Little-known California law that can curb gas prices — but state’s refusing to use it

California had an ambitious plan to curb price gouging and prevent high-prices at the pump, but as fuel surges above $4.50 per gallon, a 2023 law meant to “take on big oil” continues to remain unused.

The bill, which was authored by former state Sen. Nancy Skinner and co-sponsored by Attorney General Rob Bonta, allows the California Energy Commission (CEC) to impose price-gouging penalties for oil companies and put a cap on refinery profits looking to capitalize when the global commodity spikes.

When California Gov. Gavin Newsom signed the legislation in 2023, he declared the stated “took on Big Oil and won,” but three years later, the law is nowhere to be seen.

That’s because the CEC voted to table the legislation for five years in an effort to boost “investor confidence” and prevent refineries from pulling out of the state, according to CalMatters.  

The move came after Newsom directed Siva Gunda, the vice chair of the CEC, to work closely with oil refiners after pushback from the industry and fears gas prices could top $8-a-gallon, the outlet reported.

“Further, I am directing you, as my Administration’s lead representative on this issue, to reinforce the State’s openness to a collaborative relationship and our firm belief that Californians can be protected from price spikes and refiners can profitably operate in California,” Newsom said in a letter addressed to Gunda.

Jamie Court, president of Consumer Watchdog, told CalMatters this is the precise moment the law is needed.

“These are the moments we need them, because when the price of a commodity goes through the roof — be it crude oil or refined gasoline — that’s when companies make outrageous profits,” she said, adding that Newsom “panicked.”

The commissioners retain the right to rescind its decision and implement the rule before the five-year delay period is up, according to the outlet.

While some argue California’s strict environmental regulations are the reason for refiners shuttering and rising gas prices, Newsom blames the ongoing conflict in Iran and points to the global commodity hitting record highs.

But not everyone believes the answer is capping profits for refineries. 

“The last thing we need is to start trying to regulate refinery margins,” UC Berkeley energy economist Severin Borenstein told CalMatters. “As much as people don’t like high gasoline prices, they really, really hate gas lines.”

Instead, Zachary Leary, a lobbyist for the Western States Petroleum Association, told the outlet the real problem is that California is an “energy island,” that continues to lose its refining capacity. 

Phillips 66 shutdown its Los Angeles refinery last year. Valero is currently in the process of ceasing its operation in Benicia.

And Chevron has warned the state’s cap-and-invest regulations aimed at reducing greenhouse gas emissions “will cripple the survivability of the state’s remaining refineries, which will result in California losing the entire industry to this misguided program.” 

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