Newsom calls for windfall tax as gas prices spike

The California State Capitol Building in Sacramento (Reid Wilson / Pluribus News)

California Gov. Gavin Newsom (D) on Friday called for a new windfall tax on oil companies as gas prices in the Golden State hover more than two dollars above the national average.

“It just doesn’t add up,” Newsom said in a video. “This degree of divergence from the national prices never has happened before. And oil companies, they provide no explanation.”

According to AAA, the national average price of a gallon of gasoline is $3.79. The average price in California stands at $6.29.

“The fact is they’re ripping you off,” Newsom said of oil companies. “Their record profits are coming at your expense.”

Californians are now paying a higher per-gallon price for gas than they were in August, when oil prices stood north of $100 a barrel and a gallon of gas was selling for $5.06. 

Kara Greene, a spokesperson for the Western States Petroleum Association, a trade association that represents petroleum companies, said that the governor has other tools to reduce prices such as spending the gas tax.

“The Governor and the Legislature fail to understand time and time again that their policy decisions have a major impact at the pump,” Greene said in an email. “Gov. Newsom has the ability to quickly lower gas prices by suspending gas taxes and his regulatory program costs, but he’s deliberately chosen to make another policy decision to further increase costs on consumers through yet another tax on fuel.”

Doug Shupe, a spokesman for AAA of Southern California, said in a brief interview that gas prices have risen due to “a string of both planned and unplanned refinery outages, whether it be planned maintenance, or some type of unplanned issue problem with our refineries. 

“And unfortunately, that has really squeezed our supply here,” Shupe continued. He said he expects prices to remain volatile until the refinery issues are settled.

Data from the Energy Information Agency shows fuel inventories on the West Coast are at their lowest levels in a decade.

Newsom said the funds raised from the windfall tax would be returned to Californians to help offset the surging cost of gas. 

Earlier this year, California legislators approved a $17 billion rebate package that sent checks of up to $1,050 to taxpayers, payments that Newsom and Democratic legislative leaders cast as both inflation relief and money to help pay for gas. Those payments will begin showing up in bank accounts next week.

Newsom on Friday also directed the California Air Resources Board to make an early transition to winter-blend gasoline, something the state typically does when the weather turns cold later in the year. The move is expected to increase oil supplies by 5% to 10%, easing gas prices. When California made the same move in 2012, gas prices dropped by 25 cents within two weeks.

But Shupe said that plan may not deliver the intended relief. 

“Now winter blend fuel obviously is less expensive. It’s less to produce, it’s made with butane, which is cheaper to produce than components used in the summer blend fuel,” Shupe said.

“But it depends on how high these prices go,” Shupe said. “Whether that’ll mean much of a difference for consumers,, if you’re paying close to $7 or above $7, a little 15 to 20 cent drop is still going to be high pump prices.”