A year after California Governor Gavin Newsom signed a bill targeting oil companies over alleged gas price gouging, the state’s Energy Commission admitted during a Senate hearing that clear evidence of gouging hasn’t emerged. However, the Commission highlighted a significant increase in oil refiners’ profit margins during times of pump price spikes.
During the hearing, Vice Chair of the California Energy Commission, Siva Gunda, noted that industry representatives acknowledged substantial profit increases during these periods. The debate now centers on determining acceptable profit margins during such times.
Senate Bill x1-2 was introduced after gas prices soared to an average of $6.39 per gallon in California in October 2022, sparking public outcry. Despite hopes that the threat of a windfall profits cap would lower prices, the average price for regular unleaded remains high at $5.31 per gallon.
Experts and industry representatives agree that California’s gas price surge results from various factors, including refinery closures over the past four decades. With just nine refineries remaining, the industry’s high concentration exacerbates market instability, compounded by global oil price fluctuations and refinery maintenance issues.
Western States Petroleum Association President Cathy Reheis-Boyd attributes California’s gasoline supply challenges to obstacles hindering market supply and increasing demand. She emphasizes the need for solutions to address these issues rather than penalizing oil companies.
As California explores alternatives to combat high gas prices, options such as utility-style regulation and subsidies akin to Australia’s post-COVID approach are being considered. However, the gradual transition to electric vehicles poses a challenge, potentially impacting refinery production and market competitiveness.
