Gov. Newsom Announces Proposed Regulations Against Oil Companies In California

Governor Gavin Newsom announced Thursday he will be proposing more regulations against oil companies in California, including instituting a new watchdog organization and adding a new price gouging penalty for oil companies.

Since the beginning of the decade, the average price of gas in California has been consistently above $4 a gallon. Last year, due to a variety of issues, including the Russia-Ukraine war, Summer gas changes, and overall supply issues, the average cost rose to above $6 a gallon for a period of several months. Few solutions were agreed to to reduce costs, including Democratic lawmakers blocking a temporary reduction of the state gas tax and relief checks sent later in the year being labeled from gas tax relief to overall inflation relief.

Late in 2022, Newsom increased pressure on oil companies and refining companies, including a gas price hike meeting in November that all major refineries, including Chevron, Marathon, Phillips 66, PBF Energy and Valero, refused to attend due to it being seen as an ‘ambush’. A special session with the Legislature on alleged price gouging was also held the next month. As the Globe noted on Thursday, this was nothing new for the Governor, with Newsom back bills such as SB 1 and other legislation going after oil companies well before he was even Governor.

This led to Newsom’s meeting with Attorney Rob Bonta and others on Thursday. Amongst the proposals include the creation of a new independent watchdog organization within the California Energy Commission (CEC) charged with monitoring California’s petroleum market on a daily basis to watch over for any unusual price activity. 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 would reveal patterns of misconduct or price manipulation, and direction to refer violations of law to the Attorney General for prosecution.

The CEC would also be allowed to set a price gouging penalty via a public rulemaking process against oil companies. The CEC would also 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.

In addition, the state would have greater authority to look into California gas price rises in the last decade and to see if there is any credence to a “mystery gasoline surcharge.”

“We’re making major progress with the Legislature to hold Big Oil accountable for fleecing Californians at the pump,” said Governor Newsom on Thursday. “With a coalition representing hundreds of organizations and local leaders backing our proposal to impose strong and effective oversight measures on oil companies, the momentum is on our side to get this done for California families. What we’re asking for is simple: transparency and accountability to drive the oil industry out of the shadows. Now it’s time to choose whether to stand with California families or with Big Oil in our fight to make them play by the rules.”

As the Globe noted on Thursday, Newsom has pushed for more regulations on the cost of gas despite proof that the high costs come mainly from state Government and not from the oil or refinery companies. In addition, the Globe pointed out the hypocrisy of many ‘supporter’ statements of the proposed regulations.

“So California, the fact of the matter is, you are paying the same or less for the crude oil contained in a gallon of gas or diesel. You are just paying a lot more for government,” said Dave Noerr.

New proposals by Newsom

Industry experts who have worked with both oil companies and state governments added to the Globe on Friday that Governor Newsom’s proposals would only hurt Californians at the pumps in the long-term.

“The things he wants to do, it would make a lot more sense to take out some state taxes rather then just put more pressure on oil companies,” explained Shane Beck, an oil refinery consultant, to the Globe on Friday. “I mean, he wants a whole new government  program just to check on every gas price rise and instituting fines for companies that put prices over a certain threshold? Does he have any idea how bad that would be? Gas prices can be pretty fickle, and there are wars in major oil producing regions right now. Sometimes gas can jump up because of a problem at a refinery in Louisiana, or because a highway delay held up some tankers. And then there are tons of little things a day  that influence the price. That’s a whole lot of things to check.”

“Oh, and then he wants to investigate a mystery surcharge? He would need to look into what the state does first, look at how they inflate the prices. I guarantee you he wouldn’t have a leg to stand on then when claiming that the oil companies are doing it.”

“Look, oil companies, and refinery companies, they are not saints. I can spend hours talking about the environmental issues alone. But when the state obviously has more problems and is contributing more to the problem, don’t put the blame squarely on one side.”

“Also, this is an aside, but we had several language experts help craft oil company press releases when refinery issues came up, especially after Deepwater Horizon. Americans are not struck by words like ‘Big Oil’ like they are used to be. And we were also told not to use the word ‘families’ in press releases because the majority of people found using that a lot to be very creepy. And the word ‘gouging’ is also very ineffective too. Whoever is writing the Governor’s press releases is actually making the Governor sound pretty bad. Look at how much they use those words.”

More on the proposals are expected to be updated soon.