California settles price-fixing claims against fuel traders for $50 million

(CN) — California Attorney General Rob Bonta on Wednesday announced a $50 million settlement with two gasoline trading firms accused of price-fixing.

Bonta sued the two firms — Switzerland-based Vitol, Inc. and South Korea-based SK Trading International — in 2020, accusing the two corporations of manipulating the price of gasoline through a series of trades on the futures market, following an explosion at an oil refinery in Torrance in 2015. The two companies used traders who were friends with each other to collude and cause large spikes in the oil market. The market manipulation may have cost California drivers as much as $150 million in 2015 alone.

According to the complaint, the two firms “may not have created the supply disruption that impacted California starting in February 2015, but they exacerbated the effects of that disruption to illegally enrich themselves at great cost to California consumers.”

According to the American Automobile Association, California has the highest average gas prices in the nation, and by some distance. The state averages $4.78 per gallon — more than a dollar higher than the national average of $3.54, and nearly 10 cents higher than the second most expensive state, Hawaii. Some of the discrepancy can be chalked off to taxes — California has the highest gasoline tax in the country. The state also has environmental regulations that drive up the cost, and requires a special blend of fuel that has lower emissions that only 11 of its refineries can produce.

Some have argued those two reasons don’t fully explain such a large price difference, which they have dubbed the “Mystery Gasoline Surcharge.” The man who coined that term, economist Severin Borenstein, has argued that part of the mystery can be explained by market manipulation and price gouging.

“Petroleum companies should not get to reap mass profits out of the pockets of hardworking Californians through illegal market manipulation,” Bonta said in the announcement of the settlement. “Market manipulation and price gouging are illegal and unacceptable, particularly during times of crisis when people are most vulnerable.”

California drivers can apply to receive a small part of the $50 million settlement by going to the website www.calgaslitigation.com, though it has not yet been set up.

Representatives for Vitol and SK Trading did not immediately respond to emails requesting a comment on the settlement.

In 2023, California lawmakers passed Senate Bill X1-2 which gave the California Energy Commission the power to penalize oil companies for price gouging.

“When oil companies manipulate markets to line their own pockets, California will hold them accountable, and I commend my former colleagues in the Department of Justice on seeing this landmark case through to a successful conclusion,” said Tai Milder, director of the Division of Petroleum Market Oversight, in a written statement.“Today, with Senate Bill X1-2 — the Gas Price Gouging and Transparency Law — California has even stronger tools to monitor the oil industry, expose bad actors, and protect consumers. These tools make it harder for industry actors like these firms to engage in this kind of misconduct in the first place."

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