A $50 million settlement was announced by the California Attorney General’s Office on Wednesday in response to accusations that two gasoline trading companies conspired covertly to manipulate gasoline prices in Southern California in 2015.
San Francisco Superior Court Judge Y.S. Cheng is expected to hear the deal on August 2 in order to finalize it. The settlement, which is pending the judge’s approval, resolves a four-year legal battle involving the Attorney General, Korea-based SK Energy Americas, Netherlands multinational energy and commodity trading corporation Vitol, and SK’s trading division.
Over two million papers were exchanged and over fifty depositions were turned in by the parties at that time. The disagreement stems from a lawsuit that the state filed in May 2020, alleging that Vitol and SK took advantage of market conditions following an explosion at a refinery in Torrance that shut off around 10% of the state’s gasoline supply.
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According to the lawsuit, the businesses allegedly participated “in a scheme to drive up gas prices for their own profit” by stifling rivalry in the gas market, which raised consumer prices.
The lawsuit charged Vitol and SK with conspiring to drive up the cost of large quantities of gas sold in California’s fuel market by selling tiny amounts of gas at high prices. As per the agreement, Vitol and SK are required to pay $37.5 million to the Attorney General’s office and $12.5 million in civil penalties under California’s Unfair Competition Law.
The gasoline trading market in California is no longer served by any company. Attorney General Rob Bonta stated in a statement that “price gouging and market manipulation are illegal and unacceptable, particularly during times of crisis when people are most vulnerable.” By 4 p.m. on Wednesday, Vitol and SK had not responded to The Union-Tribune’s request for comments on the settlement. Neither Vitol nor SK admit any legal fault in the deal.
According to the Attorney General’s Office, between February 20 and November 10, 2015, 10 counties in Southern California, including San Diego County, were impacted by the increased cost of retail gas. Customers who bought gas during that time frame could be eligible to get a share of the $37.5 million that Vitol and SK paid, according to the settlement.
The Attorney General’s Office claims that the $37.5 million is presently in escrow and will be released if and when the judge approves the arrangement. Following that, a procedure will be implemented to inform clients of how to submit claims and obtain their individual portions of the $37.5 million settlement.
Notifications will include mailing postcards to families and publishing a link where clients can submit claims, per the settlement.
The $12.5 million in civil fines will be paid to legal expenditures related to launching the action against Vitol and SK, as well as to a fund that supports the Unfair Competition Law. During the litigation, an expert consulted by the Attorney General’s Office calculated that the increased cost of gasoline in 2015, which was ascribed to Vitol and SK, was $127.8 million.
However, the legal agreement from the AG’s office stated that there were “a number of challenges and unsettled legal issues” that might lessen Vitol and SK’s financial culpability. The office pointed out the “difficulty of piecing together the actions of individuals nine years ago” along with the “inherent risk of putting on a jury trial.” “The negotiated Settlement represents the best outcome for consumers,” the Attorney General’s Office stated, taking those aspects into account.
Long a contentious political issue in California, the high cost of gas has recently gained attention after consumers witnessed the average price of normal gasoline surge beyond $6 during spikes in 2022 and 2023.
Senate Bill X1-2 was passed by the Legislature last year at the urging of Governor Gavin Newsom. Called the “nation’s first price gouging law,” according to the governor’s office, SB X1-2 established the Division of Petroleum Market Oversight to keep an eye on the state’s petroleum and gasoline firms.
Following the announcement of the settlement on Wednesday, the division’s director released a statement.
“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,” Tai Milder stated.
Refineries are required by SB X1-2 to submit daily data on the market and imports, as well as maintenance programs that are planned. Furthermore, the bill grants the California Energy Commission the power to impose penalties on oil firms in the event that they surpass a “maximum gross refining margin.” It’s still unclear exactly what would set off the punishment, which will be the first of its type in the United States, and when it will go into effect.
