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Gas company Valero announces more than 500% profit increase amid sky-high gas prices

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CBS News Los Angeles Live

While many in Southern California are dealing with astronomically-high fuel prices, gas companies like Valero continue to increase their profit margins.

"Horrible, horrible," said taco truck owner Matthew Urquilla. "We sell al day and still don't make enough money."

Urquilla stopped at a North Hill Valero gas station to fill up the generator on his taco trailer before he heads to work. In a single day, he will spend about $135 in order to fill the power supply that his business depends upon.

"They don't care," said Urquilla. "They all make money on us. We just have to fork out every single thing we make. They can relax and take vacations and all we do is work, work, work."

Valero becomes the newest company to announce a big boost to its profit margins thanks to high gas prices. In the third quarter of the fiscal year, the energy company announced a more than 500% increase compared to last year, a feat that has drawn the ire of Gov. Gavin Newsom.

"Valero's new profits are out," Newsom tweeted. They experienced a 500% increase in profits this year. So why are gas prices so high? Time to hold these oil companies accountable."

Head of the UC Berkley's Energy Institute Severin Borenstein, who has been tracking gas prices since the 1980s, attributes the increase in fuel costs to a lack of competitive markets. 

"What we really rely on is having competitive markets," he said. "And unfortunately due to mergers and shutdowns, our market is not very competitive anymore."

Additionally, and more importantly, the closures of several refineries last month exacerbated the situation by creating a dramatic supply shortage. 

"The supply shortage is definitely what's causing the high prices," said Borenstein. "That doesn't mean they aren't doing something wrong either. We just don't know whether that supply shortage is entirely just bad luck or exacerbated by some firms who are holding product off the market to push the price higher."

Essentially, Borenstein firms don't have the incentive to produce more gas since there are only a handful of refineries and drivers are willing to pay the high costs.

"What I don't know is whether those refineries really did everything they could to increase output as fast as possible because it may not be in the economic interest of these refineries," he said. "Because they're making so much money off the quantity they are selling." 

Borenstein suggests California launch a thorough investigation into the refineries and the distribution process, where he claims consumers have been charged billions of dollars over several years.

"Every day, we don't sleep, we just work to pay gas  — that's about it," said Urquilla.

However, prices are slowly dropping and experts are advising consumers to shop around for cheaper alternatives to force expensive stations to drop their rates.

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