Newsom, legislators reach deal to crack down gas price spiking

The bill would empower a new California Energy Commission unit to set a profit cap and issue penalties for exceeding it.
California Gov. Gavin Newsom (D) (AP Photo/Julia Nikhinson, File)

California Gov. Gavin Newsom (D) and Democratic legislative leaders announced an agreement Monday on a proposal designed to keep gas prices low by increasing oversight of the oil industry and potentially capping profits. 

The bill, introduced by Sen. Nancy Skinner (D), would empower a new independent unit within the California Energy Commission to monitor the petroleum industry, issue subpoenas and cap oil-company profits via the rule-making process. The commission would be authorized to issue administrative penalties to companies whose profits exceed the cap, which would be set by the commission.

“Today’s agreement represents a major milestone in our efforts to drive the oil industry out of the shadows and ensure they play by the rules,” Newsom said in a statement. “This represents some of the strongest and most effective transparency and oversight measures in the country, and the penalty would root out price gouging. We’re getting the job done for California families.”  

The bill announcement comes more than three months since Newsom convened a special session to respond to the record-high gas prices in California last year. Gas cost an average of well more than $6.00 a gallon in the fall, far higher than the national average. Gas prices there are currently $4.857 a gallon for regular, while the national average is $3.44 a gallon.

The industry said refinery maintenance squeezed supplies, resulting in the state’s higher prices. The new proposal would expand the commission’s authority to require refiners to report maintenance activities, both planned and unplanned, to the commission. 

Last year’s gas price spike resulted in record refiner profits of $63 billion in just 90 days, Newsom said. Newsom initially called for a tax on profits but abandoned that idea after it failed to gain traction with the legislature. 

Kevin Slagle, spokesperson for the Western States Petroleum Association, said in a statement that the legislature should not rush this.

“First it was a windfall profits tax, then it was a penalty, and lacking legislative support for that, Governor Newsom is now proposing a new tax and a bigger bureaucracy,” Slagle said. “This new language has major implications for California’s fuel market and consumers, and now the burden is on legislators to protect their constituents from the costs and impacts on fuel supply this bill could bring to the state.”

Democratic legislative leaders praised the bill. 

“Gas prices are out of step with the rest of the country, so it is important that we can move forward with measures that will begin to put the brakes on oil company price gouging,” said Assembly Speaker Anthony Rendon (D). “An accountability structure is a major step to requiring producers to justify price hikes.”