Home>Articles>Gov. Newsom Proposes Penalties for Oil Company ‘Price Gouging’ But Ignores State’s Highest Gas Taxes

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Gov. Newsom Proposes Penalties for Oil Company ‘Price Gouging’ But Ignores State’s Highest Gas Taxes

In years when inflation is highest and Californians can least afford it, fuel taxes go up the most

By Katy Grimes, December 5, 2022 4:36 pm

Californians are paying the highest gas prices in the entire nation, with the current price nearly $6 a gallon in many locations, according to AAA. Gov. Gavin Newsom claims this is because of greedy oil companies and “price gouging.” Consequently, the governor and Legislature held a special session Monday, and “unveiled a proposed price gouging penalty on oil companies’ excess profits.” They claim this is “to deter excessive price increases and keep money in Californians’ pockets.”

Following the special session of the Legislature, in a press statement titled, “Governor Newsom Unveils Price Gouging Penalty on Big Oil’s Excessive Profits to Protect Californians from Being Ripped Off,” Newsom claims his proposal would discourage oil refiners “from fleecing Californians” by making it unlawful to charge excessive profits. And if they do, “excessive refiner margins would be punishable by a civil penalty from the California Energy Commission.”

The Globe talked with oil industry expert, Dave Noerr, who is also the Mayor of Taft, CA, and President and CEO of Huddleston Crane Service, about Gov. Newsom’s proposal. Noerr says the governor is grossly wrong, and that this is “déjà vu all over again.”

“California’s price gouging penalty is simple – either Big Oil reins in the profits and prices, or they’ll pay a penalty,” said Governor Newsom. “Big Oil has been lying and gouging Californians to line their own pockets long enough. I look forward to the work ahead with our partners in the Legislature to get this done.”

“Putting the Governor’s proposal in print allows the Legislature and the public to begin discussions on this important issue. No one can deny that California’s gas prices were outrageously high compared to other states. And those high prices hurt California consumers and businesses,” said Senator Nancy Skinner (D-Berkeley), who authored the governor’s proposal.

What does this new bill authorize?

  • Expands the Energy Commission’s authority to investigate and obtain information regarding pricing, supply contracts, and inventory management, from participants in the market for transportation fuels.
  • Expands the Energy Commission’s authority to order that refinery maintenance and turnarounds be rescheduled in specified circumstances, when consistent with employee and public safety and necessary to avoid supply shocks in the market for transportation fuels.
  • Requires the Energy Commission and the State Air Resources Board, in consultation with the state’s fuel producers and refiners, to plan for and monitor progress toward the state’s reliable, safe, equitable, and affordable transition away from petroleum fuels…
  • Directs the California Department of Tax and Fee Administration, in collaboration with the State Energy Resources Conservation and Development Commission, to investigate and report on the drivers of and factors affecting the price of gasoline in the refining, distribution, and retail segments of the gasoline market; to uncover pricing irregularities in the California gasoline market and their effect on tax revenue; and toCOPY report its findings to the Governor and the Legislature.

You see where this is going – further regulations on the oil and gas industry instead of suspending California’s hefty existing taxes on oil, gas and diesel fuels, the governor wants to impose a new tax on oil/gas suppliers, which will inevitably make gas prices even higher.

It’s as if Gov. Newsom and Senator Skinner are facilitating the state takeover of the oil industry, with their proposal telling oil refineries when they can perform maintenance, and penalize them over profits.

Noerr says this is “another day, another attention grabbing headline,” by Gov. Newsom. He said the deja vu part is California Democrats investigating the cause(s) of high gas prices. “On April 22, 2019 Governor Newsom asked the California Energy Commission to do an in depth analysis of differential cost between national & California gas prices,” Noerr said. “In the end, the report delivered October 15, 2019, ruled out refiner margins as well as crude oil prices. The CEC also found ‘no evidence that gasoline retailers fixed prices or engaged in false advertising.’ The same holds true today, yet here we go again with the witch hunt.”

Noerr said the convenient scapegoat over high oil and gas prices has been Russian President Vladimir Putin. “But historical facts in California paint a different picture.” Noerr played out the recent history:

  • California set its record for the retail cost of gas in June of 2008 at $4.53 a gallon, according to the Energy Information Agency (EIA), Global oil averaged $131.00 a barrel that month.
  • In October 2012 we hit that cost of gas again but crude only averaged $103.00 that month.
  • We broke that all time record, not when Putin invaded Ukraine, but on November 15, 2021, when crude oil averaged $82.00 a barrel- more than 3 months before the invasion of Ukraine.
  • The prices of gas and diesel have continued to climb since that day. 

“A closer look at the numbers shows an interesting trend. In June of 2008 oil cost $3.12 a gallon or 69% of the cost of a gallon of gas,” Noerr said. “When gas hit $4.53 a gallon next in 2012, oil cost $2.45 a gallon, 54% of the cost of a gallon of gas. In November of 2021 when gas hit $4.60 a gallon, oil cost $1.95 a gallon or 43% of the cost of a gallon of gas.” And Noerr said this was a full three months ahead of Putin’s attack on Ukraine.

Noerr continued: “So, the portion of the cost of a gallon of gas, represented by the cost of crude oil, went from 69% in 2008 to 54% in 2012 to 43% in 2021. And on July 1, 2022 this trend continued. Why?”

“On November 1, 2017, then Governor Jerry Brown supported by Lieutenant Governor Gavin Newsom, signed Senate Bill 1 which substantially increased vehicle registration fees as well as taxes on diesel and gas,” Noerr said. “SB1 also has a provision to automatically, without discussion, increase taxes on gas and diesel annually based on inflation every July 1st, and it has been increasing annually since that date. So, in years when inflation is highest and Californians can least afford it, fuel taxes go up the most.”

Gov. Newsom and Democrats are playing a form of bait-and-switch with taxpayers. They are trying to keep your eye focused on evil Big Oil while they push their green agenda which involves California banning the sale of all gas powered vehicles in the state in just 13 years, replacing them with electric vehicles.

Gov. Newsom must not have read the memo this past weekend: Swiss officials just drafted emergency proposals to ban electric cars and restrict power usage because of energy shortages this winter, the Telegraph reported on Saturday.

Green energy cannot replace oil and gas, and is nowhere near close to replacing oil, gas or coal, yet in September 2020, using his emergency authority during the Covid crisis, Governor Gavin Newsom issued an executive order requiring sales of all new passenger vehicles to be zero-emission by 2035 and “additional measures to eliminate harmful emissions from the transportation sector.” Prior to his executive order, California was aiming to eliminate internal combustion engine autos by 2050.

Assembly Republican leader Jim Gallagher and then-Assemblyman Kevin Kiley offered a solution to California’s highest-in-the-nation gas prices earlier this year, proposing to suspend California’s .54 cent gas tax. But Democrats on the Assembly Transportation Committee hijacked Kiley’s legislation by passing amendments to gut the bill so they could not be accused of voting for the gas tax increase.

Here are some of the policies implemented in California by the Legislature and governor that drive up the cost of gasoline through tax add-ons:

  • 54.1 cents – State gas tax
  • 25 cents – Cap and Trade (estimate)
  • 22 cents – Low Carbon Fuel Standard (estimate)
  • 2 cents – Underground Storage Fee
  • 10-15 cents – California’s switch to summer-blend costs more to produce than other types of gasoline.
  • 14.4 cents – State sales tax (estimate based on 6/20 average price)

Notably, as Globe contributor Chris Micheli observed Monday, “It would appear that a penalty (like a fine) is a type of monetary charge assessed for violating the law. And types of fines and penalties, such as violating the Vehicle Code (e.g., for speeding), are used to punish an offender for violating the law. So, when the Legislature imposes a new Vehicle Code prohibition, and requires a fine or penalty to be paid by the violator, that bill does not require a 2/3 vote.”

“For a penalty against ‘excessive margins,’ one would have to presume that such a bill would provide that an oil company could only make a specified margin on the sale of gasoline in this state, and when a company makes more than that specified margin, then the company would violate the law, and therefore the State could impose a penalty for violating the margin law.”

The language of the proposed price gouging penalty can be found here.

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17 thoughts on “Gov. Newsom Proposes Penalties for Oil Company ‘Price Gouging’ But Ignores State’s Highest Gas Taxes

  1. Great article about the Gov’s latest obnoxious attempt to get more attention for his Prez bid.
    We can only conclude from this article that if anyone is fleecing anyone (hey, Gavin and his flunky legislator Sen Nancy Skinner brought it up, we didn’t), it’s the Gov fleecing Californians with those numerous bogus fees and taxes which he, with his executive powers, can remove at any time, and which are scheduled to increase for inflation on auto-pilot, don’t forget —- tacked on to the Grampy Joe-created skyrocketing gas and other energy prices that are killing (maybe literally) Americans as we speak.

    1. The Gov’s regulations, taxes, and authoritarian rules regarding production of gas will do exactly what the Demos want, raise the cost of gas in the future and force people to buy E autos. Working to make their 2035 prediction come to pass.

  2. I’ve got a couple of questions for Governor Glamour Shots:
    1. How do you power the farm equipment at your wineries?
    2. How did the Getty family earn the money that financed your wineries?

      1. 3. Does the wine industry provide employment for everyone from high school dropouts to PhD’s the way that the petroleum industry does?

  3. what is: 25 cents – Cap and Trade (estimate) tax?
    How is it legal to have a state sales tax on top of the ther gas taxes? Isn’t that taxing a tax? How is that legal?

    1. In my city, Water & Power surpluses go into the city’s general fund, which means we are being overcharged every month. What are those surplus payments of residents if not a tax? We are then charged a city Utility Users Tax (which residents voted to levy on themselves – ! – some years ago under threat of police and fire cuts) on the total amount, which is a tax on a tax. Illegal I’m sure, but the money transfer from Water & Power has been done by the city with impunity for years if not decades. It’s a “tradition!” No entity protesting this practice has thus far been successful in ending this practice.

    1. How do you determine “excessive” profits? Individual wines from Newsom’s FatJack winery are priced $70-$170. That seems excessive to me.

      It’s the san francisco way to create artificial shortages which decrease supply and drive up prices, thus creating opportunities for san francisco politicians to be melodramatic. Other examples: a housing “crisis” and outrageous housing prices in san fran due to byzantine/complex permitting processes, drought due to “flushing” the san fran bay with fresh water from the Central Valley

  4. I’m still seeking answers to how the state will makeup for lost review as the ban fuels of all sorts here in California. How will this affect counties who sales tax brings in bundles.. Here in the City of San Luis Obispo you can no longer have NG in you new home. You are required to buy electricity from a city electric supplier.

  5. Newsom has zero regard for human life, only his agenda and power. Recently experienced a 4-hour power outage, 5-9pm, with temps in the 30’s, placing lives at risk. The saving grace being gas-powered generators, fireplace, gas stove, and the ability to siphon fuel from underground storage tanks for emergency vehicle use if needed. A wind turbine will fail long before it is able to produce enough electricity to justify resources used to manufacture it, many of which are oil-based, while turbine blades cannot be recycled and are buried (environment?). Check Newsom’s Twitter video relating to oil, something’s amiss. No crows feet, expression lines in his forehead, barely facial hair…. who is this ‘person’?

    1. Wow, you’re not kidding, Marilyn, just saw Gav’s Twitter oil video. What a weirdo he is. Looks like maybe he’s had work done? Sorta like Kamala did before she was suddenly our V.P. Or maybe he used a filter, like a Kardashian. “Something’s amiss,” as you said, for sure. What do you think is going on with him — any thoughts?

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