California Governor Gavin Newsom said Friday that he will convene a special session of the state Legislature on December 5 to pass a new tax on oil companies in response to high gasoline prices.
Rich Pedroncelli/AP
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California Governor Gavin Newsom said Friday that he will convene a special session of the state Legislature on December 5 to pass a new tax on oil companies in response to high gasoline prices.
SACRAMENTO, Calif. — California Governor Gavin Newsom said Friday that he will convene a special session of the state Legislature in December to pass a new tax on oil company profits to punish them for what he called “excessive price gouging.”
Gasoline prices soared across the country this summer due to high inflation, Russia’s invasion of Ukraine and ongoing global supply chain disruptions.
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But while gas prices have recovered somewhat across the country, they have continued to climb in California, hitting an average of $6.39 a gallon on Friday, $2.58 more than the national average, according to AAA.
California has the second highest gas tax in the country and other environmental regulations that increase the cost of fuel in the most populous state in the country. Still, Newsom said there is “nothing to justify” a price difference of more than $2.50 a gallon between California gasoline and prices in other states.
“Time to get serious. I’m sick of this,” Newsom said. We have been too shy.
The oil industry has pointed to California’s environmental laws and regulations to explain why the state routinely has higher gas prices than the rest of the country. Kevin Slagle, vice president of the Western States Petroleum Association, said Newsom and state lawmakers should “take a hard look at decades of California energy policy” instead of proposing a new tax.
“If this were anything more than a political stunt, the governor wouldn’t wait two months and call the special session now, before the election,” Slagle said. “This industry is ready right now to work on real solutions for energy costs and reliability, if that’s what the Governor really cares about.”
Several states chose to suspend their gas taxes this summer, including Maryland, New York and Georgia. Newsom and his fellow Democrats who control the state Legislature refused to do that, opting instead to send $9.5 billion in refunds to taxpayers, which began showing up in bank accounts this week.
It’s unclear how the tax Newsom is proposing would work. Newsom said he is still working out the details with legislative leaders, but on Friday he said he wants the money “put back in the hands of the taxpayers,” possibly using the tax money to pay more refunds.
The state Legislature briefly considered a proposal earlier this year that would have imposed a “windowal gains tax” on the gross receipts of oil companies when the price of a gallon of gasoline was “abnormally high compared to the price of a barrel of petroleum”.
That proposal would have required state regulators to determine the tax rate, making sure to recoup profit margins from oil companies that exceed 30 cents a gallon. The tax money would have been returned to taxpayers through rebates.
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Newsom did not comment on that proposal when it was introduced in March, and lawmakers quickly shelved it. However, it could act as a model for the new proposal being negotiated between Newsom and legislative leaders.
The Legislature’s two top leaders, Senate President Pro Tempore Toni Atkins and Assembly Speaker Anthony Rendon, said in a joint statement that lawmakers “will continue to examine all other options to help consumers.”
“A solution that takes excessive profits out of the hands of oil corporations and puts money back into the hands of consumers deserves strong consideration by the Legislature,” they said. “We look forward to reviewing the governor’s detailed proposal when we receive it.”
California Republicans, who do not control enough seats to influence the Legislature’s policy decisions, have called the tax “reckless.”
“Who here thinks another tax is going to lower gas prices? Is it going to lower costs in this state? It’s not going to happen,” Assembly Republican Leader James Gallagher told reporters Wednesday.
Last month, regulators at the California Energy Commission wrote a letter to five oil refiners (Chevron, Marathon Petroleum, PBF Energy, Phillips 66 and Valero) demanding an explanation as to why gasoline prices rose 84 cents in a period of 10 days, even when oil prices fell. The commission wrote that the oil industry “has failed to provide an adequate and transparent explanation for this price increase, which is causing real economic hardship for millions of Californians.”