Elias: Blame oil industry, not government, for California’s high gas prices

Academics have known for many years the potential for conflicts of interest when they conduct studies or write reports on products or companies for which they have consulted. That’s why they almost always disclose conflicts.

There is also no doubt of the strong link between the Saudi Aramco oil company and California’s biggest oil refiner, Chevron, known as Standard Oil of California when it co-founded (with Texaco and two others) just plain Aramco, the Saudi Arabian company’s name when Americans got it going in the 1930s.

Fast-forward to this year in mid-April, when television networks like ABC, CBS and Fox, plus Forbes magazine covered a study by Michael Mische, an associate professor at the University of Southern California’s Marshall School of Business, that predicted gasoline costing $8 a gallon in this state very soon.

There is no such thing as gas price gouging in California, Mische contended. As the New Jersey-based Forbes reported, “the average price of a gallon of regular unleaded (gasoline) in California was $4.67 — more than 55% above the national average.”

Forbes quoted from Mische’s report entitled “Ensuring California’s Gasoline Security for the 21st Century.” Forbes reported that it “lays out a clear and compelling case for why California fuel costs are so high,” the reasons being structural, state policy driven and “deeply embedded in how the state regulates, produces and distributes gasoline.”

It doesn’t help that California refineries ship large amounts to neighbor states. Mische blamed environmental regulations, the state’s cap-and-trade program and seasonal gas blends as big causes of California prices, along with high taxes and fees, frequent refinery closures, declining in-state oil production and the fact that no pipelines bring gas here from other states.

Other studies have indicated such factors account for about a third of the price differential. Mische denies oil companies collude to raise prices, despite phenomena like the huge price hikes of February 2023, when a single refinery outage shot pump prices up about $2.50 per gallon overnight — not just for the refiner with the outage but for every brand of gas. The state then passed new laws aimed at punishing such gouging, and no new similar incidents have happened since then.

Forbes reported that Mische included a disclaimer saying he “has not received any special compensation and has no promise or anticipation of future compensation for the work presented … .” That was vague about the recent past. The upshot of Mische’s report is that the new state laws are pointless because there is no gouging.

This may surprise the more than 1 million Californians who received $21.65 apiece from the state in mid-May after a settlement reached by state Attorney General Rob Bonta with three gasoline trading firms that allegedly manipulated gas prices in 2016 during another refinery outage.

Now comes Jamie Court, the president of advocacy group Consumer Watchdog, which has documented how oil company profits set records whenever California gas prices spike. Court obtained a copy of Mische’s resume and discovered the professor’s private consulting firm listed the Saudi Public Investment Fund, co-owner of Saudi Aramco, as a major client.

That company and Chevron still have strong ties even though the Saudi government and its fund took ownership of Aramco decades ago. The two companies also partner on advanced refinery technology. So there’s a direct link between California’s largest oil refiner and a major Mische client. This, of course, debunks Mische’s disclaimer about impartiality.

“There is no question that the policies Mische advocates (to the Legislature) will … benefit his client,” Court wrote in a letter to USC officials.

Mische responded to an emailed query asking why he failed to disclose his tie to Saudi Aramco in the recent paper, saying he would provide answers to the emailed questions shortly. The answers did not arrive. Policies he recommends include tax subsidies and other giveaways to oil refiners and drillers.

“Sacramento lawmakers (were) unaware of Mische’s ties because of his failure to disclose them,” said Court. “There is no question Mische’s work would be looked at differently if people knew … . In failing to (disclose), he dishonors USC and its tradition of ethics.”

The bottom line: The decades-long pattern of industry-wide price hikes when only one refinery has an outage makes it clear some kind of collusion and price gouging has long been at work.

Email Thomas Elias at tdelias@aol.com, and read more of his columns online at californiafocus.net.