California lawmakers will meet on Thursday to vote on imposing penalties on gas and oil companies for raising gas prices.
California gas prices have been extremely volatile since the beginning of the pandemic, particularly after Biden took office. Some parts of California saw prices jump to $8/gallon. Prices have gone up and down since last summer, but are currently on the rise again. Average gas prices in the state stand at about $4.80/gallon as of the date of this publication.
Governor Gavin Newsom blames oil companies for “excessive profits” and has demanded they submit to extra reporting and monitoring standards to explain their pricing. In December of 2022, Newsom insisted the legislature work to pass a bill limiting oil profits above a certain threshold, but remained vague about what that threshold might be even after a special session was called to discuss the issue.
After the session concluded, details from the governor’s office came in. In this bill language, Newsom wants to penalize gas companies when they make over a certain profit and that money will then go into a fund to go back to Californians in some form.
Oil executives have pushed back on the idea they are responsible for the sharp increase in gas costs.
Kevin Slagle, spokesperson for the Western States Petroleum Association, said oil companies would have to report data on 15,000 transactions per day, what he called “a ridiculous level of reporting” that would drive up costs. He said the real problem with California’s gas prices are state laws and regulations that hinder the supply of fuel. He criticized Newsom and lawmakers for rushing the bill through the Legislature with little input from the oil industry.
Slagle says the attempts to blame rising prices on industry greed are misplaced. He calls the move an attempt to garner a “political win” for the Governor. Many people believe Newsom intends to run for the White House in 2024, despite Biden’s stated intentions of running for a second term.
“Why does the governor want to jam this through? Clearly it’s because the details of this are not good for California consumers,” Slagle said. “They don’t address the problem, but it provides him a political win.”
California currently holds one of the highest gas taxes in the nation, at 54 cents per gallon. The state has refused to relieve taxpayers during rising prices, and in fact added a 5.6% gas tax last July as prices hovered in the $7/gallon range. State Democrats insist on blaming oil companies for the prices, even though President Biden himself has called rising costs the “Putin Price Hike.”
California also voluntarily restricts its own supplies. The coastal locale is an oil-rich state, yet exports nearly all of their crude oil, keeping mere 1% for local markets. Many California cities have also passed laws restricting the construction of new gas stations as part of an aggressive, economically unsound climate agenda. In addition, Governor Newsom has announced plans to phase out the sales of new gas-powered vehicles by 2035. A deeply complicated regulatory burden also prevents companies from establishing new refineries and adds extra costs to their operations.
All of this adds up to an extremely anemic oil market in one of the wealthiest states in the world.
The California Senate will vote on imposing penalties on oil company profits on Thursday. If it passes, which is likely due to a longtime Democrat supermajority, the bill will move to the Assembly.
If Newsom runs for POTUS in 2024, he is sure use California’s climate agenda as a major leg of his platform. The Governor has recently spent time in “rival” states like Texas and Florida, making his case for California supremacy and criticizing the governors of those states for how they have handled issues like abortion, the environment, and pandemic restrictions.