The story below is definitely newsworthy — written by the “news” reporters for the LA TIMES.  California’s years of restricting our state’s refinery capacity — coupled with regulations that pretty much block gasoline being imported from other states — have resulted in periodic windfall profits for the very oil companies everyone loves to hate.

But this article is deceiving — and given the paper’s strong liberal bias — I’m sure it’s intentional.  The paper uses “gross profits” as a benchmark. But that term is both undefined, and mis-defined in the article.

Here’s the proper accounting definition of “gross profit”: A company’s revenue minus its cost of goods sold. Gross profit is a company’s residual profit after selling a product or service and deducting the cost associated with its production and sale.
http://www.investopedia.com/terms/g/grossprofit.asp#ixzz3gjTdyqoW

What the paper is calling “gross profit” is really “gross margin”: Refiner Margin (costs and profits) is calculated by subtracting the market price for crude oil from the wholesale price of gasoline. The result is a gross refining margin which includes the cost of operating the refinery as well as the profits for the refining company.
http://energyalmanac.ca.gov/gasoline/margins/

Most people will assume that “gross profit” equals PROFIT.  In this article, it does not.  The refinery capital and operating costs are NOT profit. Employee wages and benefits are NOT profit. But trust me when I say that news media outlets and talk shows will be referencing this “profit” story in that fashion.

SHAME on the LA Times!  For the U-T editors, just recognize the folly of blindly repeating LA TIMES stories.  For the REST of the California media, don’t consider LA TIMES articles as an objective source.   Or now U-T stories, for that matter.

http://www.latimes.com/business/la-fi-gas-profits-20150722-story.html

California oil refineries’ gross profits nearly double in 2015

By IVAN PENN AND SAMANTHA MASUNAGA    contact the reporters

As Los Angeles drivers shelled out more than $4 a gallon at the pump in recent weeks, the state’s oil refineries pocketed record amounts of money — as much as $1.17 a gallon in gross profits.

From Jan. 1 to July 6, oil refineries almost doubled the typical amount they collect on a gallon of gasoline, state data show.

 . . .

For the rest of the story, go to the link