MADE A GOOD BET ON
A LONG TERM CONTRACT AND GOT
THEIR CRUDE OIL AT $50 A BARREL
AND IT WAS SELLING FOR $50 A
BARREL AT ONE POINT NOT THAT
LONG AGO. THEY GOT HIM AT $50 A
BARREL AND THEY CAN CHARGE THE
EQUIVALENT OF $110 A BARREL. GOD
BLESS THEM. THEY MADE A GOOD BAD
DAY MADE THE HEDGE. THEY SHOULD
MAKE THAT MONEY. AND I SAID,
WELL, WHAT ABOUT THE GUY WHO
CAN'T GET TO WORK? IT HAS TO
QUIT HIS JOB BECAUSE IT'S $6 A
GALLON AND THAT'S WHERE YOU GUYS
COME IN BECAUSE YOU'RE THE
ARBITER BETWEEN THOSE THE MARKET
AND THE CONSUMER. AND I THINK
THERE NEEDS TO BE A REASONABLE A
REASONABLE LIMITS SET BUT TO SAY
THAT THE OIL COMPANIES DIDN'T
HAVE A GOOD YEAR BECAUSE OF
UKRAINIAN AND PUTIN JUST FLIES
IN THE FACE OF THE FACTS AND THE
FACTS OF THEIR OWN INVESTOR
REPORTS. IN TERMS OF THEIR
INVESTOR REPORTS SHOWING THE
RECORD PROFITS, RECORD PROFITS
AND SHOWING EXACTLY WHERE IT
CAME FROM. I MEAN, WE CAN
PINPOINT THE FACT THAT THE WEST
COAST AND OBVIOUSLY MORE
SPECIFICALLY CALIFORNIA HAS BEEN
AN A T M FOR THEM FOR A LONG
TIME, BUT NOW IT'S BECOME LIKE A
FOUR OH, ONE K. I MEAN, IT IS IT
IS, UH AND IF WE DON'T PUT SOME
LIMITS ON IT IF WE DON'T EXPOSE
IT. IT WILL, IT WILL HAPPEN
AGAIN. SO. SO YOU'RE REFERRING
TO BUT I 1234 YOUR FIFTH CHART
THAT SHOWS THE DIFFERENCES IN
THE REFINING MARGINS BETWEEN THE
WEST COAST VERSUS YEAH, AND
THERE'S TO BE TRUE. THE TRUTHFUL
THE REFINING MARGINS ARE CRAZY
THROUGHOUT THE REST OF THE
COUNTRY. BUT THERE'S STILL MUCH
GREATER THERE'S STILL GREATER IN
IN IN IN CALIFORNIA IN THE WEST
, AND IF YOU DID CALIFORNIA
THEY'D BE EVEN GREATER HERE. UM
AND I HONESTLY BELIEVE THAT ONE
OF THE REASONS IS THE OIL
COMPANIES LIKE TO PUNISH US HOLD
US OUT AN EXAMPLE FOR
ENVIRONMENTAL LAWS AND THEY CAN
MAKE A LOT MORE MONEY DOING IT
AND THEY HAVE THE CAPACITY
BECAUSE THEY HAVE SUCH CONTROL
OF THE MARKET. BUT THEN WE CAN
HAVE THEM COME UP AND SAY, LOOK,
IT'S YOUR ENVIRONMENTAL LAWS.
YEAH WHAT DO YOU DO YOU DO YOU
WANT TO ADOPT THOSE
ENVIRONMENTAL LAWS IN IOWA? LOOK
WHAT'S HAPPENED TO CALIFORNIA. I
THINK THERE IS SOME ELEMENT OF
THAT, UH, IN IN WHAT THEY'RE
DOING, BUT, UM, THEY DO KEEP THE
PRICE OF GAS AND THEIR PROFITS
HIGHER IN CALIFORNIA.
HISTORICALLY THERE HAS NEVER
BEEN ANYTHING LIKE THESE MARGINS
GOING BACK. 10 12 15 YEARS I
HAVEN'T GONE BACK FURTHER THAN
THAT. WE HAVE NEVER SEEN MARGINS
ANYWHERE NEAR THESE. SO UM, AS
AS PART OF YOUR PROPOSED
SOLUTIONS, YOU YOU. ONE OF YOUR
PROPOSALS IS, UH GREATER
OVERSIGHT. UH FROM A POSITION
THAT YOU'RE, YOU KNOW, CALLING
THE GAS PRICINGS ARE HERE WITH
WITH A SUBPOENA PROBLEM POWER
AND THE ABILITY TO PROSECUTE. UH
BAD ACTORS. I MEAN, ISN'T THAT
THE ATTORNEY GENERAL? ATTORNEY
GENERAL. MAYBE IT TAKES A LONG
TIME FOR THEM TO GET A CASE
GOING. UM THEY HAVE SUBPOENA
POWER. THE OIL FRONTS DON'T
ACTUALLY HAVE TO ANSWER HIM.
THIS PERSIAN GULF CASE IS ABOUT
WHAT HAPPENED IN THE WAKE OF
2015. IT'S A PRIVATE CASE GOING
FORWARD WITH THIS INFORMATION
THAT I WILL SHARE WITH THE
COMMITTEE. THE CASE THAT THE, UH
ATTORNEY GENERAL'S PROSECUTING
NOW AGAINST ONE OF THE BIG
TRADERS IN THE MARKET IS A CASE
FROM AROUND THE SAME TIME, SO IT
TAKES AN AWFUL LONG TIME FOR
THESE CASES TO BE FOUND OUT.
THEY HAVE TO GET THE INFORMATION
AND THEY OFTEN COMES IN LATE.
I'M TALKING ABOUT SOMEONE WHO IN
REAL TIME IS THEIR JOB IS TO
WATCH THIS MARKET. IF A TRADER
HAS A REPORT ABOUT SOMETHING
WRONG, THEY CAN CONTACT THIS
PERSON, IF THERE'S SOMETHING
THAT'S AMISS WITH THE
PROFITABILITY IN ONE PERIOD THEY
CAN INVESTIGATE. THEY CAN DO IT
IN REAL TIME. OUR LEGAL SYSTEM.
WORKS BUT IT TAKES A LONG TIME
TO WORK AND I'M TALKING ABOUT A
POSITION WHERE IN REAL TIME, UH
, THERE CAN BE INVESTIGATIONS.
THE C E C. ISN'T EQUIPPED TO
INVESTIGATE. I DON'T THINK
INITIALLY HAS THE WILL TO
INVESTIGATE. BUT REGARDLESS,
IT'S MORE OF A PARTNER WITH THE
OIL COMPANIES AND SHARING
INFORMATION AND GETTING THINGS
DONE. WE NEED SOMEONE WHO'S
BASICALLY ADVERSARIAL WITH THE
INDUSTRY AND A WATCHDOG INSIDE
GOVERNMENT ON THE INDUSTRY, BUT
YOU KNOW AS A AS A FORMER MEMBER
OF THE ATTORNEY GENERAL'S
OFFICE, I KNOW THAT YOU KNOW
WHEN YOU'RE TALKING ABOUT AND
YOU KNOW, BEING MORE ADVERSARIAL
, BEING MORE INVESTIGATORY, I
MEAN GETTING YOU KNOW? GETTING
INFORMATION, AS AS YOU INDICATED
, IS DIFFICULT. IT'S NOT
CURRENTLY POSSIBLE AND SO THAT
THAT TAKES SUBPOENAS NOT ONLY
ISSUING SUBPOENAS BUT ALSO GOING
TO COURT TO TRY TO ENFORCE THE
SUBPOENAS TO FIGHT AGAINST THE
ARMY OF LAWYERS THAT THE THAT
THE OIL COMPANIES ARE GOING TO
THROW AGAINST THE ATTORNEY
GENERAL'S OFFICE. AND SO I MEAN
, IT JUST SEEMS TO ME LIKE
RATHER THAN REINVENTING THE
WHEEL THAT WE SHOULD TRY TO
EMPOWER OUR FOCUS ON THE
ATTORNEY GENERAL'S OFFICE, MAYBE
GIVE THEM GREATER RESOURCES TO
BE ABLE TO, UH, TAKE MORE OF
THAT. I WOULD. I WOULD SUGGEST
MAYBE SOMEONE HOUSED IN THE
ATTORNEY GENERAL'S OFFICE, BUT
HIS SPECIFIC I MEAN, THE
ANTITRUST DIVISION OF THE
ATTORNEY GENERAL'S OFFICE IS
DOING A LOT OF CASES. THEY'RE
NOT JUST DOING GAS PRICING
CASES. THEY'RE DOING A LOT OF
CASES, AND I THINK KATHLEEN
FOOT'S DOING A MARVELOUS JOB.
BUT I THINK WE NEED MAYBE
RESOURCES. TO SPECIFICALLY
WATCHDOG, THE GAS PRICING MARKET
, AND I THINK HOUSING THAT
PERSON OR PEOPLE TO AS A
PERMANENT, UH, AS A PERMANENT
PRESENCE IN THE ATTORNEY
GENERAL'S OFFICE IS A GOOD
COURSE. AND LAST QUESTION THAT I
CAN THINK OF NOW, AS I MEAN, YOU
WERE TALKING ABOUT THE NEED TO
UPDATE AND OUR ANTITRUST LAWS.
UH SPECIFICALLY JUST TO STOP THE
SHARING OF INFORMATION. THAT YOU
WERE REFERRING TO EARLIER TOO.
BASICALLY. RIGGED THE MARKET. UH
I MEAN ARE ARE ARE THEIR STATE
VERSUS FEDERAL JURISDICTIONAL
ISSUES, OR IS THIS IT'S A STATE
UM, I THINK THAT'S THE STATE
HAVE THE LEGAL AUTHORITY TO DO
THAT ON THE STATE CAN STATE HAS
ANTITRUST LAWS AND IT CAN UP UP
UPDATE ITS ANTITRUST LAWS? UH I
BELIEVE IT COULD SAY, YOU KNOW,
THERE'S LIKE IN THE INSURANCE
MARKET, WHICH IS STRICTLY
REGULATED BY THE STATE. BUT WE
HAVE A PROHIBITION ON THE
SHARING OF PRICING MANUALS. THEY
CAN'T SHARE INFORMATION ABOUT
WHAT GOES INTO THEIR PRICES.
THEY USED TO. THEY TRIED WE
REVOKE THAT THIS WOULD BE A
SIMILAR THING. UH WHY SHOULD
THEY BE ABLE TO KNOW WHAT THEIR
WHAT THEIR COMPETITORS ARE
PAYING FOR A TRUCKLOAD OF
GASOLINE AT EVERY GAS STATION IN
THE STATE? WHY SHOULD BE ABLE TO
SHARE THAT INFORMATION. I DON'T
THINK THEY SHOULD. UM UH, IF YOU
PUT STRICTER REGULATIONS ON
TRADERS NOT BEING ABLE TO TALK
TO TRADERS. FROM OTHER COMPANIES
TO SHARE THEN IT THEN, THEN YOU
COULD PROSECUTE THEM IF THEY DID
SHARE INFORMATION, RATHER THAN
HAVING TO GO AFTER THE COMPANY'S
IT'S THAT TYPE OF THAT. THAT
TYPE OF INFORMATION SHARING THAT
CONCERNS ME. ALL RIGHT. THANK
YOU VERY MUCH. THANK YOU SO MUCH
FOR JOINING US TODAY, AL KIND OF
TOUCHED ON A LOT OF MR
MURATSUCHI TOUCHED ON A LOT OF
THE QUESTIONS THAT I HAD ALREADY
. SO WHAT ON THIS EXCESS
PROFITS? UM IDEA. UH YOU
MENTIONED GREAT. BRITAIN WAS
LOOKING AT IT. IS THERE A MODEL
ANYWHERE ELSE THAT THIS IS DONE
AND LET ME LIKE. YOU KNOW, I I'M
ALWAYS CONCERNED ABOUT PRICE
FIXING. IF YOU SAY WELL, THE
EXCESS PROFIT IS CAN'T BE MORE
THAN 50 CENTS. ISN'T THERE A
NATURAL INCLINATION TO GO ALL
THE WAY UP TO 50 CENTS SO YOU
MIGHT END UP UH IN IN OTHER
TIMES, INCREASING THE PRICE OF
GAS. UM. YOU KNOW THAT'S A GOOD
QUESTION. THE GREAT BRITAIN
ACTUALLY PASSED NEXT S PROFITS
TAX ACTUALLY, IN EFFECT. BUT IT
IS ON OVERALL REVENUE ABOVE A
CERTAIN AMOUNT DOESN'T TARGET
LIKE TARGET MARGIN. UH AND
THERE'S ALL SORTS OF WAYS TO DO
THAT. YOU COULD YOU COULD YOU
COULD. YOU COULD. YOU COULD, UH,
YOU KNOW, TARGET EXCESS PROFITS
ABOVE A CERTAIN AMOUNT. UM
RATHER THAN DO IT BASED ON THE
MARGIN. UM OR YOU COULD DO WHICH
ISN'T THAT DIFFERENT. UH AND
UPDATE TO THE PRICE GOUGING LAWS
THAT SAY IF A VALUE OF VALUE OF
GAS IF THE PRICE OF GASOLINE
GOES UP MORE THAN 20% AND, UH,
AND IT'S NOT JUSTIFIED BY THE
COST OF THAT. THEN. AH THEY CAN
BE PROUD. THEY CAN BE PROSECUTED
FOR PRICE GOUGING, WHICH WHICH
WOULD, WHICH IS ANOTHER WAY TO
DO IT? UM AND YOU JUST TAKE OUT
THE PART THAT IN TIME OF A
NATURAL NATURAL STATE OF
EMERGENCY HAS TO BE DECLARED
DECLARED, UM, I'M JUST TRYING TO
GIVE YOU SOME IDEAS OF WAYS THAT
THE CURB THINGS I DON'T HAVE ALL
THE ANSWERS. THERE ARE EXCESS
PROFITS TAX IS AROUND THE WORLD,
ANOTHER ANOTHER GOODS AND
SERVICES, AND I'M HAPPY TO
PREPARE A LITTLE PAPER FOR YOU
ON HOW THEY WORK. IF YOU WANT. I
CAN LOOK INTO IT MORE. I WOULD
BE CURIOUS. I'M JUST A LITTLE
CURIOUS, TOO. THE I'M SORT OF,
YOU KNOW, I'M KIND OF IN. UH I'M
IN THE IF YOU TRY TO, UH, MESS
TOO MUCH WITH THE FREE MARKET
THAT THERE'S UNINTENDED
CONSEQUENCES, SO, BUT, YOU KNOW,
OBVIOUSLY, WE HAVEN'T HAD AN
ISSUE THE MARKETS FREE REALLY
FREE. SO YOU HAVE TALKED ABOUT
THE, UM BUT YOU KNOW THE
QUESTION, REALLY. WE WANTED TO
KNOW WHY GAS WAS SO EXPENSIVE
AND YOUR ANSWER REALLY IS THE
CONSOLIDATION THAT'S HAPPENING
IN CALIFORNIA. ARE THERE OTHER
AREAS OF THE COUNTRY THAT YOU
SEE THIS TYPE OF CONSOLIDATION
OR DO WE HAVE THE CONSOLIDATION
JUST BECAUSE WE HAVE THIS HIGH
STANDARD THAT NOBODY ELSE DOES.
THERE ARE OTHER AREAS THAT
THEY'VE CONSOLIDATED. BUT WHAT'S
UNIQUE ABOUT CALIFORNIA AND YOU
MIGHT HAVE HEARD THIS IS UM, YES
, WE HAVE THIS. WE HAVE THIS
FUEL ISLAND BECAUSE OF A FEW
FACTORS. ONE IS THE CARB FUEL
THE SPECIAL FUEL. THE OTHER
THING IS, WE DON'T HAVE PIPES
COMING INTO CALIFORNIA ONLY
GOING OUT. WE CAN'T. WE CAN'T
BRING GAS FROM OTHER PLACES.
EVEN IF WE WANTED TO. UM E? SO
IT IS A LITERALLY A FUEL ISLAND
AND WE HAVE WE GET OUR WE GET
OUR GAS ONCE MADE ELSEWHERE, AND
WE GET THE COMPONENTS OF GAS VIA
SHIP COMING DOWN THE COAST. AND
THEY ACTUALLY STOPPED AT, YOU
KNOW THE REFINERIES, MANY OTHER
FINE ARIES AND, UM, SO WE HAVE
THIS. THIS THIS IT'S. IT'S AN
INTEGRATED. CARTEL IN MANY WAYS
, YOU KNOW, THEY CONTROL THE
PRODUCT THEY CONTROL HOW HOW
MUCH THEY CHARGE. TWO THIRDS OF
THE GAS STATIONS FOR THE
PRODUCT, SO THEY'RE BASICALLY
SENDING THE STREET PRICE FOR THE
PUBLIC IN TWO THIRDS OF THE
CASES. UM AND THEY ALSO, UM
PREVENT OTHER PLAYERS FROM
COMING IN THE MARKET. THERE'S
SOME MEMOS THAT HAVE WENT AROUND
THE GAS PRICING TASK FORCE. THEY
THE A G DID AND THERE'S MORE
MEMOS SHOWING THAT THEY DO TRY
TO KEEP PLAYERS FROM COMING IN
AND BUILDING UP SUPPLIES TO THE
POINT WHERE THEIR PROFITS WILL
BE REDUCED. UM SO I THINK IT'S
THE MOST THE FACTOR OF THE
CONSOLIDATED MARKET AND THOSE
OTHER, UM, UNIQUELY CALIFORNIA
FACTORS, BUT THE END RESULT IS,
UM IN A STATE THAT NEEDS GAS AS
BAD AS WE ARE. I MEAN, WE'RE THE
WE'RE THE FIFTH LARGEST ECONOMY
IN THE WORLD TO HAVE FIVE
REFINERS CONTROLLING MAKING 97%
OF THE GASOLINE IS VERY
DANGEROUS. UM BECAUSE THEY CAN
SQUEEZE US WHEN THEY WANT TO
SQUEEZE US, AND THERE ISN'T MUCH
ROOM FOR COMPETITION. UM AND SO
I DON'T KNOW HOW TO UN RING THAT
BELL IS THE PROBLEM. THESE ARE
IF WE CANNOT RING THE BELL AND
CREATE MORE COMPETITION IN THE
MARKET. I WOULD THINK THAT WOULD
BE A BETTER SOLUTION THAN HAVING
TO TAKE BACK EXCESS PROFITS
AFTER IT'S CHARGED, BUT I CAN'T
THINK OF HOW TO UNRING THAT BELL
AND THAT, BY THE WAY, THIS
CONSOLIDATION HAPPENED LARGELY
IN THE WAKE. OF THE EXXON GOING
DOWN. UM THERE WAS SOME SOME
APPROVALS OF SOME MERGERS THAT
ALLOWED FOR THAT CONSOLIDATION
TO TIGHTEN RIGHT IN THE SAME
PERIOD THAT THERE AND THAT'S WHY
WE HAD THIS CONFLUENCE OF
FORCES. THE TWO AREAS WHERE YOU
MENTIONED THAT WE DON'T HAVE THE
DATA AS ONE WHAT THE PRICES OF
CRUDE THAT THE REFINERS PAID.
WHAT THEY'RE WHAT THEY WHAT THEY
WHAT THEY PAY FOR THE PRICE OF
CRUDE THE AVERAGE PRICE THEY PAY
FOR A BARREL OF CRUDE, AND THEN
IT SEEMS THE OTHER AREA THAT
WE'RE LACKING INFORMATION.
CURRENT INFORMATION IS THE
CONTRACTS BETWEEN THESE NO, NOT
NO BRAND. UH UM, STATIONS AND
THE BRAND STATIONS WHAT THE
DIFFERENCE IS AND WHAT THEY'RE
PAYING FROM THE SAME AREA, BUT
THOSE ARE BOTH. CONTRACTS RIGHT?
I MEAN, IT'S THAT'S THAT'S WELL
, THAT IS NOT THAT'S
CONFIDENTIAL INFORMATION.
ACTUALLY WE DO HAVE AN IDEA OF
WHAT THE COTTON THE DIFFERENCE
BETWEEN THE BRANDED AND
UNBRANDED PRICES ARE BECAUSE WE
CAN GET WHAT IS CALLED PRICES AT
THE RACK FROM OPUS AND OTHER
SERVICES, SO WE ACTUALLY KNOW ON
ANY GIVEN DAY AT GIVEN RACK AND
SAYING TORRANCE THE DIFFERENCE
BETWEEN WHAT THEY'RE CHARGING
THE GAS STATION OWNERS FOR
BRANDON. WHAT? THEY'RE CHARGING
THE GAS STATION THAT WAS FRONT
BRANDED. UH HUH. AND WE CAN WE
CAN WE CAN PULL THAT TOMORROW IF
YOU TAKE A LITTLE EFFORT, BUT WE
CAN DO THAT. UM WE DON'T KNOW
THE PRICE OF CRUDE. YOU'RE
RIGHT, BECAUSE THAT IS A
CONTRACT THAT THOSE ARE. THOSE
ARE THOSE ARE ON UNDER LONG TERM
CONTRACTS. THEY ALSO TRADE CRUDE
OIL AMONGST THEMSELVES TO KEEP
MAKE SURE THEY ALL HAVE CRUDE
OIL. UM SO WE, WE NEED TO KNOW
THAT THE PRICE THE VALUE OF THE
PRICE OF CRUDE OIL. ON AVERAGE
IN A GIVEN MONTH THAT THEY'RE
RUNNING THROUGH THE REFINERY,
AND THEN THE AVERAGE PRICE OF
THE GASOLINE THAT COMES OUT THE
OTHER END. AND THEN WE CAN WE
CAN WE COULD DO IT OURSELVES. OR
THEY CAN CALCULATE THE WHATEVER
THAT MARGIN IS BETWEEN THE GROSS
MARGIN. DO YOU? YOU SAID THAT
THEY'RE SHARING THE COMPANIES
ARE SHARING THE PRICE. YEAH THIS
IS INTERESTING. I MEAN, HOW HOW
DO YOU KNOW WHEN WE WERE GOING
THROUGH THE P MAC? WE HAD SOME
PEOPLE IN THE INDUSTRY INFORM US
AND I HAVEN'T SEEN THIS THAT
THERE IS A VERY DETAILED SURVEY
PUT OUT BY THE LUNDBERG LUNDBERG
SURVEY. YOU SEE, YOU'VE HEARD
LUNDBERG SURVEY. THEY ACTUALLY,
YOU KNOW, THEY PUT OUT WHAT THE
AVERAGE PRICE OF GRASS IN AREAS
THEY GET THAT VIA A DETAILED
SURVEY OF WHAT EVERY GAS STATION
OWNER PAYS FOR THEIR GASOLINE
AND WHAT THEY CHARGE FOR THEIR
GASOLINE. GAS STATION OWNERS
FILL IT OUT. THEY ALL SHARE IT
AND THE REFINERS SHARE IT. WE'VE
TRIED TO GET IT AND WE HAVEN'T
BEEN ABLE TO GET IT. I THINK THE
C E C TOLD ME THEY ARE NOT
PRIVY. TO THAT, SIR. BUT THAT'S
UH WE ARE TOLD AND THE ALL HAVE
AS TO IT, SO THEY BASICALLY.
YEAH BUT I WOULD URGE THE
COMMITTEE TO INVESTIGATE THE
LUNDBERG SURVEY. UH AND, UH, AND
FIND OUT MORE ABOUT THAT BECAUSE
WE HAVEN'T BEEN ABLE TO FIND OUT
MUCH MORE THAN THAT. RIGHT, UM
WRITING THAT DOWN AND THEN UM,
WHAT IS YOUR OPINION ABOUT THE,
UM THE NUMBER OF GAS STATIONS,
UH, DECREASING IN CALIFORNIA,
AND THAT POTENTIALLY IN THE
INCREASING COMPETITION AND
INCREASING PRICE. AH! I DON'T I
DON'T SEE A LACK OF YES,
STATIONS IS A REAL ISSUE. I
DON'T SEE PEOPLE WAITING IN LINE
AT GAS STATIONS. I THINK UM,
THAT'S PRICES IS REALLY SET IN
THE MARKET BY THE REFINER. UM
THE UNBRANDED STATIONS CLEARLY
AND GET A BETTER DEAL. I MEAN,
MOST AND UNTIL WHAT? THE CHANGE
I'VE SEEN RECENTLY YOU COULD GET
30 CENTS. YOU CAN PAY 30 CENTS
LESS, MAYBE EVEN 40 CENTS LESS
AT AN UNBRANDED STATION. BUT THE
PROBLEM IS THE UNBRANDED
STATIONS HAVE YOU KNOW THE
BRANDED SECTOR HAS SHRIVELED
OVER THE LAST 10 12 YEARS, SO
THERE IS NOT AN EQUAL SECTOR.
SAY IF WE COULD ENCOURAGE
UNBRANDED STATIONS THAT WOULD
HAVE AN IMPACT ON PRICE,
ENCOURAGING BRANDED STATIONS. I
DON'T THINK MUCH HAS MUCH OF AN
IMPACT ON PRICE BECAUSE THE
BRANDED STATIONS TRADITIONALLY
HAVE THE HIGHER PRICES. OKAY?
ALL RIGHT. UH HUH.
ASSEMBLYMEMBER'S MURATSUCHI.
THANK YOU VERY MUCH. I WANTED TO
FOLLOW UP ON THE SHARES
QUESTION. ABOUT WELL, MAYBE NOT
FOCUSING ON THE GAS STATIONS,
BUT ON UH, STATES REFINING
CAPACITY. I MEAN, GIVEN THAT
YOU'RE FOCUSING ON THE TOP FIVE
OIL REFINERS CONTROLLING 96% OF
GASOLINE IN CALIFORNIA. UM GOING
BACK TO WHAT I WAS TRYING TO
EXPLORE EARLIER WITH THE OIL
INDUSTRY REPRESENTATIVE MEAN IF. CALIFORNIA UM, STARTS TO SEE A
REDUCTION IN THE DEMAND FOR
GASOLINE. UM. WHAT IF ANY
IMPLICATIONS DO YOU SEE IN TERMS
OF, UH YOU KNOW? THE OIL
REFINING CAPACITY IN THE STATE
OF CALIFORNIA. IS HE GOING TO,
YOU KNOW, FURTHER CONCENTRATE.
UH THIS, UH. THEY THE PERCENTAGE
OF GASOLINE BEING, UH REFINED BY
A FEWER NUMBER OF REFINERIES, DO
YOU? DO YOU HAVE ANY, UH, ANY
PROJECTIONS IN TERMS OF WHERE WE
MIGHT BE HEADED? I WOULD. I
WOULD SAY THAT THE REFINERS KEEP
US RUNNING, YOU KNOW, PRETTY
CLOSE ON INVENTORY A ON AN
INVENTORY TO EMPTY, YOU KNOW,
LIKE, I THINK, 10 DAYS SUPPLY OR
SOMETHING LIKE THAT, AT ANY
GIVEN TIME, THEY HAVE THE
CAPACITY TO RAMP UP SUPPLY. THEY
CAN RAMP UP SUPPLY IN THEIR
REFINERIES IN WASHINGTON STATE,
WAS PREVIOUSLY MENTIONED. IF
NEED BE. THEY CAN RAMP UP SUPPLY
AND ANY THEY CAN TURN OVER
REFINERY AROUND AND LOTS OF
DIFFERENT PLACES AND MAKE
GASOLINE FOR CALIFORNIA. IT JUST
TAKES A TURNAROUND TIME AND
ENOUGH OF A MARKET TO BRING THE
GAS TO MARKET. SO I DON'T SEE
THAT AS A REAL ISSUE. UM I THINK
THAT, UH, THE REFINERS WILL KEEP
US RUNNING ON INVENTORIES THAT
ARE JUST RIGHT SO THEY CAN HIT
THE PRICE POINT THAT THEY WANT.
UM AND FOR THEM, IT'S ABOUT.
IT'S REALLY ABOUT MAKING SURE
THAT WE HAVE JUST ENOUGH SO THAT
SOMETHING GOES WRONG. THERE'S A
REFINERY OUTAGE THAT CAUSES A
SPECULATIVE CONCERN ABOUT THE
SUPPLY, WHICH DRIVES UP THE
PRICE, AND THEY'RE MAKING THE
GAS AT THE SAME. COSTS AND THEY
GET TO CHARGE MORE FOR IT. SO
THAT'S WHY WE'VE BEEN THE
SYSTEMS ALWAYS BEEN. WELL AS
ALWAYS HAS FOR THE LAST 10 15
YEARS OR AS LONG AS I'VE BEEN
LOOKING AT HAS BEEN, UM, HAS
BEEN RUNNING ON, YOU KNOW,
ALMOST JUST IN TIME INVENTORIES
WITH JUST WITH JUST A LITTLE BIT
MORE. I'D SAY 10 DAYS OR
SOMETHING, AND THAT THAT IS A
PROBLEM. UM THAT'S WHY THAT WE
THE IDEA OF THE STRATEGIC CARB
RESERVE FOR ONE OF A BETTER WORD
CAME OUT. IT JUST WAS RATHER
IMPRACTICAL TO ACCOMPLISH. UM,
BUT UM, I THINK THAT THE, UM I
THINK THAT THEY'RE FINDERS HAVE
A GREAT MARKET HERE. AND THEY
WILL KEEP SERVING DEMAND AS LONG
AS WE HAVE IT FOR THEM, AND I
DON'T THINK WE HAVE TO WORRY
ABOUT THEIR, UH, THEIR CAPACITY
TO MEET IT. WE HAVE TO WORRY
ABOUT A LITTLE BIT THE OPPOSITE
THING LIKE I WORRY THAT THE TWO
UM, THE TWO MET THE MARATHON
REFINERY GOING OFFLINE IN THE
PHILIPS REFINED DRIVE LONG ARE
GOING TO SHORT THE MARKET AS
GREAT THAT THEY'RE MAKING FOR
BIODIESEL. BUT WE HAVE A REAL
NEED FOR CARB FUEL. SO I WORRY
MORE ABOUT THE OPPOSITE. AND WE
HAVE SEEN REFINERIES GO OFFLINE
. WE'VE SEEN MEMOS. THERE'S AN
INFAMOUS MEMO OF EXXON AND
ANOTHER COMPANY WORKING TO KEEP
A REFINER FROM OPENING REFINERY
BY ADVOCATING HIGHER
ENVIRONMENTAL QUALITY STANDARDS
TO SO THAT THEY COULDN'T MEET
HIM TO OPEN THE REFINERY. THERE
THERE. THERE IS A LONG
DOCUMENTED EVIDENCE ABOUT
REFINERS WORKING TO KEEP THE
MARKET FROM HAVING MORE PLAYERS.
UH AND I DON'T THINK WE'RE GOING
TO CHANGE THAT, UNFORTUNATELY,
WHICH IS WHY I THINK THE BEST WE
CAN DO IS POLICE THAT NO,
ACTUALLY, I WAS, I SHARE YOUR
CONCERN ABOUT THE MARATHON AND
PHILLIPS 66 BEING PERHAPS AN
INDICATION OF A TREND OF FEWER
REFINERS, CONSOLIDATING, UH
GREATER CONTROL OVER OVER THE
GASOLINE, NOT MARKET IN ACCIDENT
LIKE THE EXXON REFINERY AT ONE
BIG REFINERY AND WE'RE BACK TO
WHERE WE YOU KNOW, WE DON'T WANT
TO BE AGAIN SO THAT'S WHY I SEE
CONSOLIDATION IS THE PROBLEM
BECAUSE AS AS LONG AS I'VE BEEN
SAYING, THIS IS IT'S ONE
PERMUTATION OR ANOTHER. THEY
ALWAYS FIND A WAY TO MAKE THE
MONEY IF THE BRANDED UNBRANDED
DEAL IF IT'S KEEPING, THEY KEPT
SUPPLY OUT IN THE WAKE OF
TORRANCE FOR A LONG TIME WE WERE
THERE WAS AN L. A TIMES ARTICLE
ABOUT THIS MYSTERY EXXON SHIP
FLOATING OUT OUT WITH WITH WITH
CARB FUEL IN IT. OUT FORGET
WHERE IT WAS LIKE AN INDONESIAN
AND THEY DIDN'T BRING IT IN, AND
WE BASICALLY DID TRACK SHIP LOGS
OF THE FACT THAT THERE WAS A
SHIPMENT OF CARBON FUEL NEVER
CAME TO CALIFORNIA. AND I MEAN
THERE'S ALL SORTS OF WAYS, BUT
THE PROBLEM IS, I DON'T HAVE THE
ABILITY TO POLICE THIS INDUSTRY
AND WHAT I'M SAYING IS, WE NEED
SOMEONE IN THE ATTORNEY
GENERAL'S OFFICE IN REAL TIME
WHOSE JOB IT IS. TO POLICE, THE
INDUSTRY AND THAT WAY LIKE IF
WE'RE SHORT ON SUPPLIES, SOMEONE
SHOULD BE ASKING. WHAT ARE WE
GOING TO DO TO GET SUPPLY IN THE
C E C MAY ASK THAT QUESTION, BUT
THEY DON'T ASK IT THE SAME WAY.
THE ATTORNEY GENERAL ASSET, UM,
AND WE NEED SOMEONE YOU KNOW
WHO'S GOING TO GO PUBLIC AND DO
THINGS TO MAKE SURE THAT THE
REFINERS KNOW THEY HAVE THE
OBLIGATION THAT BRINGS SUPPLY IN
WHEN REFINERIES DOWN. THANK YOU.
WE WE REALLY APPRECIATE YOUR
TIME TODAY. THANK YOU FOR
LOOKING INTO THIS. I'M GLAD
YOU'RE DELVING. I THINK. RIGHT?
I DON'T KNOW IF WE HAVE ANY
GENERAL COMMENTS, BUT WE NOPE.
OKAY, SO WHY DON'T WE MOVE TO,
UH OUR LAST ITEM PUBLIC
COMMENTS. DO WE HAVE ANY
SPEAKERS THAT ARE HERE THAT
WOULD LIKE TO COMMENT. THIS IS
YOUR OPPORTUNITY. ALL RIGHT.
WELL UM, THANK YOU AGAIN TO ALL
OUR SPEAKERS REALLY APPRECIATE.
I'LL SAY IT AGAIN. YOUR PATIENTS
WITH APPROPRIATIONS TAKING SUCH
A LONG TIME AND I WANT TO THANK
UM ALL OUR STAFF ARE HELPING TO
PUT THIS HEARING TOGETHER. YEAH
AND IF THERE'S NO FURTHER
COMMENTS, WE WILL ADJOURN THIS
MEETING.