Newsom’s call for tax on oil profits raise eyebrows

California’s oil industry is back in Sacramento’s crosshairs after a price spike led Gov. Gavin Newsom to suggest oil producers and refiners should pay a higher rate on profits above a set level.

The state’s oil industry is back in Sacramento’s crosshairs after a disproportionate jump in California gasoline prices last month led Gov. Gavin Newsom to suggest oil producers and refiners should pay a higher rate on profits above a set level.

Newsom joined other officials in blasting what they called an unprecedented departure from the national trend that added a record 84 cents to the price of a gallon of gas in 10 days. The chairman of the California Energy Commission, demanding quick answers Friday from five refiners, all but accused them of intentionally neglecting to build up their inventories in anticipation of planned outages.


State Attorney General Rob Bonta said in a news release Friday he warned refineries earlier this year against taking advantage of market disruptions, and that as his office monitors the market for illegal manipulation, “We will not hesitate to take action if we find evidence that the law is being violated.”

The industry sees the price jump as a foreseeable outcome of California’s reduced capacity for refining the state’s special blend of gasoline within a so-called energy island with limited import options. Its view is that, under such conditions, refinery outages planned or not stretch an already tight supply.

The Western States Petroleum Association said in a statement Newsom and the state Legislature failed to see their policy decisions have a big impact at the pump. The trade group said Newsom could lower regulatory program costs or suspend gas taxes, “but he’s deliberately chosen to make another policy decision to further increase costs on consumers through yet another tax on fuel.”

CEO Rock Zierman of the California Independent Petroleum Association trade group added that foreign oil producers supplying ever more crude to the state would pay no taxes under Newsom’s plan.

Newsom did not specify in his comments Friday what profit level should trigger higher taxation or how steeply excessive profits should be taxed. He said revenue from the tax should be given back to consumers as a rebate similar to the checks of up to $1,050 the state is preparing to send families to help offset rising fuel costs.

His statements Friday were among the harshest yet aimed at an industry he has targeted with tighter regulations, legislative initiatives, far-reaching policy pronouncements and administrative bans on certain oilfield techniques. Newsom posted a video on Twitter saying consumers are being cheated, the recent jump in gas prices amounts to “oil company extortion” and that “greedy oil companies” are fleecing California.

California gasoline prices averaged $6.412 Tuesday, an increase of 9 percent in a week and almost 22 percent higher than a month ago, according to the AAA. By contrast, Brent crude, the global benchmark against which most of California’s oil is priced, has declined more than 8 percent in the past month.

Related Posts