Newsom makes abrupt turnaround after tough Big Oil talk

California Democratic Governor Gavin Newsom made a sudden U-turn this week in his effort to hit oil companies with price hike penalties amid record high gasoline prices and an energy crisis.

Newsom on Thursday unveiled a proposal creating a new watchdog arm within the California Energy Commission (CEC) that would monitor daily fluctuations in oil market prices to ensure market participants “play by the rules.” The proposed CEC office would be given sweeping powers to analyze refinery data, subpoena other information and refer cases directly to the state attorney general.

“We are making major progress with the Legislature to hold Big Oil accountable for scamming Californians at the pumps,” Newsom said in a statement. “With a coalition representing hundreds of organizations and local leaders supporting our proposal to impose strong and effective oversight measures on oil companies, the momentum is on our side to get this done for California families.”

“What we are asking for is simple: transparency and accountability to bring the oil industry out of the shadows,” he continued. “Now is the time to choose whether to stand with California families or with Big Oil in our fight to make them play by the rules.”


California Democratic Gov. Gavin Newsom said he is “making major progress with the Legislature” on a revised proposal to punish Big Oil for high prices. (Tom Williams/CQ-Roll Call, Inc via Getty Images.)

However, while the governor called the proposal “stronger” action, it represents a slimmed down version of a separate proposal to punish oil companies. Ultimately, it could also indefinitely delay the implementation of a state penalty for price gouging, which Newsom has aggressively pushed, according to The Sacramento Bee.


In December, Newsom announced aggressive actions punish oil companies for “lying and abusing Californians to line their pockets”. The comments came after he called on the state legislature to craft legislation clamping down on excessive energy price increases and called on the California Senate Committee on Energy, Utilities and Communications to hold a hearing on the subject.

The Newsom-backed legislation would hit companies with a financial penalty if they were found to be “excessively” raising gasoline prices. However, the legislation has encountered significant hurdles after experts and state lawmakers, including Democratic leaders, expressed concern about unintended consequences for consumers.

A worker walks past pump cylinders operating at the Kern River Oilfield in Bakersfield, California.

A worker walks past pump cylinders operating at the Kern River Oilfield in Bakersfield, California. (AP Photo/Jae C. Hong)

“The adoption of SBX1-2 is not in the best interest of the consumer, will not reduce retail prices at the pump, and is not in the best long-term economic interest of California,” said Michael Mische, a professor at the University of Southern California’s Marshall School of Business, said during a hearing last month. “There are better alternatives.”

“Passing it will reduce supply, drive out producers and reduce employment in a well-paying industry,” Mische continued, adding that gas and energy prices would rise as a result of the bill.

Democratic State Sen. Steve Bradford argued during the hearing that lawmakers need to “ensure that our actions that we take first (do) not harm consumers.”


Over the past year, California has consistently recorded the highest average gas prices of any state, even topping $6 a gallon in June and October, according to data from the Energy Information Administration. Although pump prices have fallen significantly in the state over the past two months, to an average of $4.87 per gallon, they are still by far the highest in the country.

Newsom’s office did not respond to a request for comment.


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