The companies allegedly took advantage of 2015 Torrance Refinery explosion to launch scheme to raise gas prices statewide for their own profit
May 5, 2020 - SACRAMENTO – California Attorney General Xavier Becerra on Monday announced a lawsuit against two multinational gasoline firms for allegedly manipulating California’s gas prices and costing consumers more at the pump. The lawsuit alleges that Vitol, Inc. (Vitol) and SK Energy Americas, Inc., along with its parent company SK Trading International (SK), took advantage of the market disruption following a February 2015 explosion at a gasoline refinery in Torrance, California to engage in a scheme to drive up gas prices for their own profit. In the complaint, Attorney General Becerra alleges that Vitol and SK violated California’s antitrust laws and engaged in unlawful, unfair, and fraudulent practices that raised the price of gasoline in the state.
“Californians are accustomed to casting suspicious eyes at gas pump prices. Whether prices are low or high, try to convince an American that someone isn’t gaming the system. I won’t, because today I’m taking two multinational gas companies to court to prove they manipulated gas prices to illegally enrich themselves at the cost of California consumers,” said Attorney General Xavier Becerra. “Price gouging, whether it’s toilet paper or gasoline, stinks. It’s greed that hurts grandma, the Good Samaritan and everyday Americans. Every once in a while we get to fight back. That’s what today’s lawsuit is about. No one is above the law.”
In February 2015, California’s gasoline supply experienced serious disruptions as a result of an explosion at a large gasoline refinery complex in Torrance, California. The explosion left the refinery in need of extensive repairs, curtailing production at the Torrance facility which normally produced 10 percent of the state’s supply of gasoline. This disruption caused an undersupply of refined gasoline within the state. Vitol and SK took advantage of the disruption by organizing an anti-competitive scheme to drive up the price of gasoline and their own profits.
The lawsuit alleges that Vitol and SK engaged in manipulative trades to increase their profits in violation of the Cartwright Act and California’s Unfair Competition Law. These trades were selectively reported to the Oil Price Information Service, LLC (OPIS) – the most widely used gasoline reporting service in California – in order to drive up the benchmark prices of Regular and Premium gasoline in OPIS’s Spot Market Report. The companies, through two traders who were friends and former colleagues, colluded to drive up the price of OPIS-reported trades during pricing windows for large sales in order to increase the price of gasoline in the state to their profit. The firms engaged in unusual and otherwise irrational market-spiking trades with each other and third parties that had the effect of driving up prices prior to large trades – and they were successful in doing so, artificially moving and inflating the price of Regular and Premium gasoline so effectively that the prices moved or stayed unaccountably higher than the supply and demand prevailing at the time of the pricing windows. By driving up benchmark prices, the companies were able to sell their own product at a higher price, and inflate costs for consumers.
The complaint also alleges that the firms not only took steps to engage in specific trades for the purpose of inflating the published price on the CA spot market, they also executed certain trades to hide the scheme and share profits. The two companies tried to hide the nature of their market manipulation scheme by executing and facilitating trades that were not reported to OPIS and effectively negated the volume of gasoline purportedly exchanged in the reported trade. They also attempted to limit or eliminate market risk on their reported trades to OPIS. Vitol and SK also shared the illegally-acquired profits of the scheme amongst themselves. The lawsuit alleges that Vitol and SK’s actions illegally suppressed competition within the gasoline market and forced California consumers to pay more for gasoline.
Attorney General Becerra has made it a priority to protect consumers and to keep California markets competitive. In June 2019, Attorney General Becerra filed a lawsuit to block the proposed merger of telecommunication companies T-Mobile and Sprint over concerns it would result in fewer choices and higher service costs for consumers across the state and announced a settlement resolving that litigation in March 2020. In December 2019, Attorney General Becerra secured a historic $575 million settlement against Sutter Health, the largest hospital system in Northern California, for anticompetitive practices that resulted in higher healthcare costs for Northern Californians. During that same month, he also announced a $23 million settlement involving 52 auto parts manufacturers for antitrust law violations that arose from illegal bid rigging in response to requests for bids from automakers. In 2017, Attorney General Becerra sued Valero Energy Corporation to stop the oil giant from acquiring the last independent petroleum distribution terminal in Northern California and obtained a final judgement prohibiting the transaction.
A copy of the complaint can be found here.
Source: CA. DOJ