Newsom tries to scapegoat oil industry, again

Just as he did in 2019, Gov. Gavin Newsom is blaming oil industry “price gouging” for the fact that California has far higher gasoline prices than the rest of the country. At that time, Newsom demanded an investigation by the California Energy Commission, which ended with a 10-page report citing the effect of the state's own policies and finding no evidence of illegal activity. Then Newsom sent the matter to Attorney General Xavier Becerra to investigate further. Becerra ultimately found that the actions of two international energy traders had possibly accounted for a price increase — of about 1 cent per gallon.

As the November 2022 election approached, Newsom rolled out the same act again, thundering about oil industry “price gouging,” calling for a windfall profits tax and vowing to call a special session of the Legislature to hurry it into law. Then the windfall profits tax was tossed out in favor of a bill that would set penalties for excess profits. Even that proposal met with skepticism from lawmakers, some of whom pointed out that it would cause oil companies to limit how much gasoline they are willing to sell in California, resulting in gas shortages and higher prices.

But like an undead vampire flying to the necks of California consumers, the governor's proposal is back in a new form. This week, Newsom announced that he reached an agreement with legislative leaders to advance a bill that would empower the state bureaucracy to do what the Legislature did not want to do — impose penalties for “excess” profits.

“We're going to hold Big Oil accountable for ripping off Californians at the pump,” Newsom said.

“With this bill, the state will finally have the tools to get answers on oil profits and put a stop to price gouging,” said Senate President pro Tempore Toni G. Atkins.

“Gas prices are out of step with the rest of the country,” said Assembly Speaker Anthony Rendon.

Senate Bill 2, or SBX1-2 as it's designated in the special session, would authorize the California Energy Commission to establish a “maximum gross gasoline refining margin” and “impose an administrative civil penalty on a refiner” for exceeding it. The money would be deposited into a new “Price Gouging Penalty Fund” in the state treasury. Unlike an earlier version of the governor's proposal, the money would not be “returned, as refunds to residents of the state.” That phrase was stricken out. In this version, the money would be spent by the Legislature to “address the consequences of price gouging on Californians.” No refunds.

The 2019 report of the California Energy Commission found that the price difference between California and other states was due to “California's additional program costs.” These include the mandated low-carbon fuel standard and the capand-trade program, both intended to reduce greenhouse gas emissions, and the special summer and winter fuel blends that have been required decades to improve air quality.

In addition, California has extraordinarily high taxes on gasoline, now raised annually to adjust for inflation. The rest of the cost differential can easily be explained by the well-documented higher cost of doing business in California.

The Legislature should reject SBX1-2. Despite its intentions, it would put the state at risk of gas lines and higher prices. Call your representatives (findyourrep.legislature.ca.gov) before it's too late.