California lawmakers on Monday approved the nation\u2019s 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\u2019s most populous state last summer.<\/p>\n
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.<\/p>\n
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\u00a0a new tax on oil company profits<\/a>\u00a0after the average price of gas in California hit a record high of $6.44 per gallon, according to AAA. Taking on the oil industry has been a major policy priority for Newsom, who is widely viewed as a future presidential candidate.<\/p>\n \u201cWhen you take on big oil, they usually roll you \u2014 that\u2019s exactly what they\u2019ve been doing to consumers for years and years and years,\u201d Newsom told reporters after the vote. \u201cThe Legislature had the courage, conviction and the backbone to stand up to big oil.\u201d<\/p>\n He is expected to sign the bill into law Tuesday.<\/p>\n Legislative leaders rejected his initial call for a new tax because they feared it could discourage supply and lead to higher prices.<\/p>\n 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\u2019t a potential penalty. Instead, it\u2019s the reams of new information oil companies would be required to disclose to state regulators about their pricing.<\/p>\n 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.<\/p>\n \u201cIf we force folks to turn over this information, I actually don\u2019t believe we\u2019ll ever need a penalty because the fact that they have to tell us what\u2019s going on will stop them from gouging our consumers,\u201d said Assemblymember Rebecca Bauer-Kahan, a Democrat from Orinda.<\/p>\n California\u2019s gas prices are always higher than the rest of the country because of the state\u2019s taxes and regulations. California has the second-highest gas tax in the country at 54 cents per gallon. And it requires a special blend of gasoline that is better for the environment but more expensive to produce.<\/p>\n But state regulators say those taxes and fees aren\u2019t 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.<\/p>\n \u201cThere\u2019s truly no other explanation for these historically high prices other than greed,\u201d said Assemblymember Pilar Schiavo, a Democrat from Chatsworth. \u201cThe problem is we don\u2019t have the information that we need to prove this, and we don\u2019t have the ability to penalize the kind of historic price gouging we saw last year.\u201d<\/p>\n The oil industry recorded massive profits last year, following years of huge losses during the pandemic when more people stayed home and fewer people were on the road.<\/p>\n Eloy Garcia, lobbyist for the Western States Petroleum Association, said California\u2019s 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. He noted California does not have a pipeline to send oil into the state, meaning it has to ship what it can\u2019t produce itself from the ocean, which takes longer and costs more.<\/p>\n \u201cWe\u2019re not like Texas. We\u2019re not like Louisiana. We\u2019re not like the Northeast,\u201d Garcia said. \u201cWe do not have a fungible fuel supply. We have chosen to do that. We have set ourself up by 30 years of public policy.\u201d<\/p>\n Garcia said Monday\u2019s vote \u201csends a clear signal not to invest in California.\u201d<\/p>\n Lauren Sanchez, senior climate advisor for Gov. Gavin Newsom, said the state has plenty of supply, noting California oil refineries exported 12% of their product to other states last year.<\/p>\n \u201cWe\u2019re also the third-largest gasoline market in the world for these companies,\u201d she said.<\/p>\n<\/div>\n Subscribe to Well Adjusted, our newsletter full of simple strategies to work smarter and live better, from the Fortune Well team. Sign up today<\/a>.<\/p>\n<\/div>\n