Please ensure Javascript is enabled for purposes of website accessibility
California Bill Penalizing Oil Profits Makes Little Progress
gvw_ap_news
By Associated Press
Published 2 years ago on
February 23, 2023

Share

Getting your Trinity Audio player ready...

After gas prices in California spiked to more than $6.40 per gallon last summer, Gov. Gavin Newsom led a charge against an industry he says is “ripping you off.”

Months later, it’s not clear if California’s Legislature is following him.

Newsom called lawmakers into a rare special session in December to pass what would be the nation’s first penalty on excessive oil company profits. But the bill is still sitting in the Democratic-controlled Legislature three months later, with no details on how much the penalty would be or when oil companies would have to pay it.

The oil industry spent about $34 million lobbying the Legislature in the last two-year session and remains a powerful political force, particularly among Democrats who represent parts of the state where the industry provides jobs. The proposal would need support from a majority of lawmakers to pass.

The bill is a big risk for Newsom, who was just reelected in November and is seen as a possible presidential candidate ahead of 2024. Newsom has embraced electric cars, ordering state regulators to ban the sale of most new gas-powered cars by 2035. But for decades gasoline is likely to continue to be a critical commodity in California, a state that has twice as many licensed drivers as any other state.

Historically, California’s gas prices have always been higher than the rest of the country because of the state’s higher taxes and fees, and the special blend that gasoline regulators require because it is better for the environment.

But state regulators say they can’t explain recent price spikes like the one last summer that, at its peak, had some California commuters paying as much as $8 per gallon while oil companies recorded super-sized profits. Newsom’s solution is to penalize oil companies when their profits get too high, and return that money to the public.

During the bill’s first public hearing in the state Senate on Wednesday, many Democrats were sympathetic to drivers hit by price spikes. But several Democrats appeared to be skeptical.

“What the hell are the possible unintended consequences that could hurt those very people to a greater extent?” asked state Sen. Bill Dodd, a Democrat from Napa.

Dodd wanted to know what would stop oil refiners from simply shipping their product to other states in order to avoid California profits that could trigger a penalty. State Sen. Steven Bradford, a Democrat from Los Angeles, wondered how the Newsom administration would return the money to the public.

California a Highly Profitable Market

Nicolas Maduros, director of the California Department of Tax and Fee Administration, said years of data show California is one of the most profitable markets for these oil companies, meaning it wouldn’t make sense for them to stop selling gasoline there. Plus, he said the Newsom administration hopes the penalty would never be needed.

“This isn’t a tax. It’s not meant to raise revenue. It’s meant to change behavior,” Maduros said.

Catherine Reheis-Boyd, president and CEO of the Western States Petroleum Association, said the real reason for California’s high gas prices is not profits but a lack of supply. She said Newsom’s proposal will only make that worse because oil companies would likely supply less gasoline in the state to avoid paying a penalty.

“This is too important to get wrong. Let’s work toward a better way, not a political way,” she said.

Newsom said the reason it’s taking so long to advance the bill is a “lack of transparency” from the big five oil refiners, which supply nearly all of California’s gasoline. Those companies — Valero, Phillips 66, PBF Energy, Marathon and Chevron — have declined to testify during public hearings.

“Today’s hearing provided even more evidence that we need to crack down on Big Oil’s price gouging at the pump,” Newsom said. “Big Oil’s lobbyists again used scare tactics and refused to provide answers or solutions to last year’s price spikes.”

The big question is how much profit would trigger the penalty. Consumer Watchdog, a nonprofit group that Newsom has frequently cited when criticizing oil companies, wants that threshold to be anytime oil company profits exceed 50 cents per gallon.

One way to measure that would be to look at the difference between the wholesale cost of gas and the cost of crude oil. But that calculation isn’t perfect, because it doesn’t include oil company operational costs, Jamie Court, the group’s president, said.

In the last 20 years, the big five oil refiners have average profits of 32 cents per gallon, Court said. The group says all of the big five refiners surpassed 50 cents in 2022. If that threshold had been law in 2022, Consumer Watchdog said it would have generated $3.3 billion in penalties.

“The real problem we have in California is we have five refiners who make 97% of our gasoline,” Court said. “When they want to squeeze us, they can.”

Wednesday, a panel of economists and experts — some with ties to the oil industry — mostly criticized the proposal, saying it would not likely cause gas prices to decrease.

Severin Borenstein, a University of California, Berkeley, business professor and expert on energy policy and fuel pricing, said drivers in the state paid $8 billion more last year than they would have if prices were in line with the rest of the country.

But he said lawmakers should focus more on requiring oil companies to disclose more information about pricing so regulators can better understand what’s driving increases.

“The fact is, shooting first and then finding out if it is the right solution is likely to be just as detrimental as helpful,” Borenstein said.

RELATED TOPICS:

DON'T MISS

What Are Fresno Real Estate Experts Predicting for 2025 and Beyond?

DON'T MISS

First California EV Mandates Hit Automakers This Year. Most Are Not Even Close

DON'T MISS

Newsom Proposes Scaling Back Health Care for Immigrants in California

DON'T MISS

Qatar Signs $200 Billion Deal to Buy Jets From Boeing During Trump Visit

DON'T MISS

Is the Answer to Expensive Cars a Pickup Truck Without Power Windows?

DON'T MISS

California Released 15,000 Prisoners Early During COVID. New Data Reveals What Happened to Many of Them

DON'T MISS

Fresno Unified Substitute Teacher Arrested in Online Child Exploitation Case

DON'T MISS

Investors Buy Fig Garden Village. How Much Did It Sell For?

DON'T MISS

Fresno County DA Wants Teens Tried as Adults in Caleb Quick Murder

DON'T MISS

State Farm Wins First-Ever Emergency Rate Hike in California

DON'T MISS

Work Permits Reinstated for UC Merced International Students, Anxiety Persists

DON'T MISS

Tatum to Miss Remainder of Playoffs After Achilles Tendon Surgery

UP NEXT

California Released 15,000 Prisoners Early During COVID. New Data Reveals What Happened to Many of Them

UP NEXT

State Farm Wins First-Ever Emergency Rate Hike in California

UP NEXT

Caltrans’ Response to Homeless Encampments Is Lagging, Cities Complain

UP NEXT

Democrats Seeking California Governorship Strut Their Stuff for Union Leaders

UP NEXT

Republicans Face Internal Disagreements Over Trump Tax Cut Package

UP NEXT

Netanyahu Says There Is ‘No Way’ Israel Halts the War in Gaza Until Hamas Is Defeated

UP NEXT

Has the California Dream Become a Mirage?

UP NEXT

Trump Administration Terminates Another $450 Million in Grants to Harvard

UP NEXT

Trump Signs Economic Partnership Agreement With Saudi Arabia

UP NEXT

As Fresno Files First Case, Maxwell Vows to Protect Wage Theft Unit

California Released 15,000 Prisoners Early During COVID. New Data Reveals What Happened to Many of Them

1 hour ago

Fresno Unified Substitute Teacher Arrested in Online Child Exploitation Case

12 hours ago

Investors Buy Fig Garden Village. How Much Did It Sell For?

15 hours ago

Fresno County DA Wants Teens Tried as Adults in Caleb Quick Murder

16 hours ago

State Farm Wins First-Ever Emergency Rate Hike in California

16 hours ago

Work Permits Reinstated for UC Merced International Students, Anxiety Persists

17 hours ago

Tatum to Miss Remainder of Playoffs After Achilles Tendon Surgery

17 hours ago

Fresno Police Seek Public’s Help Identifying Shooting Suspect

17 hours ago

MLB Reinstates Pete Rose and Shoeless Joe Jackson, Making Them Hall of Fame Eligible

17 hours ago

Karbassi Running for Fresno County Elections Clerk, Says He Can ‘Do Better’

18 hours ago

Newsom Proposes Scaling Back Health Care for Immigrants in California

SACRAMENTO, Calif. — Gov. Gavin Newsom will call Wednesday for California to scale back health care for immigrants in the country illegally ...

56 seconds ago

https://www.communitymedical.org/thecause?utm_source=Misfit+Digital&utm_medium=GVWire+Banner+Ads&utm_campaign=Branding+2025&utm_content=thecause
Gov. Gavin Newsom discusses California state firefighting operations in Sacramento on April 24, 2025. In a budget presentation planned for May 14, Newsom will call on California to scale back health care for undocumented immigrants to help balance the state budget, retrenching on his desire to deliver “universal health care for all.” (Andri Tambunan/The New York Times)
56 seconds ago

Newsom Proposes Scaling Back Health Care for Immigrants in California

U.S. President Donald Trump, Qatar's Emir Tamim bin Hamad Al Thani and Boeing CEO Kelly Ortberg attend a signing ceremony in Doha, Qatar, May 14, 2025. REUTERS/Brian Snyder
10 minutes ago

Qatar Signs $200 Billion Deal to Buy Jets From Boeing During Trump Visit

A model truck at Slate Auto’s design center in Troy, Mich., on April 30, 2025. The company is backed by venture capital firms and Jeff Bezos, the Amazon founder. (Emily Elconin/The New York Times)
16 minutes ago

Is the Answer to Expensive Cars a Pickup Truck Without Power Windows?

1 hour ago

California Released 15,000 Prisoners Early During COVID. New Data Reveals What Happened to Many of Them

Carlos Gonzalez, 43, of Fresno, a substitute teacher at Fresno Unified School District has been arrested for allegedly attempting to meet a minor for sex after contacting the child through a messaging app, prompting authorities to urge potential victims to come forward. (Fresno County SO)
12 hours ago

Fresno Unified Substitute Teacher Arrested in Online Child Exploitation Case

15 hours ago

Investors Buy Fig Garden Village. How Much Did It Sell For?

Fresno clovis caleb quick
16 hours ago

Fresno County DA Wants Teens Tried as Adults in Caleb Quick Murder

16 hours ago

State Farm Wins First-Ever Emergency Rate Hike in California

Help continue the work that gets you the news that matters most.

Search

Send this to a friend