California’s Gas ‘Price Gouging’ Bill Is Now in Effect

The nation’s first of this kind bill creates a new watchdog office.

June 27, 2023

In response to record high gas prices, the Governor of California, Gavin Newsom, signed a law (SBX1-2) into effect that his office describes as an effort to “combat price gouging at the pump.”

Californians paid an average of $6.294 per gallon in June of 2022, with gas prices routinely topping $5.

California aims to reduce the demand for gasoline by 94% by 2045; the state has the second-highest gas tax in the country (54 cents per gallon) and requires oil companies to sell a special blend of gasoline to the state’s residents. State Sen. Kelly Seyarto (R-Murrieta) opposed the bill back in March, “To sum it all up, it’s our energy policy—our energy policy and our efforts to replace fossil fuel with all electric in a very, very short amount of time,” she said. “Why can’t we just tell our constituents that? That’s why your gas prices are so high.”

SBX1-2, which took effect June 26, created the Division of Petroleum Market Oversight, an independent state watchdog. The law also enables the California Energy Commission (CEC) to issue penalties to the violators.

According to the release from the Governor’s office, the new law requires:

  • Daily reports on the market and imports
  • Refineries to report maintenance schedules in advance and unplanned maintenance in real time
  • Monthly reports on refiners’ profit margins

Senator Nancy Skinner (D-Berkeley), who authored the bill, said, “Californians faced outrageously high gas prices last year, prices that strained family budgets an extra $600 or more a month. In calling for immediate action, Governor Newsom responded decisively in proposing SBX1-2, the strongest, most effective transparency and oversight measure in the nation.”

Dissenters of the bill argue that the new law will encourage lower gasoline supply and thus drive prices higher. “At the end of the day, this proposal does not solve Californians’ gasoline supply problem and will likely lead to the very same unintended consequences legislators have reiterated to the Governor: less investment, less supply, and higher costs for Californians,” Kevin Slagle, spokesperson for the Western States Petroleum Association, remarked earlier this year when the bill was proposed.

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