Holding Oil Companies Accountable for California’s High Fuel Prices

Standing behind a podium coated by a banner stating, “Holding Massive Oil Accountable” within the rotunda of the California State Capitol on March 28, Governor Gavin Newsom spoke concerning the invoice, SBX 1-2,  that he would quickly signal into legislation. From his press launch:

“With this laws, we’re ending the oil business’s days of working within the shadows. California took on Massive Oil and gained. We’re not solely defending households, we’re additionally loosening the vice grip Massive Oil has had on our politics for the final 100 years.”

HOW IT WORKS: Authored by Senator Nancy Skinner (D-Berkeley), co-sponsored by Legal professional Basic Rob Bonta and accepted by a supermajority in each the Senate and Meeting, SBx1-2 creates a devoted, day-in and day-out, impartial watchdog to root out worth gouging by oil corporations and authorizes the California Vitality Fee (CEC) to create a penalty to carry the business accountable. The legislation will go into impact on June 26, the 91st day after the tip of the particular session.

It started as a tax

As famous, the invoice was launched throughout a particular session (explaining the ‘SBX’ within the invoice quantity) that convened final fall “to confront California’s excessive fuel costs, together with his proposal to create a windfall tax on the earnings of oil corporations,” reported Dustin Gardiner for the San Francisco Chronicle on October 7, 2022.

“Final fall, he pivoted to calling his proposal a ‘worth gouging penalty,’ a transfer with vital implications: Making a tax requires approval from two-thirds of lawmakers, whereas a penalty requires solely a majority,” reported Gardiner on March 27 within the supply article.

Will it decrease costs?

On April 2, the typical worth of standard grade gasoline within the Golden State was $4.83 per gallon, highest within the nation in accordance with AAA. That is $1.33 (or 38%) larger than the nationwide common of $3.50 per gallon, however far decrease than the “$6.42 per gallon final 12 months, a historic $2.61 greater than the nationwide common,” in accordance with the 1-page reality sheet [pdf] on SBX 1-2.

“Critics of Newsom’s plan, together with the Western States Petroleum Affiliation and Republican legislators, say it may have the unintended consequence of driving costs up if it causes oil corporations to provide much less fuel in California,” provides Gardiner.

The invoice is much less meant to decrease gasoline costs, largely a operate of provide and demand, as it’s to forestall worth spikes.

A brand new layer of regulation

“Newsom’s plan, SBX1-2, would additionally give the Vitality Fee extra oversight authority to require oil refiners to share details about their transactions and enterprise practices, together with subpoena energy,” provides Gardiner.

Legislators and Newsom have pushed business executives in latest months — to no avail — to launch extra details about the causes of fuel worth spikes in California final 12 months, which got here as the businesses introduced in file earnings.

Newsom victory

“The [oil] business has been pretty profitable in staving off efforts by politicians to control its operations,” opined Dan Walters for CalMatters on March 22.

Final 12 months, Newsom and the Legislature positioned restrictions on oil wells close to colleges and houses however they’re on maintain as a result of the business has certified a referendum to overturn the legislation for the 2024 poll.

[See Ballotpedia: California Oil and Gas Well Regulations Referendum (2024)]

Laurel Rosenhall, Sacramento bureau chief for the Los Angeles Occasions, noticed on March 30 the political implications of the invoice’s unusually speedy passage, writing that “the brand new legislation nonetheless offers Newsom a political victory over the oil business, permitting him to place himself as a cutting-edge chief who scored a win towards a politically highly effective business that many progressives view as a bogeyman.”

Planetizen has extensively coated the infinite quest by politicians to scale back gasoline costs. A pattern: