Gov. Newsom’s Artificial Gas Shortage Plan: Playing Politics with Fuel

If the ‘Big Oil’ companies are so greedy, why are they only greedy in California and not greedy in every state?

California’s Assembly Democrats voted Tuesday to pass Governor Gavin Newsom’s proposal to decrease the state’s gas supply, which will clearly result in even higher gas prices at the pump.

Californians are already paying the highest gas prices in the entire country – even higher than Hawaii, according to AAA today.

Texans pay $2.73 per average gallon of gas. That’s a difference of nearly $2.00 per gallon that Californians pay a premium for.

California Governor Gavin Newsom called for a special legislative session after accusing California’s oil refineries of price gouging. The governor claimed that “Gas price spikes on consumers are profit spikes for oil companies, and they’re overwhelmingly caused by refiners not backfilling supplies when they go down for maintenance.”

ABX2-1 will give the California Energy Commission more authority to impose new mandates for oil storage requirements on oil refineries in California, even as California is on the verge of an energy crisis with the push for electrification by 2035, as John Kabatek, California State Director, National Federation of Independent Business warned last week. “The regulation requirements in ABX2-1 will artificially create a fuel shortage crisis due to limiting the distribution of fuel.”

Catherine Reheis-Boyd, President and CEO of the Western States Petroleum Association shared her statement over passage of ABX2-1 today in the Assembly:

“Today’s vote on ABX2-1 represents false progress. Many critical questions about how this mandate will actually work—and at what cost to consumers and refinery workers—remain unanswered. Until lawmakers roll up their sleeves and engage in the hard work of finding real solutions, Californians will continue to pay the price for rushed, incomplete policies.

“As California’s special session unfolds, the notion of mandating refineries to store fuel supplies may seem like a simple fix to price spikes, but the reality is far more complex. The math behind this proposal is incomplete and fails to address key operational questions. For example, how many days of supply will refiners be forced to withhold from the market? What will the storage costs be? And crucially, what happens if a price spike never materializes—are Californians then stuck paying more year-round for no reason?

“This theory of cost savings is just that—a theory. Without a deep understanding of the complexities of refinery operations, policymakers are gambling with consumers’ wallets. We, as an industry, are ready to roll up our sleeves and address the root causes of California’s volatile energy market, which has been shaped by decades of policies. We call on legislators to do the same. Californians deserve solutions grounded in reality, not rushed ideas pushed through during a special session. This bill lacks the time, detail, and diligence required to truly address the problem.

“We must take the time to find a better way forward—one that balances the need for affordable energy with the complexities of our energy infrastructure, rather than relying on untested economic theories that put consumers at risk.”

Assemblyman Tom Lackey (R—Palmdale) said:

“Californians are working hard to put food on the table, pay the rent and keep the lights on. They are driving as much as two-hours each way to earn a paycheck.

“Hardworking Californians deserve better than the Governor’s experiment.

“The Governor should listen to his own administration. In their 87 page report, his appointees said his proposal could create artificial supply shortages, and inadvertently increase gas prices.

“Families are struggling with inflation and an affordability crisis. California leaders should be focused on immediately lowering costs for consumers. It can be done by suspending the $0.60 per gallon state gas tax.”

California Republican Party Chairwoman Jessica Millan Patterson:

“I wish I could say I was surprised by Assembly Democrats’ reckless decision to pass Governor Newsom’s radical refinery storage mandate, but supporting a bill that is expected to raise gas prices and cause shortages is perfectly on brand for them. Californians are already paying the highest gas prices in the nation, and instead of working with Republicans on commonsense solutions to lower energy costs for everyone, Democrats doubled down on their incompetent agenda. Voters won’t forget Democrats’ slap in the face to hardworking Californians struggling to make ends meet.”

Assembly Republicans had this to say:

Today, Assembly Democrats passed Gavin Newsom’s refinery storage mandate — a reckless proposal that his own Energy Commission, fuels market experts, and the governors of Arizona and Nevada warned could increase prices and cause gas shortages.

“Gavin Newsom is continuing his legacy of driving up costs for drivers and Assembly Democrats are once again enabling his pricey agenda,” said Assembly Republican Leader James Gallagher (Yuba City). “Newsom’s scheme won’t do a damn thing to lower gas prices, and he knows it. As long as Democrat politicians refuse to stand up to the governor, costs at the pump are only going to increase.

As Ed Ring reported for the Globe last week:

…much of the high price for gasoline in California is caused by higher taxes. In July 2024, when the average price per gallon in California was $4.49, state taxes, fees, and programs added $1.23 to the price, along with another $0.18 of federal excise tax. The cost of crude oil added $2.04 and “industry costs and profits” added $1.04. Included in that last number are not only refinery operating costs, but also distribution and marketing costs.

California’s state government collects corporate income tax on oil company profits, which adds to the $1.23 they collect in direct taxes and fees on a gallon of gas. So one may ask, since our governor is so concerned about California’s consumers getting gouged at the pump, why the amount the state collects on every gallon of gasoline is grossly in excess of not only industry profits (before taxes), but profits plus total operating costs. Who, then, is gouging who?

As the Globe has asked repeatedly, “If the ‘Big Oil’ companies are so greedy, why are they only greedy in California and not greedy in every state?”

As WSPA’s Catherine Reheis-Boyd summed up, “California’s growing energy demand requires all forms of energy, including oil and gas, which will remain essential for decades to come. The focus should be on making energy affordable and ever-cleaner, not artificially disrupting our state’s ability to provide it.”

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For additional background, here is more of our reporting on the Newsom Effect on California’s oil and gas industry:

In February 2023, the Globe reported, In October 2022, Gov. Newsom addressed the $2.50 difference between California’s highest-in-the-nation gas prices, over $7.00 in some California locations, and the rest of the country in a video. “This degree of divergence from the national prices has never happened before. And oil companies? They provide no explanation. The fact is, they’re ripping you off,” he said. “Their record profits are coming at your expense.”

Newsom left out of his video the part where in 2021 he largely killed hydraulic fracturing for natural gas in California as part of his overall plan to end oil extraction. He also announced his action to halt issuance of fracking permits by 2024.

Gov. Newsom also signed a package of “sweeping legislation” in September 2022 to achieve statewide carbon neutrality as soon as possible, and no later than 2045, by establishing an 85% emissions reduction target, capping oil wells, slowing oil and gas permitting, making it impossible to increase refining capacity, and entirely phasing out oil and gas starting in two years.

That “sweeping set of laws” Newsom touts is 40 new climate change bills regulating California businesses and its people. And that’s just the start.

In 2019, During Gavin Newsom’s first year in office, the Trump administration Bureau of Land Management finalized plans to open 800,000 acres of federal land in Central California to oil and gas leasing, primarily located in Fresno, Monterey and San Benito counties. This would have allowed oil and gas drilling to move forward in Alameda, Contra Costa, Fresno, Merced, Monterey, San Benito, San Joaquin, San Mateo, Santa Clara, Santa Cruz and Stanislaus Counties, according to a report by the Bureau of Land Management.

This caused environmentalists’ and Democrats’ heads to explode. “California won’t stand idly by while the Trump Administration pushes forward a project that endangers our communities and natural resources,” then-Attorney General Xavier Becerra said.

Just ahead of the BLM announcement, Gov. Gavin Newsom ordered the firing of California’s top oil regulator after environmental activists reported a recent spike in state fracking permits and allegations that senior officials within the Division of Oil, Gas and Geothermal Resources own stock in petroleum companies they oversee,” Bakersfield.com reported.

“The Western States Petroleum Association, one of California’s leading oil trade groups, attributed the surge in fracking permits to the resolution of a bottleneck in the approval process.” Bakersfield.com has extensive detail about this.

California sued the Trump administration in 2020, with Attorney General Xavier Becerra calling the Bureau of Land Management plan “half-baked” and “misguided.” Becerra said the plan conflicts with California policy of reducing emissions of planet- warming gases 40% by 2030, KQED reported.

The overall goal of Newsom’s “sweeping” climate change package is “Achieving net zero GHG emissions” in the state, and to Newsom and his acolytes, that means outlawing oil and gas. So pretty much everything we use in modern society needs to be upended, overhauled, and restricted, according to the Gov. Newsom and the burgeoning industry of climate change hustlers.

The California Legislature had a chance to halt increasing California gas tax increases in 2022, but they didn’t. In March 2022, the Assembly Transportation Committee was set to hear AB 1638 by then-Assemblyman Kevin Kiley, to suspend California’s .51 cent gas tax (CA gas tax is now .54 cents). Kiley noted that Maryland and Georgia had just reduced their gas taxes, and the people of those states saw immediate results. He said rebates are a good idea, especially with a substantial state surplus, and should be much larger, returning to overtaxed tax payers more of their own money.

Kiley’s bill was hijacked by Democrats who passed amendments to gut the bill so they could not be accused of voting for the gas tax increase.

Continue reading here.