California Sues Gasoline Trading Companies for Price Manipulation

Lawsuit against Vitol and SK alleges companies took advantage of 2015 supply disruption
Photograph: Shutterstock

SACRAMENTO, Calif. — The state of California is suing two multinational gasoline trading companies for allegedly manipulating the spot market for gasoline and artificially increasing pump prices during a major refinery outage.

In a lawsuit announced May 4 by California Attorney General Xavier Becerra, the state accuses Vitol Inc. and SK Energy Americas Inc. and its parent company SK Trading International (SK) of taking advantage of the market disruptions that followed an explosion at ExxonMobil’s Torrance, Calif., refinery, violating state antitrust laws and committing unlawful, unfair and fraudulent practices that resulted in higher gasoline prices. Vitol Inc. is a Houston-based trading firm owned by Netherlands-based Vitol Group, and Houston-based SK Energy Americas is a subsidiary of Korean energy trading firm SK Trading International.

In February 2015, an explosion forced the Torrance refinery, which produced about 10% of the state’s gasoline, to run at limited capacity for more than a year. (ExxonMobil is not accused of wrongdoing; the refinery was since acquired by PBF Holdings Co. LLC, now operating as Torrance Refining Co.) Fuel prices jumped to their highest point in 18 months after the explosion, Reuters reported at the time.

The lawsuit alleges that, during that time, traders at Vitol and SK coordinated to “selectively” report their trades to the Oil Price Information Service (OPIS), the most commonly used gasoline reporting service in California, to drive up the benchmark prices of regular and premium gasoline in OPIS’ Spot Market Report. In doing so, Vitol and SK created the impression among other market participants of strong demand and as a result could sell their product at a higher price, according to the lawsuit.

This ultimately increased costs for consumers, the lawsuit alleged. The combination of price manipulation and anti-competitive practices may have increased the price of gasoline by more than 1 cent per gallon, which could have raised $150 million in profits for the two companies, the lawsuit alleges.

“Unfortunately for California consumers, defendants Vitol and SK participated in a scheme to drive up and manipulate the spot market price for gasoline so that they could realize windfall profits on these large contracts to deliver gasoline and gasoline blending components,” the lawsuit said.

In a statement, Vitol said the lawsuit “lacks merit.”

“Following the 2015 explosion at Exxon’s Torrance, Calif., refinery—which reduced gasoline production in California—Vitol aided the California markets by importing gasoline into the state, supplying refiners and other companies at competitive market prices, and managing risk using routine commercial practices,” the company said. “Vitol’s actions were consistent with customary market practice and fully compliant with all applicable laws.”

The legal action follows a January 2019 request from several California legislators to investigate possible market manipulation of gasoline prices in California. They cited a 2017 report issued by the California Energy Commission that found retail gasoline prices in California had an unexplained, “hidden surcharge” compared to the rest of the country, even after accounting for the state’s gasoline tax and higher regulatory costs. The legislators charged that the higher gas prices could be the result of illegal price manipulation by the oil industry.

While the price-manipulation allegations in the lawsuit against Vitol and SK are not connected to the COVID-19 pandemic, Becerra told reporters in a May 4 press conference that his office has received “several thousand” complaints about price gouging, the Los Angeles Times reported.

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