SACRAMENTO —
Gov. Gavin Newsom on Monday unveiled an outline of his plan to place a cap on oil refinery profits in California, a proposal he’s asking lawmakers to approve in hopes of reducing future spikes on gasoline prices.
After convening a special legislative session, the governor publicly shared a first look at his plan more than two months after he said he would ask the Legislature to penalize what he called excessive profits by the oil industry, accusing companies of price gouging by intentionally elevating the cost of gas for California drivers.
“California’s price-gouging penalty is simple — either Big Oil reins in the profits and prices or they’ll pay a penalty,” Newsom said in a statement Monday afternoon. “Big Oil has been lying and gouging Californians to line their own pockets long enough. I look forward to the work ahead with our partners in the Legislature to get this done.”
The industry contends recent high prices are a result of the state’s policies to phase out the use of oil and reduce dependence on fossil fuels. The companies argue Newsom has politicized the issue and a penalty on them will only exacerbate the problem in a state that already levies heavy taxes on the industry.
According to a draft of Newsom’s plan, the governor is asking the Legislature to enact a yet-to-be-determined “maximum gross gasoline refining margin” — or profit cap — based on a monthly calculation of the average profit per barrel that an oil refiner earns for wholesale gasoline.
The proposal would allow the California Energy Commission to impose an administrative civil penalty for violations of the profit cap, which would vary based on the percentage by which profit margins earned by a refiner exceed the limit. Any penalties would go into a new “Price Gouging Penalty Fund,” which lawmakers could return to residents as a refund through the state budget.
The governor’s proposal also calls for new regulatory review and oversight, giving the Energy Commission expanded authority to investigate supply and price issues.
Lawmakers opened Newsom’s session Monday as they returned to the state Capitol to begin the 2023-24 regular session and swear in legislators who were elected in November.
Though the two sessions run concurrently, any legislation passed within the parameters of the special session can take effect 90 days after adjournment. Bills approved in regular sessions generally do not become law until the start of the next calendar year. In the special session, legislative leaders also have an opportunity to craft unique rosters of lawmakers for committees that could make it easier to approve controversial new bills.