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Governor Newsom and Legislative Leaders Strike Deal on Proposal to Hold Big Oil Accountable

Government and Politics

March 20, 2023

From: California Governor Gavin Newsom

SACRAMENTO – Governor Gavin Newsom’s special session proposal to hold Big Oil accountable, authored by Senator Nancy Skinner (D-Berkeley), is now in print. The measure includes a dedicated, year-round independent watchdog to root out price gouging by oil companies.

The language of the special session proposal can be found here. With this step, the bill can now move through the legislative process of committee hearings and votes.

What Governor Newsom said: “Together with the Legislature, we’re going to hold Big Oil accountable for ripping off Californians at the pump. Today’s agreement represents a major milestone in our efforts to drive the oil industry out of the shadows and ensure they play by the rules. This represents some of the strongest and most effective transparency and oversight measures in the country, and the penalty would root out price gouging. We’re getting the job done for California families.”

The Governor last week met with Attorney General Rob Bonta, co-sponsor of the measure, and representatives from a broad coalition of nearly 200 organizations, stakeholders and local leaders supporting the measure to create strong and effective new oversight over oil companies to protect Californians.

“Let’s face it: Californians deserve answers and accountability for the prices we’re paying at the pump. We know what the costs of maintaining our roads and meeting our climate goals are, and with this bill, the state will finally have the tools to get answers on oil profits and put a stop to price gouging,” said Senate President pro Tempore Toni G. Atkins (D-San Diego). “I want to thank Senators Skinner, Bradford, Limón, and McGuire for their work on reforms that include the transparency and accountability needed to stop any wrongdoing and to protect California consumers.”

“Gas prices are out of step with the rest of the country, so it is important that we can move forward with measures that will begin to put the brakes on oil company price gouging. An accountability structure is a major step to requiring producers to justify price hikes,” said Assembly Speaker Anthony Rendon (D-Lakewood). “I thank my Assembly colleagues Irwin, Lee, Ting and E. Garcia for working with the administration to refine this plan, and our colleagues in the Senate for putting the plan into legislation.”

The proposal would create a new, independent watchdog within the California Energy Commission (CEC) charged with monitoring California’s petroleum market on a daily basis to ensure market participants play by the rules. The division would have access to new information required to be reported by refiners, subpoena power to compel production of other data and records that could reveal patterns of misconduct or price manipulation, and authority to refer violations of law to the Attorney General for prosecution.

Additionally, the CEC would be authorized to set a price gouging penalty via a public rulemaking process, to hold Big Oil accountable for making excessive profits at the expense of Californian families. The CEC would establish a penalty structure that deters excessive pricing by imposing a civil penalty on refiners who charge more than a maximum allowable margin for the price of gasoline.

The Governor’s proposal also enhances the state’s authority to analyze why California has seen unexplained higher gas prices since 2015 – sometimes referred to as the “mystery gasoline surcharge” – and enforce reporting requirements on the oil industry to provide greater transparency into California’s petroleum market and encourage companies to play by the rules.

HOW WE GOT HERE:

    Gas prices reached a high of $6.42 per gallon last fall, a record $2.61 more per gallon than the national average. Last fall’s spike occurred while crude oil prices dropped, state taxes and fees remained unchanged and gas prices did not increase outside the western U.S., so the high prices went straight to the industry’s bottom line.

    This spike in gasoline prices resulted in record refiner profits of $63 billion in just 90 days, disproportionately affecting low- and middle-income families, driving inflation higher and making it harder for California families to make ends meet.

    The Governor convened a special session of the Legislature in December to hold Big Oil accountable with a price gouging penalty. Also in November, all five major oil refiners refused to attend a state hearing to investigate the unprecedented spike in gas prices.

    Governor Newsom will protect consumers from ongoing price gouging by requiring refiners to confidentially report information needed for the state to effectively monitor and deter harmful conduct by the fuels industry.

    Governor Newsom’s proposal includes establishing a new division within the CEC to provide independent oversight and analysis of California’s petroleum market for the protection of consumers. The new division would have the power to subpoena information deemed necessary to root out and address abuse of market power in the petroleum market in California.

    The Governor’s price gouging penalty would discourage oil refiners from fleecing Californians by authorizing the California Energy Commission (CEC) via a public rulemaking process, and informed by expert analysis, to impose a civil penalty on refiners who have engaged in price gouging.