Gov. Gavin Newsom (D-CA) signed a bill on Tuesday that prohibits oil companies from “price gouging,” contending that the new law would protect the state’s climate and lower prices.
The legislation, introduced by State Sen. Nancy Skinner (D-CA) at the end of last year, forces oil companies to reduce their profits in order to avoid a civil penalty from the California Energy Commission. Newsom endorsed the bill with the support of various climate groups and activists.
“With this legislation, we’re ending the oil industry’s days of operating in the shadows. California took on Big Oil and won,” Newsom said in a statement. “We’re not only protecting families, we’re also loosening the vice grip Big Oil has had on our politics.”
The new law will permit the State Energy Resources Conservation and Development Commission to create a maximum gross gasoline refining margin and establish a penalty for any refineries in the state which exceed the margin.
The average gas price in the state of California is presently $4.83 per gallon, according to data from AAA, which is 40% higher than the national average gas price of $3.46 per gallon.
Newsom immediately faced criticism from the oil and gas sector after he signed the legislation. “Price caps, taxes, and tax-like penalties do not increase supply or reduce prices, but instead can have the opposite effect: less investment, less gasoline supply, and ultimately higher costs for Californians,” Western States Petroleum Association CEO Catherine Reheis-Boyd said in a statement. “With this politicized process behind us, it’s time for serious discussion about what it will take to ensure an affordable, reliable and safe fuel supply for the years ahead.”
California also has the highest gas taxes in the United States: residents can expect to pay nearly $1.00 in state taxes and fees beyond the federal excise tax of $0.24 cents per gallon, according to data from the American Petroleum Institute. Newsom has previously dismissed the notion that high taxes are partially responsible for elevated fuel costs in his state.
“When gas prices started skyrocketing in August and September, our gas tax and fees hadn’t changed a single cent,” he remarked in a video meant to promote the legislation. “Our proposal includes some of the nation’s most aggressive transparency measures as well, so we can get answers and prevent it from happening again.”
Assembly Minority Leader James Gallagher (R-CA), who labeled the price gouging policy “code for a tax increase,” called the bill “one of the greatest ripoffs” in the state’s history. “The state collects the lion’s share of the money from the high gas prices and he just allowed it to collect even more,” he asserted. “We keep paying the price for his failed policies.”
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Congressional Democrats have also claimed that rising energy costs are attributable to price gouging. Former House Speaker Nancy Pelosi (D-CA) voiced support last year for a bill that would allow President Joe Biden to declare an “energy emergency,” providing him the authority to regulate costs by prohibiting fuel companies from selling their products at rates deemed to be “unconscionably excessive” and “exploiting” such an emergency.
Gas prices have increased 45% since the $2.38 per gallon charted when the Biden administration assumed power in January 2021, according to data from the Energy Information Administration. Costs reached heights of $5.00 per gallon in June 2022.