California ‘Gas Price Gouging’ Law Now in Effect

A new law designed to stop price gouging by oil companies went into effect Monday, only three months after Governor Gavin Newsom signed Senate Bill 2 into law.

For years, Governor Newsom and other legislators have targeted oil companies for high gas prices due to ‘price gouging’. While industry experts and governmental organizations such as the California Energy Commission (CEC) have found no evidence that gasoline retailers fixed prices or engaged in false advertising and that other factors, such as the Russian war in Ukraine and high Californian oil and gas taxes are in part to blame for the higher prices, the Governor and the Legislature moved ahead with proposals to stop price gouging anyway.

SBx1-2, authored by Senator Nancy Skinner (D-Berkeley) moved up in March following proposals by Gov. Newsom for more oil industry regulations. While SB 2 was introduced in December 2022, the bill wasn’t brought to committee until March, becoming a rare off-session bill. It then moved up at a lightning pace. Governor Newsom made his proposals on March 17th. Then the bill passed through the three Senate Committees and the Senate itself in only two days, passing on March 23rd. On March 27th, the bill then was quickly passed through an Assembly Committee and the Assembly on the same day. While there was strong GOP opposition against the bills, with a few Democrats joining them, they nonetheless passed, with Newsom then signing the bill into law the very next day on the 28th, with a start date on the new law set for June 26th.

The law sets up four major policies:

1. A new watchdog agency on the industry, the Division of Petroleum Market Oversight, is to be set up within the CEC
2. Daily reports on the oil market and imports are now required, which will detect any price manipulation
3. All refineries are to report maintenance schedules in advance and unplanned maintenance ASAP, to help prevent gas spikes by offline refineries
4. Monthly reports will be required on refinery company profit margins for accountability purposes

According to the Governor’s office, “Working with Senator Nancy Skinner and the Legislature to pass SBx1-2, this new law creates the Division of Petroleum Market Oversight, a dedicated state independent watchdog to root out price gouging by oil companies and authorizes the California Energy Commission (CEC) to create a penalty to hold the industry accountable. The new division will closely monitor the industry on a daily basis to identify unethical or illegal behavior, and will refer any violation of law – including industry misconduct or market manipulation – to the Attorney General for prosecution.”

“Price Gouging” law comes into effect

On Monday, with the bill now in effect, Governor Newsom added in a statement that “California is delivering on our promise to hold Big Oil accountable. These new transparency laws will help us track refiners’ profits and shine a light on price manipulation so Californians aren’t vulnerable to the greedy whims of Big Oil. And this is just the start – we’re standing up the nation’s first Big Oil watchdog to monitor the industry 24/7, rooting out illegal price gouging in real-time to help you keep money in your pocket.”

However, the new law has concerned many in and out of the oil and gas industry, as many have insisted that this would not lower prices.

“Putting pressure on the oil companies like this is not going to change oil prices or their fluctuations,” explained Shane Beck, an oil refinery consultant, to the Globe on Tuesday. “If anything, it will just be a few pennies. Taxes and fees, meanwhile, are over $1.20 added per gallon right now. The Excise tax alone is 54 cents right now. How about that be lowered instead. If they are going to hit the industry this hard, they should at least give some relief on their end. But they don’t.”

“And hey, we all know that the future is in electric cars. That will happen. Everyone in the industry knows it. But we’re not quite there yet, and the majority of drivers still need gasoline. And now California pulls this. It’s not quite forced adoption, even with that no new gas-powered car sales past 2035 law out there, but it’s damn close. The first reports on how this law is going will be interesting to say the least, because it might just reveal how unnecessary this law is.”

The first reports on the new oil law are likely to come later this year.