Newsom’s gas price proposal debated at special session legislative hearings

Lawmakers gathered in Sacramento this week in a bid to prevent gas prices from soaring in the Golden State.

The first two hearings of the state Assembly’s special session to consider Gov. Gavin Newsom’s proposal to prevent gas price spikes via a refinery supply mandate come amid criticism from oil companies that new rules would create artificial shortages of fuel in California.

Newsom, a second-term Democrat who has been accused by conservatives of pursuing gas-pricing regulations to gain political points, wants refineries to maintain back-up supplies so that when they go offline for routine and emergency maintenance, therefore reducing supplies, gas prices won’t rise dramatically. Last year, a lack of surplus crude oil cost Californians upward of $2 billion while refiners netted $50 billion in profits, Newsom said in a statement.

“Right now, Big Oil can and does let supply dip, artificially creating higher prices at the pump and letting oil companies reap the profits,’’ the governor said. “This proposal ensures the opposite — it would require companies to keep supply on hand so they can draw it down during outages, to avoid shortages.”

But the Western States Petroleum Association, which represents the oil industry, said such a mandate would result in “bad regulations” that will harm consumers.

“Governor Newsom’s refinery supply mandate will create artificial shortages of fuel in California, Arizona and Nevada by forcing refiners to withhold fuels from the market,’’ said Catherine Reheis-Boyd, the group’s president and CEO in a statement. “Lawmakers who vote for this mandate will be voting to increase gas costs for their constituents.”

The governors of both Arizona and Nevada have spoken out against the oil supply mandate proposal amid concerns that if Newsom’s plan is approved, it will also drive up gas prices in their respective states.

Reheis-Boyd said that “California already faces a de facto production ban, forcing more than 75 percent of the crude our state uses to be shipped in from overseas.”

Additionally, Reheis-Boyd said upcoming shipping regulations set to take effect in a few months could worsen supply issues by restricting shipping and causing significant declines in the supply of crude oil and other transportation fuel products needed to meet the state’s energy demands.

David McCuan, a political science professor at Sonoma State University, said the special session is much more about politics than about policy.

“This is a series of power plays by a governor who is looking at being gone and doesn’t want to be seen as a lame duck,” McCuan said. “(This) is much more than the politics of now and what comes next than it is about gas prices or oil refineries or fuel mix.”

Still, gas prices are rising.

The latest price spike is in Northern California, where gas prices increased from $4.76 on Aug. 20 to $5.02 last week, $1.92 higher than the national average, according to AAA.

Last week, the state’s new petroleum watchdog within the Division of Petroleum Market Oversight, an independent division of the California Energy Commission, said refinery maintenance, low inventories, and spot market volatility are driving up California gas prices, even as crude oil prices and national gas prices are declining.

These are the same market conditions that drove retail gas price spikes in 2022 and 2023, the group said. During that time, Californians were paying at least $2.25 more per gallon than those in other states.

“We are concerned that the oil industry may take advantage of this situation by taking excessive profits at the expense of California consumers,” Tai Milder, director of the oversight division, said in a statement. “We will continue to monitor the market, scrutinize industry activity, and call out profiteering conduct.”

The state’s petroleum watchdog said multiple refineries statewide have had maintenance issues in the past few weeks and have also allowed supplies to dip by roughly 12% since late June, leaving less supply available to stabilize prices.

Jamie Court, the president of Consumer Watchdog, a consumer advocacy group, said late Wednesday in the legislative special session that California needs to establish a minimum inventory requirement if it wants to avoid gas price spikes.

“Establishing a 15- to 20-day floor on gas inventories is the easiest way to protect California consumers at the pump from the grip of the four oil refiners that make 90% of the gasoline in the state,” Court said.

The Assembly is expected to vote on Newsom’s proposal in October. The state Senate, while heavily Democrat, has bristled at Newsom’s call for a special session and has not agreed to meet. Any proposal would need to clear both bodies to become law.