(CN) — In a 30-8 vote on Thursday, California senators approved Governor Gavin Newsom’s proposal to create an oversight committee to hold the oil industry accountable for gas price gouging and penalize oil refineries when their profiting climbs too steep.
“For decades, oil companies have gotten away with ripping off California families while making record profits and hiding their books from public view,” Newsom said in a statement. “With this proposal, California leaders are ending the era of oil’s outsized influence and holding them accountable. Thanks to the Senate’s quick action, we’re getting this done for California families.”
The state Senate’s approval follows six months of Newsom's windfall tax threats against oil companies, as California has maintained some of the highest average gas prices in the country.
Newsom’s initial call to action occurred last fall, when he said that oil companies raised California gas prices “by a record 84 cents per gallon in just the last 10 days”, even as crude oil prices dipped.
Some lawmakers, including Assembly Republican leader James Gallagher of Yuba City, opposed Newsom's proposal. According to the nonpartisan research nonprofit Vote Smart, Gallagher counts gas companies like Chevron and California Independent Petroleum Association among his campaign contributors.
On Feb. 21, Gallagher shared demands from state Republicans for Newsom to “stop the gas tax hike,” extend the diesel tax holiday expiring on Sept. 30 and delay the fuel blend transition from summer to winter-blend gasoline.
According to Newsom’s proclamation issued alongside the Senate bill last December, oil refiners increased their share of the price Californians paid between Aug. 29, 2022, to Oct. 3, 2022, from $0.64 per gallon to $2.48 per gallon. As a result, refiners earned millions to billions of dollars of record profits – while continuing to damage the environment and disproportionally burden lower-income residents who drive longer distances for work.
Newsom also discussed how the state Assembly’s Select Committee on Gasoline Supply and Pricing and the Energy Commission had been investigating the causes behind gas price hikes and supply shortages, but oil companies had been uncooperative and refused to provide “complete and adequate explanations for their actions.”
The governor wrote that low inventory levels and overlapping maintenance schedules only account for part of last year’s price increases, which remain elevated for no reason after a refinery explosion caused gas prices to increase throughout the West Coast.
If passed by the Assembly, Newsom’s proposal would create a new independent monitoring committee within the California Energy Commission – appointed by Newsom himself – that would oversee California’s petroleum market to detect price gouging. To do so, the state would empower the committee to subpoena refiners for any documentation or data that could reveal “patterns of misconduct or price manipulation” and refer violations to California’s attorney general for prosecution.
The bill would similarly allow the state to investigate why its residents have paid inexplicably high gas prices since 2015 and enforce reporting requirements on oil companies for greater transparency.
Additionally, the measure would authorize the California Energy Commission to set a price gouging penalty through a public rulemaking process on refiners who charge more than a maximum allowable margin, also set by the commission, for the price of gasoline. Refiners would be allowed to file exemptions; in the event they are caught price gouging, the state would set aside penalties in a fund to determine how to spend later.
Should state auditors find that the bill’s penalty program does not deter gas price gouging by March 1, 2033, the bill would require California to cease penalties within 180 days.
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