In battle with Big Oil, Newsom rips into Valero’s 500% rise in profit amid soaring gas prices
The two sides spent last week sparring over the California gas prices that have climbed more than 400% since 2008. Newsom’s press secretary, Dan Morain, took a jab at Valero, which agreed to pay $8.3 billion to settle allegations that it manipulated the market to drive up the price of gasoline.
The California Public Utilities Commission slapped Valero with an $800 million penalty in January for price-fixing, the largest in the commission’s history. Valero’s stock jumped 23% in a single day after the agency announced the fine. That doesn’t factor in the stock’s recent surge as the company raised its dividends from $0.0125 to $0.0075 last year.
Valero is only one of many companies with oil fields that have seen prices soar in recent years. The rise has taken many companies by surprise, forcing them to make large investments in fuel efficiency, cleaner energy and solar power.
For many companies, the increase has been a double-edged sword. Gas prices have helped them get more people interested in their products, but they’ve also become a source of revenue. Their share in the state’s economy has gone from 20% to 36%, according to Cal-Government.
“Companies are feeling a lot of pressure as gas prices have gone up. They were making $100 or $150 an acre in the past,” said Matt Williams, president of Williams & Company. “The fact is that oil prices have fallen like a rock. If we were in a world in which oil prices were $90. or $100. a barrel, we would be taking the opposite tack. You’d take the biggest action you have and then make your profit from the difference in price between where you make $100 or $150 a acre now and $90. or $100. a barrel.”
In the past, oil prices were so low that energy companies were making plenty of profit regardless of how high gas prices went.