California intended to combat price gouging and stabilize fuel costs with a new law, but it hasn’t been enacted yet as gas prices climb over $4.50 per gallon.
The legislation, put together by former state Sen. Nancy Skinner and backed by Attorney General Rob Bonta, would empower the California Energy Commission (CEC) to impose fines on oil companies engaging in price gouging and limit profits for refineries trying to profit from rising global prices.
After Governor Gavin Newsom signed this bill in 2023, he proclaimed, “We fought big oil and won,” but here we are three years later, and the law isn’t active.
It appears the CEC decided to delay the law for five years, aiming to enhance “investor confidence” and retain refineries in the state.
This decision came after Newsom instructed CEC Vice Chair Shiva Gunda to collaborate closely with refiners following concerns that gas prices might reach $8 a gallon.
In a letter to Gunda, Newsom stated that he hopes to reinforce a relationship of partnership while protecting Californians from unfair pricing and ensuring that refiners can still operate profitably.
Jamie Cote, head of Consumer Watchdog, expressed that now would be the right time to implement such legislation.
She pointed out, “This is the moment we need. Companies are making excessive profits while the price of oil or gasoline skyrockets,” adding that Newsom seemed to have “panicked.”
Interestingly, the CEC retains the authority to reverse its decision and activate the law before the end of the five-year delay.
While some attribute California’s soaring gas prices to strict environmental regulations leading to refiner closures, Newsom blames ongoing international conflicts like the situation in Iran and highlights surging global commodity prices.
Some, however, doubt that capping profits is the best solution. Severin Borenstein, an energy economist, warned against regulating refinery profits, stating that while high prices are unpopular, the last thing consumers want are interruptions in supply.
Zachary Leary, a lobbyist for the Western States Petroleum Association, claimed California functions as an “energy island” losing refineries. Recent closures include Phillips 66’s facility in Los Angeles and Valero’s move to halt operations in Benicia.
Chevron also cautioned that upcoming cap-and-invest regulations aimed at curbing greenhouse gas emissions could threaten the viability of California’s remaining refineries, meaning the state could risk losing a critical industry under this plan.
