SACRAMENTO, Calif. – Furious at oil companies’ outsized profits after a summer of record gas prices, California Gov. Gavin Newsom on Monday will formally begin his campaign to punish big producers by asking lawmakers to fine them and give the money back to the drivers.
State lawmakers will return to Capitol Hill briefly on Monday to swear in new members and elect leaders for the 2023 legislative session. But this year, Newsom also called lawmakers into a special session to pass a fine on oil companies when their profits exceed a certain threshold.
It’s set to be a popular proposition with voters, who have been paying more than $6 per gallon of gas for much of the year. But the big question is how the measure will be received by California lawmakers, especially since the oil industry is a major lobbyist and campaign donor in the state.
Adding to the uncertainty are an unusually high number of new members who will take seats in the legislature for the first time. More than a quarter of the legislature’s 120 members could be new, depending on the outcome of some close races in which county officials are still counting votes.
“It’s kind of like the first day of school and you take this big test of ethics on a job you’ve never had,” said Jamie Court, president of Consumer Watchdog, an advocacy group that has partnered with the Newsom administration. to support the gas proposal.
Among the new members of the state Senate is Angelique Ashby, a Democrat who narrowly won her seat after an intense campaign. The oil industry spent hundreds of thousands of dollars on radio and television commercials in support of Ashby’s campaign, a trend noted by critics who sought to use it against her.
In an interview, Ashby said she has not been approached by lobbyists or others in the oil industry asking how she would vote on a potential fine for oil companies. He noted that the oil industry spent the money as “unrelated spending,” meaning it had no control over that spending during the campaign.
“Campaigns are not legislation, and my opponent’s campaign slogans and strategies are a thing of the past,” said Ashby, whose district includes Sacramento. “I am fixated on the people of Senate District 8 and will make my decision based on what is in their best interests.”
As of Sunday evening, Newsom had not yet disclosed his legislation and legislative leaders said they likely would not begin deliberations on any proposals until January.
But the battle has already begun. Last week, the California Energy Commission held a public hearing on why gas prices in the state are so high. Prices in California rose over the summer, but so did the rest of the country, mainly in response to the increase in the price of crude oil following the Russian invasion of Ukraine.
California prices rallied again in October, even as the price of crude fell. In the first week of October, the median price of a gallon of gasoline in California was $2.61 higher than the national average, the largest gap on record. Since then, oil companies have reported billions of dollars in profits.
Regulators had hoped to challenge the state’s big five oil refineries: Marathon, Valero, Phillips 66, PBF Energy and Chevron. But no company officials attended the hearing, and most said sharing information could violate antitrust laws.
Newsom sought to publicly shame those companies, posting a video to his Twitter account of their empty seats during Thursday’s hearing.
“Big oil is ripping off Californians, and the deafening silence from the industry (during the public hearing) is the latest evidence that a price-cutting sanction is needed to hold them accountable for profiting at the expense of California households.” Newsom said in a press release announcing the special session.
Catherine Reheis-Boyd, president of the Western States Petroleum Association, said the oil industry is volatile, pointing to billions of dollars in losses during the pandemic as demand for gasoline fell sharply as many people worked from home and canceled plans. travel plans.
During Thursday’s hearing, he blamed state taxes and regulations for driving up gas prices.
“The governor and legislature should focus efforts on removing the political barriers placed on the energy industry so we can focus on delivering affordable, reliable, low-carbon energy to all Californians,” Reheis-Boyd said.
Severin Borenstein, a professor at the University of California-Berkeley, said the problem is not at the oil refinery level, but at the retail level, where gasoline is sold to motorists.
California’s gasoline market is dominated by brand-name gasoline, which is more expensive, and the state’s gas prices have been consistently higher than the rest of the country since 2015, Borenstein said.
“We just don’t have the competition and discipline of those off-brand stations,” he said.