California Seeking to Fine Companies Over Gasoline Price Gouging
Despite the perpetual ebb and flow of fuel prices across the United States, you can reliably count on California having some of the highest per-gallon costs in the nation. While that’s not entirely the fault of energy companies – California’s high tax rate on just about everything is a major factor here – oil firms are indeed raking in unprecedented profits right now and the government would much rather you focus on that than any role it might have likewise played. To that effect, Governor Gavin Newsom has announced new financial penalties for corporations accused of price-gouging wherever fueling is concerned.
On Monday, it was announced that the California Legislature would be assembling in a special session to go over a plan designed by Democratic Senator Nancy Skinner seeking to impose new fines on oil companies leadership believes are guilty of accumulating “excess profits.”
“California’s price gouging penalty is simple – either Big Oil reins in the profits and prices, or they’ll pay a penalty,” said Governor Newsom. “Big Oil has been lying and gouging Californians to line their own pockets long enough. I look forward to the work ahead with our partners in the Legislature to get this done.”
The proposal ( available here as a pdf) hopes to establish a framework for the California Legislature to determine exactly what constitutes excess profits and then tie them to civil penalties from the California Energy Commission. The collected money would then be put into the newly created “Price Gouging Penalty Fund,” which will be returned as refunds to citizens of the state and managed by the Treasury Department. However, the plan stipulates that funding be appropriated by the State Legislature beforehand.
Truth be told, it’s still a little unclear how California plans on implementing the plan ahead of the aforementioned special session. Though the announcement suggests capping refiner margins based on the per-barrel pricing of oil. It also said leadership would be considering efforts to “empower state agencies to more closely review gas costs, profits and pricing as well provide the state with greater regulatory oversight of the refining, distribution and retailing segments of the gasoline market in California.”
But to sell the concept to residents, the government has to make a case against the oil companies – something that ended up being a major component of the related press release. The Governor’s Office noted that oil companies reported record-high profits between July and September of 2022.
Numerous examples were provided for that particular quarter: Phillips 66 profits leaped to $5.4 billion, a 1,243-percent increase over the $402 million seen in 2021; BP posted $8.2 billion in profits, its second-highest on record, with $2.5 billion going toward share buybacks that benefit Wall Street investors; Marathon Petroleum profits rose to $4.48 billion, a 545- percent increase over last year’s $694 million; Valero’s $2.82 billion in profits that were 500-percent higher than the year before; PBF Energy’s $1.06 billion that was 1,700-percent higher than the year before; Shell reported a $9.45 billion haul that sent $4 billion to shareholders for stock buybacks; Exxon reported their highest-ever $19.7 billion in profits; AND Chevron reported $11.2 billion in profits, their second-highest quarterly profit ever.
“Putting the Governor’s proposal in print allows the Legislature and the public to begin discussions on this important issue. No one can deny that California’s gas prices were outrageously high compared to other states. And those high prices hurt California consumers and businesses,” said Senator Skinner.
This one is a toughie because it’s inarguable that fuel prices in California tend to be a dollar or more per gallon than whatever the national average happens to be. But that’s largely down to state policy, rather than the nationwide gouging that energy companies are currently engaged in. The proposed solution seems to give California a lot of leverage over the market and how good or bad that seems probably has a lot to do with how much you trust the State Legislature.
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