California’s Gas Price Gouging Law Will Backfire, Critics Warn

Gas prices in California have already topped $5 a gallon this year.
MENLO PARK, CALIFORNIA - MAY 25: Gas prices over $7.00 a gallon are displayed at a Chevron gas station on May 25, 2022 in Menlo Park, California. As gas prices surge to record highs across the United States, the San Francisco Bay Area has the highest prices in the country where the average price of a gallon of regular gasoline is $6.06. The average national price is $4.59 per gallon. (Photo by Justin Sullivan/Getty Images)
Justin Sullivan/Getty Images

California’s new gasoline price gouging law will end up raising prices at the pump for everyday Americans and could even limit the state’s energy supply, critics say.

Gas prices in California have already topped $5 a gallon this year due, in large part, to the state’s high taxes and tough regulations on the industry.

However, Democratic Governor Gavin Newsom blames his state’s expensive gas on greedy oil companies.

The governor wants to cap the profits of gasoline producers, but critics worry this will burden California refineries, who will, in turn, pass the costs onto drivers and push gas prices over $6 a gallon.

Last year, Newsom signed an anti-price gouging law that establishes an industry watchdog and increases scrutiny on oil companies.

“These new transparency laws will help us track refiners’ profits and shine a light on price manipulation so Californians aren’t vulnerable to the greedy whims of Big Oil,” Newsom said last year.

The California Energy Commission is currently considering the proposal to establish a penalty for gas producers who profit too much off of California drivers. Siva Gunda, the commission’s vice president, said the commission has not found any clear evidence of price gouging so far, although he added that oil companies are indeed profiting off of the multiple gas price spikes California has seen in recent years.

“We are still in the process of evaluation the opinions of the experts we have,” Gunda said. “What we understand is there is a divergence of opinion.”

Earlier this month, California state senators held an oversight hearing on the new law.

Industry leaders warn a profits penalty could not only raise gas prices but even drive gas companies out of the state and curb the state’s oil supply.

“Chevron is concerned about the impact a margin cap could have on gasoline supply. An ill-defined and arbitrary maximum margin for refiners will not lower gasoline prices this summer,” Chevron wrote in a letter to the state’s energy commission.

Lawmakers on both sides of the aisle have also expressed concerns.

“Some of us come from very disadvantaged communities and they are the ones who bear the brunt of the cost hikes,” said state Senator Susan Rubio, a Democrat from just east of Los Angeles.

Even lawmakers in neighboring states worry their states could feel the effects of California’s gas penalty.

“We all need each other,” said Arizona state Rep. Justin Wilmeth, a Republican who attended the California oversight hearing this month.

“We need you for fuel, you need us for electricity, we all have to work together in the west,” Wilmeth said.

The commission is expected to vote on whether to start capping gas profits by the end of the year.

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