California OKS potential fines for high gas prices

SACRAMENTO, Calif. — California lawmakers on Monday approved the nation’s first penalty for price gouging at the pump, voting to give regulators the power to punish oil companies for profiting from the type of gas price spikes that plagued the nation’s most populous state last summer.

The Democrats in charge of the state Legislature worked quickly to pass the bill on Monday, just one week after it was introduced. It was an unusually fast process for a controversial issue, especially one opposed by the powerful oil industry that has spent millions of dollars to stop it.

Democratic Gov. Gavin Newsom used his political muscle to pass the bill, which grew out of his call last December for a special legislative session to pass a new tax on oil company profits after the average price of gas in California hit a record high of $6.44 per gallon, according to AAA.

“When you take on big oil, they usually roll you — that’s exactly what they’ve been doing to consumers for years and years and years,” Newsom told reporters after the vote. “The Legislature had the courage, conviction and the backbone to stand up to big oil.”

He is expected to sign the bill into law Tuesday.

Legislative leaders rejected his initial call for a new tax because they feared it could discourage supply and lead to higher prices.

Instead, Newsom and lawmakers agreed to let the California Energy Commission decide whether to penalize oil companies for price gouging. But the crux of the bill isn’t a potential penalty. Instead, it’s the reams of new information oil companies would be required to disclose to state regulators about their pricing.

The companies would report this information, most of it to be kept confidential, to a new state agency empowered to monitor and investigate the petroleum market and subpoena oil company executives. The commission will rely on the work of this agency, plus a panel of experts, to decide whether to impose a penalty on oil company profits and how much that penalty should be.

California’s gas prices are always higher than the rest of the country because of the state’s taxes and regulations.

But state regulators say those taxes and fees aren’t enough to explain last summer, when the average cost of a gallon of gasoline in California was more than $2.60 higher than the national average.

Eloy Garcia, lobbyist for the Western States Petroleum Association, said California’s high gas prices are the result of decades of public policy decisions that have made the state an island in the global petroleum market and driven many oil refiners out of the state.