Oil and Gas Profits Amid Senate Bill 1137

By Shuxuan Zhong  

SACRAMENTO, CA – The oil and gas industry has spent more than 34.2 million dollars in the 2021-22 legislative session. Surprisingly, according to an analysis of oil industry profits, the profits of the eight major oil companies in the second quarter of 2022 are 235 percent of the same quarter in 2021.          

Industries lobbied California legislators to change the law for higher profits. They are against Senate Bill 1137, which would “prohibit new oil and gas wells within 3,200 feet of homes, schools, nursing homes, and hospitals and require companies to adopt health, safety, and environmental requirements.” The government passed the measure in 2022. However, the oil and gas industries spent 20 million dollars to hold a 2024 ballot referendum which caused the government to not implement the measure until 2024. In 2022, most bills opposed by oil and gas companies have not passed, such as “a proposed ban on drilling off the California coast and diving of billions in fossil fuel industry holdings from state pension funds.”           

According to major oil companies that have reported their 2022 profits, Chevron’s profit is 36.5 billion, which doubles its 2021 profits. Marathon’s annual profit is 14.5 billion, and its Q4 profit of 3.32 billion surged 331 percent from the previous year. In 2022, high oil prices made a lot of money: over the past 20 years, California refiners have earned an average profit of 35 cents a gallon, according to consumer advocacy groups. This year, profit margins jumped to 85 cents a gallon for Chevron and 75 cents for Marathon. “Today’s high fossil fuel prices have generated an unprecedented windfall for producers,” the Paris-based agency said in its World Energy Outlook released this week. For sky-high profits, the legislature is considering action.           

Larry Harris is a professor and the Fred V. Keenan Chair in Finance at the USC Marshall School of Business. He claims, “To reduce gas prices, Gov. Gavin Newsom has proposed a tax on the oil industry’s excess profits, but that won’t necessarily help. California lawmakers should instead take a closer look at how refiners use maintenance shutdowns for their benefit.” Admittedly, part of the reason for the rise in oil prices is Hungry Russell and the war in Ukraine. Oil prices are also higher in California because of the “isolated nature of the state’s transportation fuel market, special gasoline formulations to reduce air pollution, environmental program costs and taxes.”           

According to the International Energy Agency, by 2022, the net revenues of the world’s oil and gas producers will double from 2021 levels to reach a new high of four trillion dollars. Darren Woods, Exxon’s chief executive, said the company is working hard for “people around the world and here in the U.S. to get affordable and reliable energy.” At the same time, he also claimed that “We recognize the pain high prices cause.” The price of oil is mainly related to demand. According to Economic Cycle, “I tell my guys nothing goes up or down forever,” said Trent Latshaw, president of Latshaw Drilling, a significant rig operator in Texas and Oklahoma.

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