After months with little apparent progress, Governor Gavin Newsom’s proposal to hold the oil industry accountable for high gasoline prices and deter price increases is now on a fast track toward approval in the California Legislature.
An agreement between the governor and legislative leaders, announced earlier this week, passed the Senate on Thursday and now heads to the Assembly and could be voted on next week. The deal drops Newsom’s push for the Legislature to put a cap on oil company profits, and instead gives state energy regulators the power to impose one through a public process.
It’s an admittedly weaker plan that shows the unwillingness of state legislators to directly confront California’s multibillion-dollar oil industry, which wields tremendous political influence in a state that consumes almost twice as much gasoline like any other and pays the highest gas prices in the country. But it may be more effective to have regulators let state lawmakers take on the job of collecting data and setting penalties for excessive profits in such a powerful industry. The Western States Petroleum Association. is he biggest lobbying spender in Sacramento, and the oil companies have handed out millions in campaign cash trying to pick Republicans and Democrats friendly to their industry.
“Big Oil is the most powerful industry on Earth and they have mobilized against the price gouging penalty since day one,” said Kassie Siegel, director of the Climate Law Institute at the Center for Biological Diversity.
This approach moves decisions on excessive profit penalties from the purely political realm to the administrative world of data-driven regulation and provides much-needed oversight. It is a promising idea and the Assembly must vote promptly to send it to the governor’s desk. Once empowered, state regulators must move quickly to hold this industry to account.
Newsom has pushed to penalize oil refinery profits since last year, when gasoline prices soared to more than $6.40 a gallon, about $2.60 a gallon above the national average. As Californians struggled to fill their tanks at a time of rapid inflation throughout the economy, oil companies made the biggest profits in their history. Chevron, which operates oil refineries in El Segundo and Richmond, posted a record $36.5 billion in profit in 2022, and Valero, with refineries in Benicia and Wilmington, had its the best year of all with $11.5 billion in profit.
It should be clear by now that the oil companies have been overcharging Californians for years, with consumers paying 30 to 40 cents a gallon. “mystery gas surcharge” since 2015, that amounts to an additional $40 billion or more that cannot be explained by higher state taxes and stricter environmental regulations.
Tighter oversight is urgently needed, especially as demand for oil begins to slow as California’s emissions policies increasingly force a transition to electric vehicles, a shift that is expected to reduce oil consumption in the state by more than 90% over the next two decades.
The governor’s proposal would establish an independent Division of Petroleum Market Oversight within the California Energy Commission, with subpoena power to investigate industry sales and prices and identify consumer abuse. But just as important are the bill’s transparency provisions, which should help shed light on gas prices by forcing companies to provide state regulators with new detailed information on transactions, maintenance activities and gas profit margins. refinement.
Because it authorizes, but does not require, the California Energy Commission to impose a price gouging penalty, regulators may collect and analyze new data submitted by oil companies only to determine that no action is warranted.
But that seems unlikely. California is dominated by only five major oil refineries, and the forces driving the rise in gasoline prices remain a mystery. The bill’s transparency measures alone could go a long way to reining in an industry that has long operated in the shadows and with much less oversight than other energy providers, such as electric and natural gas utilities. State regulators need more information to determine if the market is being manipulated. The disclosure itself could be a deterrent and deter the industry from fleecing consumers and punishing California for its aggressive climate policies.
Tellingly, the oil industry is resisting requirements that would force it to provide more data to state officials. Transparency shouldn’t be a problem if these companies have nothing to hide.