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As gas prices hit another record, judge dismisses class-action lawsuit accusing oil companies of colluding

The news keeps getting worse for California drivers.

In a week when the price of a gallon of gas rose for the 18th consecutive day, notching an all-time record, a federal judge in San Diego has dismissed a class-action lawsuit that accused major oil companies of colluding to keep fuel costs artificially high.

The decision was published by U.S. District Court Judge Jinsook Ohta late last week, seven months after lawyers representing the owners of a North County gas station squared off in her courtroom against some of the largest oil conglomerates in the world.

In short, the judge ruled the plaintiffs could not establish that communications between traders from rival companies helped executives raise the cost of gasoline for California consumers.

“While defendants would certainly have an economic motive to act in the manner alleged by plaintiffs, that alone cannot establish an antitrust violation,” the judge wrote in her 103-page ruling.

“Antitrust wrongdoing consists of concerted action pursuant to an illegal agreement, not independent profit-maximizing actions based on market conditions,” she said.

The decision, which affirmed a tentative ruling handed down ahead of the February hearing, comes as the average fuel price in San Diego has risen to a record $6.42 per gallon.

As of Tuesday, the area’s average cost for a gallon of gas was up about 3 cents since Monday, 52 cents over the past week and $1.18 in the past month, according to the running AAA analysis of nationwide fuel costs.

In February, when dozens of attorneys crowded into Judge Ohta’s courtroom to argue their respective positions on allegations of price-fixing, the average cost of a gallon of gas in San Diego was $4.75.

Attorneys representing Persian Gulf Inc., the filling station in Escondido that is serving as lead plaintiff in the class-action litigation, did not immediately respond to a request for comment on the judge’s ruling.

However, the plaintiffs’ counsel has waged the legal battle since 2015, so a request for review by the U.S. 9th Circuit Court of Appeals would not be a surprise.

The defendants, entities that are owned by some of the richest energy corporations on the planet, include BP, Chevron, Shell Oil, ExxonMobil, Phillips 66, Alon USA and Tesoro.

In court filings, the plaintiffs’ firm Robbins Geller Rudman & Dowd argued that the oil companies coordinated their respective refinery operating and maintenance schedules, which affected how much gas was produced and ultimately cost consumers more than $20 billion in recent years alone.

“They worked together to discourage imports, increase exports, keep their refineries running under capacity and manipulate prices through their trading activity,” they wrote in a court filing last year.

“Defendants have reaped billions of dollars in profits from their scheme, and the massive price spike seen after the Torrance explosion has never returned to normal,” they added.

Several of the defendants reached this week declined to comment on the ruling; others did not respond to requests for interviews. An ExxonMobil official issued a brief statement Tuesday.

“We agree with the decision of the court,” spokesperson Todd Spitler said by email.

In a litany of court filings dating back years and during the February hearing on the motion for summary judgment, oil company attorneys denied each of the allegations put forward by Persian Gulf Inc. and its lawyers.

“After years of costly discovery, plaintiffs have zero evidence of this claimed agreement” between oil companies, they argued in briefs filed in advance of the hearing last spring.

“Their attempts to infer a conspiracy … fall short of satisfying the governing legal standard,” the defense team said. “The conduct they identify is entirely consistent with non-conspiratorial, independent decision-making by individual defendants.”

The lawsuit alleged that, among other practices, the oil companies signed “exchange agreements” between themselves that allowed the firms to move gas back and forth in ways that kept prices higher than they might be otherwise.

Oil companies rejected the assertion that the agreements were designed to take advantage of pricing when refineries were down for maintenance or otherwise out of service.

They said compacts were convenient and cost-saving for the companies, and allowed the companies to expand their geographic reach to promote competition.

The judge agreed with the oil companies.

“While these types of agreements can be misused as part of an unlawful conspiracy, without more (evidence) this court cannot conclude that exchange agreements, in and of themselves, raise a reasonable inference of conspiracy,” she wrote.

Over the course of the litigation, plaintiffs compiled evidence that they said showed traders exchanging information with rival companies — actions they say undermine price competitiveness.

In one example from 2012, a BP trader allegedly disclosed confidential information in asking a counterpart from Shell if there was surplus gas available.

The BP refinery unit was running “at min rates until early May in order to build … inventory back to safety stock level,” the trader conveyed, according to the judge’s ruling.

Plaintiffs argued that it was improper to alert a business rival to an operating practice with specific dates because they could use the information to increase profits by limiting gas supplies.

But the judge rejected that claim.

“The court is satisfied that defendants produced plausible and justified business reasons for traders to share information with one another,” she ruled. “Defendants provide evidence that raiders needed to buy and sell gas from each other to meet their refineries’ time-sensitive supply needs.”

For years, California gas prices have remained stubbornly higher than the national average. The $6.41 average cost in California posted Tuesday by AAA was nearly 70 percent higher than the $3.81 national average.

Analysts have historically blamed California’s clean-air standards for the high cost of fuel, but state elected officials and consumers are growing increasingly frustrated with the status quo.

Last week, for example, Gov. Gavin Newsom accused oil companies of “extortion” and announced that he would direct the Air Resources Board to expedite the transition from the summer blend of fuel to the less expensive winter blend.

State Senate President Toni Atkins, D-San Diego, issued a statement with Assembly Speaker Anthony Rendon, D-Lakewood, pledging to explore a windfall profit tax when the legislature convenes early next year.

Many of the defendants in the class-action lawsuit have reported record quarterly profits in recent months.

ExxonMobil told shareholders in July that it recorded $17.9 billion in earnings during the second quarter of 2022, nearly four times the $4.7 billion the company reported over the same quarter last year and more than triple the $5.5 billion reported for the first three months of this year.

Chevron reported second-quarter profits of $11.6 billion, almost quadruple the $3.1 billion it earned in the same period in 2021.

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