California Senate Advances Bill That Would Penalize Oil Companies

The measure is a response to record-high prices at the pump in 2022.

March 27, 2023

ALEXANDRIA, Va.—In California, a bill has passed the state Senate that would penalize oil companies. It advances to the California House this week.

The bill was authored by Nancy Skinner at the behest of California’s governor, Gavin Newsom. The bill would allow a state commission to impose penalties on oil companies.

Gov. Newsom’s office says that the bill would establish a new watchdog within the California Energy Commission (CEC) “charged with monitoring California’s petroleum market on a daily basis to ensure market participants play by the rules.”

The CEC could set “a price gouging penalty” to “hold Big Oil accountable for making excessive profits at the expense of Californian families.”

According to the U.S. Energy Information Administration, gas prices in California averaged $6.294 [LK1] in June of 2022. Three other months had averages of more than $5.80 per gallon.

“Newsom, a Democrat seen as a possible presidential candidate beyond 2024, reacted by attacking the oil industry, specifically the five companies that provide 97% of gasoline in the state,” the Los Angeles Times reports.

California’s climate strategy would see the state lower demand for gasoline by 94% by 2045.

“California’s gas tax is the second-highest in the country at 54 cents per gallon. And the state requires oil companies to make a special blend of gasoline to sell in California,” according to the Los Angeles Times.

State Sen. Kelly Seyarto, a Republican from Murrieta, opposes the new bill. “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.”

The NACS Convenience Corner blog post “Do Oil Companies Make Money on High Gas Prices?” examined the issue last year and noted that profitability for oil companies is largely tied to oil prices, not gas prices. The NACS Fuels Resource Center has more than a dozen backgrounders on topics, including “Factors That Affect Gas Prices.”