Several gasoline industry heavyweights find themselves as defendants in a proposed class action lawsuit out of California federal court. The 55-page complaint charges that the companies collectively operate a scheme to manipulate and maintain gas prices in California at supracompetitive rates.
“For years Californians have seen spikes in gasoline prices, seemingly untethered to normal market forces of supply and demand, and an average price per gallon substantially above the national average. An analysis of the now available data shows that [these] increased gas prices were not the result of California's market structure, but instead are the result of [the defendants'] anticompetitive conduct.”
The defendants below have used their significant leverage to keep gas prices in California “well above the U.S. average,” the lawsuit says:
BP West Coast Products LLC;
Chevron U.S.A. Inc.;
Tesoro Refining & Marketing Company LLC;
Equilon Enterprises LLC:
Exxon Mobile Corporation;
Valero Marketing and Supply Company;
Alon USA Energy, Inc.
According to the lawsuit, Californians pay more than $10 billion extra on gasoline compared to other drivers nationwide, with the defendants’ profits hitting “obscene levels” at their refineries in the state since 2015. That year, gas prices in California reached $1.50 per gallon above the national average, the suit says, pointing out that 2015 was a pivotal year in the defendants’ alleged conspiracy.
A spike in oil prices was blamed on an explosion that occurred at a refinery in Torrance in February 2015, the suit says. According to the lawsuit, even after the refinery came back online, California consumers continued to pay “an unexplained surcharge” on gasoline. This pattern of gas prices in California falling out of step with those across the country extends back to early 2012, the lawsuit says, when the state saw two substantial price jumps that caused drivers to pay “more than $4 a gallon” while prices reportedly dropped for the rest of the country.
Cited in the lawsuit is a report released in June 2012 by McCullough Research that explains the highly concentrated gasoline industry is particularly sensitive to market fluctuations and therefore “primed for manipulation.” The industry, according to the report, is so vulnerable that “a single actor or a very few actors together can set the price in the market” and so concentrated that “the timing of the various unscheduled maintenance shutdowns in the California refineries in early 2012 became suspect.” From the complaint:
“The reason for the spikes in gasoline prices is now evident. The fire and shutdowns were cover for the refiners' scheme to create a false impression of a shortage in order to force prices up and reap windfall profits.”
A complete walk-through of the defendants’ alleged conspiracy can be found in the complaint below.