Newsom Signs Bill that will Penalize Potential ‘Price Gouging’ at the Pump

Governor Gavin Newsom has signed a bill that would address price gouging at the gas pump. 

This comes months after legislation that put new restrictions on oil refineries was signed into law. 

What’s in the Bill? 

The bill, SBX1-2, was passed 58-19 in the Assembly a week after being approved by the State Senate. It would allow the state of California to penalize oil companies for price gouging. 

SBX1-2 will create an “independent watchdog to root out price gouging and authorize the California Energy Commission (CEC) to create a penalty to hold the industry accountable.”  

The independent division of the CEC will be staffed by market experts and economists who will provide market oversight and analysis. In addition, they will have subpoena power to investigate oil companies and refer violators to the Attorney General’s office for potential prosecution. 

In a decade, state auditors will be required to investigate if the legislation is effective in lowering gas prices. If not, the auditor will have the ability to shut down the program. 

The bill will go into effect on June 26th, nearly three months after its passage. 

Why?

California has among the highest gas prices in the country, reaching a high of $6.42 per gallon last year. 

Since 2022, Governor Newsom has believed that the petroleum industry in California has “fleeced” residents after reports of oil companies making record profits. 

His belief in that went far enough that he pushed for a cap on profits by the companies in question. However, the legislature shut down the idea. 

Thus, Newsom settled on the creation of an independent agency to oversee the industry. He hopes this will ease gas prices in years to come as more Californians switch to electric vehicles.

Opposition 

While Governor Newsom has held firm in his assertion that oil companies have been price gouging to lift prices at the pump, many disagree. 

The California Energy Commission believes the primary reasons for higher gas prices in the state are: 

• Global Crude Market 
• Geopolitical Issues 
• Isolated Refinery Market 
• Cleaner Fuel Blends 
• Environmental Program Costs 
• Taxes

While the global crude market and geopolitical issues raised the rest of the world’s gas price last year, the other reasons listed are California alone. 

Over 90% of the gasoline Californians use is produced in the state via 11 refineries. Together they produce over 1.6 million barrels of crude oil per day. The 11 refineries also supply Nevada and Arizona with a high percentage of gasoline. 

However, in California, these refineries face higher gasoline taxes and strict environmental laws. The state has the 2nd highest gas tax in the nation at just over $.50/per gallon. However, Pennsylvania’s tax is higher yet fuel prices are much lower. 

One of the reasons for that is California requires oil refineries to produce a specific blend of fuel. While the gasoline blend is better for the environment, it is more expensive to produce. 

Those who oppose Newsom’s recent legislation explain that these are the reasons why California’s gas prices have soared higher than other states. While many agree on that, regulators still say the difference between California’s prices and other states is too high to be solely based on regulation and taxes. 

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