Oil Companies in CA Face Penalties for Price Gouging

Gov. Gavin Newsom and state Sen. Nancy Skinner announced a proposal Monday to penalize oil companies in an effort to deter gas price gouging.

The proposal would make it illegal for oil companies to charge excessive refining margins-- the price difference between the cost of crude oil pre-refinement and the cost of the product once it leaves the refinery-- and would expand the ability of the California Energy Commission and the California Department of Tax and Fee Administration to investigate gas costs, profits and pricing.

The legislature is expected to negotiate in January about the refining margin that would trigger penalties under the proposal.

Any penalties collected from oil companies that are found to be artificially inflating gasoline prices would be placed in a state-managed fund and then reimbursed to state residents.

“Big Oil has been lying and gouging Californians to line their own pockets long enough,” Newsom said in a statement. “I look forward to the work ahead with our partners in the Legislature to get this done.”

Major oil companies like British Petroleum, Valero, Shell and Chevron reported record-high profits or near-record-highs during the third quarter of 2022, between July and September.

During that time, the state's average price of a gallon of regular unleaded gas reached as high as $6.42. State officials have argued gas prices were excessively high, even with the price of a barrel of oil spiking during much of the spring and summer.

“No one can deny that California's gas prices were outrageously high compared to other states,” said Skinner, D-Berkeley. “And those high prices hurt California consumers and businesses.”

The California Business Roundtable, a group of senior executives of companies based in the state, argued the proposal is just a tax on oil companies and would lead to higher gas prices rather than deter them.

The group also blamed the state's gas taxes for high prices over the summer, rather than corporate gouging.

“The governor is sending a message to investors and companies across the country that California now intends to start micromanaging business decisions, in addition to the myriad and growing regulations, high taxes and policies that continue to make California the worst place in the nation to do business,” CBR President Rob Lapsley said in a statement.

As of Monday, the average price of a gallon of gas in California is $4.77, according to AAA. The national average is $3.40 per gallon.


  1. Newsom is such an idiot. Either that or he hates his constituents. I am undecided.
    Then again, maybe its both?

  2. I thought 2020 proved no legislation is necessary. We’re still in the same emergency that’s been in effect for most of Newsom’s administration. Just declare gas price controls and confiscate oil company assets in California banks. Then make a televised speech to the legislature next year outlining what was done. These policies are bound to be more popular than banning surfing was.

  3. price controls lead to supply shortages

    regressive gas taxes drive up prices

    extended wars in gas producing regions limit supply

    at least maybe Californians will lose weight from all the walking they’ll be doing

    I for one welcome $30/gallon gas, keeps the riffraff off the road

    boy you dems are clueless

  4. Higher profit rates–not higher total profits–on gas and petroleum products are clear evidence of gouging. If refiners’ costs (i.e. what they pay for transported crude oil and gas plus the wages and salaries they pay employees plus the rents they pay to the owners of real property they are occupying plus the taxes they pay to all government entities) doubled and refiners doubled the prices they charged their customers for refined gas and petroleum products, their total profits in dollar terms would also double.

    But their profit rates–total revenues from selling all the petroleum and gas products to customers divided by their total dollar outlays in a given year–would be unchanged. It’s when profit rates rise that we know oil companies are gouging the public. It’s then that we know selling prices are outpacing underlying costs of production, including the volatile costs of crude oil and gas. This is also strongly associated with market pricing power, what economists call monopoly or oligopoly power. (The corporations that dominate the U.S. and world economies have significant pricing power at their disposal which, by the way, explains much of the acceleration of inflation in the past two years.)

    If the war in the Ukraine is the actual source of the rise in petroleum prices and therefore gasoline prices, why would we accept and legitimize an increase in the profit rates–as opposed to total profits–of energy companies like Chevron? If refiners were content to produce and sell gas and petroleum products at, say, a 10% profit rate prior to the Russian invasion of the Ukraine, how can anyone argue that they need a 20% profit rate to induce them to sell those same products to the public after the Russian invasion? Why should oil companies be allowed to charge prices that earn them a higher than normal profit rate at a time of crisis? Aren’t we all in this crisis together? Windfall taxes–and wealth taxes–are therefore completely in order here.

    The libertarian backlash bots who argue against taxing big oil are selling a load of worthless ideological blather. They’ll have to lower the price of that crap in line with its value if they ever expect to sell their accumulated inventories.

  5. Don’t call Ecolast an economist – more leftist prattle, and high school math, in long form it seems.
    An entire short story based on economic stasis and stagnancy, as if everything boils down to matching the lowest performing period or person, rewarding failure, versus actual work and effort of raising performance and or production.

    Another utopia seeking novice fleeing wastelands destroyed by social-ism to further destruction abroad.
    These clowns yell “More Government Intervention” or just put government in charge –
    it works so well when rubber hits the road, just like in once Oil King Venezuela –
    now another social-ist nightmare.

    “Gasoline queues return in Venezuela as refineries fail to produce” (Reuters, December 9th, 2022)
    – Long lines for motorists at Venezuela’s refueling stations are back due to repeated outages at state oil company PDVSA’s refineries and a lack of diesel and gasoline imports.

    – In 2020 and again in 2021, drivers had to line up for days to get gasoline and farmers halted work because of insufficient diesel.
    The shortages had eased earlier this year as imports of Iranian crude boosted refinery output.

    – Though global prices have risen this year,
    Venezuela’s production is lower, a result of continued divestment, mismanagement and sanctions.

    – Venezuela is planning on oil to finance 63% of its budget for 2023, the stronger reliance on oil comes as the U.S. gov­ernment’s revises its sanctions.

    – On Dec. 2, U.S.-based oil major Chevron signed contracts with Venezuelan Oil Minister Tareck El Aissami and representatives of PDVSA.

  6. Indeed, some people’s understanding of basic economics (self proclaimed educated people at that) is appalling. Theorizing and imagining how to do things from behind a keyboard is one thing, getting out and trying to actually do them in real life can be an entirely different thing.

    Hence Newsom is an idiot.

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