California may soon sanction oil companies for high gas prices

SACRAMENTO, Calif. (AP) — California lawmakers on Monday approved the nation’s first penalty for price gouging at the pump, voting to give regulators the power to punish oil companies for profiting from the type of gas price spike that plagued the country’s most populous state last summer.

Democrats in charge of the state legislature worked quickly to pass the bill Monday, just a week after it was introduced. It was an unusually quick process for a contentious issue, especially a powerful oil industry opposition that spent millions of dollars to stop it.

Democratic Gov. Gavin Newsom used his political power to pass the bill, which grew out of his call last December for a special legislative session to pass a new tax on oil company profits after the average price of gas in California reached an all-time high of $6.44. per gallon, according to AAA. Tackling the oil industry has been a top political priority for Newsom, who is widely seen as a future presidential candidate.

“When you take the big oil, they usually roll you – that’s exactly what they’ve been doing to consumers for years and years and years,” Newsom told reporters after the vote. “The Legislative Assembly had the courage, the conviction and the backbone to stand up to big oil.”

He is expected to sign the bill on Tuesday.

Legislative leaders rejected his initial call for a new tax because they feared it would discourage supply and drive up prices.

Instead, Newsom and lawmakers agreed to let the California Energy Commission decide whether to penalize oil companies for price gouging. But the heart of the bill is not a potential penalty. Instead, it’s the reams of new information that oil companies would be required to disclose to state regulators about their prices.

The companies would report this information, most of which would remain confidential, to a new state agency tasked with monitoring and investigating the oil market and subpoenaing oil company executives. The commission will rely on the work of this agency, plus a group of experts, to decide whether to impose a penalty on the profits of oil companies and how much the penalty should be.

“If we force people to divulge this information, I don’t think we’ll ever need a sanction, because the fact that they have to tell us what’s going on will prevent them from defrauding our consumers,” the company said. Assemblywoman Rebecca Bauer-Kahan, a Democrat from Orinda.

Gas prices in California are always higher than the rest of the country due to state taxes and regulations. California has the second highest gasoline tax in the nation at 54 cents per gallon. And that requires a special blend of gasoline that’s better for the environment but more expensive to produce.

But state regulators say those taxes and fees aren’t enough to explain last summer, when the average cost of a gallon of gas in California was more than $2.60 higher than the national average.

“There really is no other explanation for these historically high prices than greed,” said Assemblywoman Pilar Schiavo, Democrat of Chatsworth. “The problem is that we don’t have the information we need to prove it, and we don’t have the ability to penalize the kind of historic price increases we saw last year.”

The oil industry reaped massive profits last year, after years of huge losses during the pandemic, when more people stayed home and fewer people were on the road.

Eloy Garcia, lobbyist for the Western States Petroleum Association, said high gas prices in California are the result of decades of public policy decisions that have made the state an island in the global oil market and driven many state oil refiners. He noted that California doesn’t have a pipeline to send oil into the state, which means it has to ship what it can’t produce itself from the ocean, which takes more time and costs more.

“We’re not like Texas. We are not like Louisiana. We’re not like the Northeast,” Garcia said. “We don’t have a fungible fuel supply. We have chosen to do so. We have established ourselves through 30 years of public policy.

Garcia said Monday’s vote “sends a clear signal not to invest in California.”

Lauren Sanchez, senior climate adviser to Governor Gavin Newsom, said the state has an abundant supply, noting that California oil refineries exported 12% of their product to other states last year. last.

“We are also the third largest gasoline market in the world for these companies,” she said.


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