Calif. created penalties to root out price gouging by oil companies. They haven’t found it yet.

Frustrated lawmakers explored a number of ideas to combat sky-high gas prices, including taking state control of oil refineries in the Golden State.

California’s nation-leading gas prices have caused Gov. Gavin Newsom and Democrats to accuse oil companies of price gouging, yet a Senate energy committee hearing on Tuesday revealed that no such clear evidence exists. 

During the hearing to discuss the new price gouging law, state lawmakers discussed a number of ideas to address gas prices – outside of canceling the gas tax – including having the state operate its own refineries. 


The backstory: Last year Newsom signed the first-ever price gouging law, requiring daily reports on the oil market and imports, monthly reports on refiners’ profit margins and establishing the Division of Petroleum Market Oversight within the California Energy Commission, among other actions. 

  • According to AAA, California has the highest average gas price in the nation of $5.329, as of Wednesday. The national average is $3.64. 
  • A contributing factor to California’s high gas prices is the gas tax, which will increase to $0.596 per gallon in July. 

The big picture: The Senate Energy and Utilities Committee held an oversight hearing into the price gouging law on Tuesday, welcoming Siva Gunda, the vice chair of the California Energy Commission. 

  • Gunda said there have been three price spikes in the last five years, and while oil companies are profiting off those spikes, the commission has not found any clear evidence of price gouging. 
  • Gunda said the price gouging law has given the state robust access into the data and information on the oil market and the operations of oil companies in California. 

What will Sacramento do: The California Energy Commission is considering a proposal to set a cap on oil profits and penalize any companies that take home profits over the cap. 

  • Any such proposal is expected to be considered later in the year. 
  • Sen. Susan Rubio (D–Baldwin Park) suggested that the state should purchase its own refineries at some point to control the market. 
  • “I know this sounds like a crazy idea – and being Californians and trying to be environmentally friendly and conscious – wouldn’t we want at some point maybe [to] buy our own refinery,” Rubbio said. “So that maybe we figure out how to store our own stock, so when these situations happen that we don’t have control over, then we control the market versus the outsiders controlling the market.”

The other side: President and CEO of Western States Petroleum Association Catherine Reheis-Boyd addressed the committee, pushing back against any caps or penalties. 

  • Reheis-Boyd said California used to have 30 refineries supplying gas to the local market and now is down under 10. 
  • California refineries also used to produce half of the crude oil needed to meet consumer demand, a number which has fallen to 25 percent. 
  • “The oil production decline is not because we don’t have crude oil,” Reheis-Boyd said. “We are blessed in this state with reserves of crude oil. It is because our member companies cannot get permits from the State of California to recover and process oil to get to refiners.”
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