Holding Big Oil accountable? Newsom has companies counting their big profits | Opinion

As the biggest oil refiners in California posted a combined $33 billion in profits over three summer months as prices spiked, Gov. Gavin Newsom says, “We’re continuing to hold them accountable with the new tools from our price-gouging law.”

By all indications, the accounting by the companies has correctly identified the profits. Whether Sacramento has truly found a way to hold the companies accountable for unreasonable profits seems questionable at best.

Opinion

As the oil companies were busy tabulating their profits, CalMatters was calculating the biggest spenders on lobbyists so far this year to influence the governor and the California Legislature. It was the oil industry, yet again. It appears to be money very well spent.

The same held true last year. According to The Bee’s Ari Plachta, the oil companies spent $34 million on lobbying in Sacramento while making $72.5 billion in annual profits.

What an extraordinary return on investment. The industry spends five-one-hundredths of 1% of its profits on lobbying in Sacramento. This paltry percentage makes it the largest lobbying machine in town. And the oil industry easily escapes an attempt earlier this year by Newsom to place an immediate cap on large profits.

These publicly traded companies, like any, are accountable to their shareholders. And they appear to be doing an admirable job of who they are truly accountable to.

The governor’s political posture, a clever one, is that he is mad as hell and taking it to the industry. He boasts of the power of the new “watchdog” the Legislature did manage to create this year, a new wing of the California Energy Commission that tracks monthly refinery costs. He is supporting September’s lawsuit by Attorney General Rob Bonta against the industry for allegedly hiding for years the global-warming qualities of oil’s products.

Meanwhile last month, the average price of gas in California was $5.765 a gallon, according to the Automobile Association of America. The national average was a full two dollars less, at $3.683 a gallon.

It’s easy to blame the oil companies. But there is no getting around the old-fashioned economics of supply and demand.

California has chosen to restrict supply by relying on an aging fleet of oil refineries in the state. California further restricts supply by producing its own cleaner-burning formula of fuel. Meanwhile, the state has nearly 18 million vehicles, nearly one set of wheels for every two residents.

Modest interruptions to supply have repeatedly led to price spikes at the pump. As an example, a single transaction on the spot market in mid-September led to a 50-cent jump in gasoline’s price in California, according to the new watchdog, which characterized this transaction as “unusual.”

The reform legislation passed earlier this year gives this watchdog agency within the Energy Commission the theoretical power of setting a cap on high profits or levying a penalty. But that army of lobbyists did an admirable job of spooking the Legislature about making California’s supply-demand problems even worse by messing with the market. If a single spot market transaction can wreak havoc with gas prices in the state, imagine what could happen with a watchdog who first brandishes its teeth.

The only way to win this is on the demand side, by lowering it. California’s plan to convert new cars to an all-electric fleet by 2035 is a big step.

In the meantime, as the governor travels about the state, he is escorted by a gas-guzzling fleet of California Highway Patrol vehicles, doing his part to keep demand high. Big Oil will forever win until the need for the product gets small.