California Passes Bill To Control Gas Prices

California Passes Bill To Control Gas Prices

John Hugh DeMastri on March 28, 2023

The California State Legislature passed a bill Monday night that would establish a limit on the profit margins oil companies can earn refining gasoline in the state.

The proposed legislation is expected to be signed Tuesday morning by Democratic Gov. Gavin Newsom, who helped craftthe bill, and grants the governor greater oversight of an industry he has frequently criticized for alleged profiteering, according to Bloomberg. The bill creates a government watchdog that has the ability to impose a limit on oil companies’ profits and exact penalties on firms that fail to comply, in a bid to control soaring gas prices in California.

Newsom’s office would have greater power to investigate what it has referred to as a “mystery gasoline surcharge,” alleging in a March 20 press release that gasoline prices have been elevated in the state for “unexplained” reasons since 2015. The Los Angeles Times reported in December that some, but not all, of the higher prices in California could be accounted for its declining number of refineries, heavy reliance on foreign importers such as Russia, high gas taxes and lack of interstate pipelines.

Refining capacity — the state had just 10 oil refineries active in December compared to 50 in recent decades — has declined in part due to the state’s push for refiners to switch to the renewable energy sector, Bloomberg reported.

At time of writing, gas prices in California were $4.82, the most expensive in the nation and nearly $1.40 higher than the national average, according to the American Automobile Association.

The Western States Petroleum Association, a major trade group representing the interests of oil companies, has criticized the bill for empowering “unelected bureaucrats and giving them the authority to tax, investigate and penalize refiners,” which it alleges will result in unintended consequences, Bloomberg reported March 20.

California has already implemented rules to ban the sale of gas-powered cars by 2035 and is expected to receive approvalfor a set of rules to ban the sale of diesel-powered heavy duty vehicles from the Environmental Protection Agency.