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Newsom signs law to stop Big Oil price gouging at pump

The bill comes after Governor Gavin Newsom's desire for a windfall tax on Big Oil failed to gain traction in the Legislature.

SACRAMENTO, Calif. (CN) — California Governor Gavin Newsom signed a bill Tuesday that creates a state oversight committee with the power to hold the oil industry accountable for gouging consumers at the gas pump and penalize oil refineries for profiteering. 

"I want to thank the Legislature for having the backs of 40 million Americans that live in the greatest state in our union. I want to thank you for not backing away from this fight," Newsom said. "We proved that we could actually beat big oil."

The new independent monitoring committee will be under the auspices of the California Energy Commission — all appointees of the governor — that will oversee California’s petroleum market to detect price gouging. 

In addition to being able to set a maximum gross gasoline refining margin — and penalize companies that exceed it — the committee will have the power to subpoena oil 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 creation of the committee came about in part to answer why Californians have paid inexplicably high gas prices since 2015. And this past December, Newsom accused the oil industry of intentionally increasing the cost of gas, inflating their own pockets and taking advantage of consumers.  

According to Newsom’s proclamation issued alongside the Senate bill in December, oil refiners' share of what Californians paid at the pump in September 2022 alone went from 64 cents 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 disproportionately burden lower-income residents who drive longer distances for work, Newsom said.

Gas prices at the pump hit a statewide average high of $6.43 per gallon in June 2022 — by far the highest in the nation.  

The oil industry denies intentionally gouging consumers, citing California’s high gas excise tax which goes to fund infrastructure projects. The price of crude oil also plays a part in the state’s gas prices. The price of crude oil rose after Russia invaded Ukraine in February 2022, and in response, President Joe Biden banned imports of Russian oil, natural gas, and coal the following month. According to the California Energy Commission, foreign refiners supplied 58.9% of the state’s oil supply in 2022, and California was one of the biggest markets for Russia’s oil. 

In a statement made after the Legislature passed the bill to create the oil industry watchdog committee, Newsom noted 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 said low inventory levels and overlapping maintenance schedules only account for part of last year’s price increases, which remain elevated since 2015 for no reason after a refinery explosion caused gas prices to increase throughout the West Coast and especially in California in what's been called a “mystery gasoline surcharge.” The bill's emphasis on transparency is in part an effort to determine the root of the surcharge.   

The bill will require oil refineries to report the net gasoline refining margin per barrel of gasoline sold each month, and post that and other information on their company websites.

Newsom said the bill gives the state the power to look under the hood of the oil industry to understand why prices for oil are so high, and then turn around and explain the reason to residents of California.

“We seek to truly understand what has been impossible to understand in the past," Newsom said.

After making a passive reference to the governor of Florida going after the Walt Disney World Resort attempting to bring "Mickey Mouse to his knees," Newsom said, "There’s a new sheriff in town, and we brought Big Oil to its knees.”

An earlier version of the bill would have required state lawmakers to enact a profit cap on the oil industry, but that provision was dropped in part because lawmakers felt they needed more information on the inner workings of the oil industry.

The committee will also be tasked with identifying ways the state can ensure a reliable supply of affordable fuel every three years. 

Should state auditors find that the bill’s penalty program does not deter gas price gouging by March 1, 2033, the bill requires the state to stop assessing penalties within 180 days. 

California-based Chevron — one of the state's largest corporations with revenue of $162.5 billion in 2022 — blasted the law.

"Chevron believes California deserves affordable, reliable and ever-cleaner energy. This legislation does nothing to make gasoline supply more secure. And it may make price spikes and supply shortages even worse," Chevron spokesperson Ross Allen said in a statement. "We believe this law risks reducing supply of gasoline by constraining refinery investment and maintenance. In so doing, it would cause the volatility and price spikes the legislation purports to address."

Categories:Energy, Government, Regional

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