Newsom strikes deal, presses for gas price penalty tax proposal

Oil producers have criticized Gov. Gavin Newsom and lawmakers for rushing a proposal with considerable unintended consequences.

California Governor Gavin Newsom has reached an agreement with legislative leaders to enact taxes on the profits of oil companies and tap bureaucrats to monitor gasoline prices.

Newsom reached the deal on Monday, kicking off a furious schedule to get it approved before the California Legislature breaks for the month.


Under the hood: The proposal, drafted by state Senator Nancy Skinner (D–Berkeley), would see the California Energy Commission be authorized to penalize refiners that charge more than a certain amount for the price of gasoline.

This plan is a departure from Newsom’s earlier proposal to impose a windfall tax on oil companies, which would have required a supermajority vote to pass. This legislation requires only a simple majority in the Democrat-controlled legislature to pass.

If the bill passes, state bureaucrats will be able to subpoena data and records that could expose patterns of misconduct or price manipulation.

The backstory: Last year, gasoline prices in California reached record highs, boosting crude refiners’ profits to unprecedented levels. As of Monday, gasoline prices in California averaged $4.85 per gallon, the highest in the country.

What they’re saying: “Empowering unelected bureaucrats and giving them the authority to tax, investigate and penalize refiners will likely lead to the same unintended consequences as his initial proposal — less investment in production, decreased supply, and higher costs for Californians,” said Western States Petroleum Association spokesperson Kevin Slagle to Bloomberg. “At a minimum, this needs thorough time for legislative analysis and discussion.”

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