California had set its sights on a bold initiative to tackle price gouging and control escalating gas prices. However, despite a law enacted in 2023 aimed at confronting major oil companies, fuel costs have soared past $4.50 per gallon, and the legislation remains dormant.

The bill, crafted by former state Senator Nancy Skinner and co-sponsored by Attorney General Rob Bonta, grants the California Energy Commission (CEC) the authority to levy penalties on oil companies for price gouging and to cap refinery profits during spikes in the global oil market.

When Governor Gavin Newsom signed the law in 2023, he proclaimed a victory over “Big Oil.” Yet, three years later, the law is still not in effect.

This delay is due to the CEC’s decision to postpone the legislation for five years to enhance “investor confidence” and deter refineries from exiting the state, as reported by CalMatters.

The strategic pause followed Governor Newsom’s directive to Siva Gunda, vice chair of the CEC, to engage in dialogue with oil refiners. This move was prompted by industry backlash and concerns that gas prices might surge to $8 per gallon, according to the news outlet.

In a letter to Gunda, Newsom emphasized the importance of maintaining a cooperative relationship, stating, “I am directing you, as my Administration’s lead representative on this issue, to affirm the State’s readiness for collaboration, ensuring Californians are shielded from price spikes while allowing refiners to operate profitably in California.”

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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