Governor Gavin Newsom (D-CA) claimed that his proposed “price gouging penalty” for oil companies would not prove harmful to residents of California.
The proposal, introduced by State Sen. Nancy Skinner (D) at the end of last year, would compel oil companies to reduce their profits in order to avoid a civil penalty from the California Energy Commission. Neither a penalty size nor an official profitability threshold appears in the legislation, which would also expand the agency’s authority to obtain information regarding price policies. Newsom claimed in a social media video that oil companies had been advancing myths about the legislation and sought to rebut them.
“This is a price gouging penalty, and Californians won’t pay a cent for it. Only Big Oil will if they price gouge you at the pump to line their pockets,” he said in response to the claim that the legislation would effectively serve as another gas tax. “The penalty is about preventing price hikes from happening in the first place so money stays in your pockets. But if Big Oil companies violate the law by charging you excessive profits, they’ll be forced to pay the penalty, which will be refunded right back to you.”
However, when addressing the notion that he should temporarily pause the gas tax to alleviate price pressures, Newsom argued there would be “no guarantee” that oil companies would “pass down the savings” to customers. “Suspending the gas tax would only give oil companies a huge tax break,” he continued. “They’d collect even more profits while putting critical improvements to our roads and bridges, our infrastructure, at risk.”
Residents of California currently face 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. The state also has the second-highest gas prices at $4.53 per gallon, second only to Hawaii, thereby exceeding the national average of $3.51 per gallon, according to data from AAA.
Newsom also dismissed the argument that high taxes are partially responsible for elevated fuel costs. “When gas prices started skyrocketing in August and September, our gas tax and fees hadn’t changed a single cent. Not a cent. Big Oil won’t say why they suddenly started charging Californians a record $2.61 more per gallon than people in other states, but we know it resulted in record profits,” he remarked. “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.”
Democratic lawmakers in the state have opposed measures that would temporarily pause the gas tax. Assemblyman Kevin Kiley (R) introduced a bill last year that would have paused the tax for six months; a party line vote nevertheless rejected the measure. California Assembly Minority Leader James Gallagher (R) rebutted the social media video posted by Newsom. “This is code for a tax increase,” he contended. “One that would probably lead to long lines and higher gas prices.”