Valero Energy, one of the largest oil and gas companies in the United States, forcefully responded last week to false accusations of price gouging.
What is the background?
On Sept. 30, the California Energy Commission wrote executives at five oil and gas companies demanding answers for sharp price increases at California gas pumps.
The letter implicitly accused gas and oil companies of profiteering and claimed the "oil industry owes Californians answers" for not having "provided an adequate and transparent explanation for this price spike, which is causing real economic hardship to millions of Californians."
How did Valero respond?
Scott Folwarkow, vice president for state government affairs at Valero, made it clear that oil and gas companies are not responsible for California's spike in gas prices.
The reason California is experiencing a spike is a problem unique to California, Folwarkow thoroughly explained.
"For Valero, California is the most expensive operating environment in the country and a very hostile regulatory environment for refining," he wrote in response to the commission.
"California policy makers have knowingly adopted policies with the expressed intent of eliminating the refinery sector. California requires refiners to pay very high carbon cap and trade fees and burdened gasoline with cost of the low carbon fuel standards," he explained. "With the backdrop of these policies, not surprisingly, California has seen refineries completely close or shut down major units. When you shut down refinery operations, you limit the resilience of the supply chain."
Moreover, California is "largely isolated from fuel markets of the central and eastern" U.S., and state regulations mandate "a unique blend of gasoline," which makes California "the most challenging market to serve."
And then there are the climate policies.
"California has imposed some the most aggressive, and thus expensive and limiting, environmental regulatory requirements in the world," Folwarkow wrote. "California polices have made it difficult to increase refining capacity and have prevented supply projects to lower operating costs of refineries."
On Friday, Gov. Gavin Newsom threatened oil and gas companies with new taxes.
"I'm calling for a Special Session to address the greed of oil companies. Gas prices are too high. Time to enact a windfall profits tax directly on oil companies that are ripping you off at the pump," Newsom tweeted.
However, there is no evidence that oil and gas companies are ripping off customers.
Oil and gas companies, after all, do not determine the price per gallon of gas at the pump. That is up to the companies and businesses that own individual gas stations.