California should pause Gov. Gavin Newsom’s plan to penalize oil companies if their profits increase too much, said a top energy regulator Friday. This comes as part of a series of proposals aimed at addressing the state’s high gas prices.
In 2023, Newsom signed a law that gave the California Energy Commission the power to penalize oil companies for excessive profits, declaring that California had “finally beat big oil.”
However, more than two years later, the commission has not imposed any penalties or defined what qualifies as an excessive profit.
Shift in Strategy
Siva Gunda, the vice-chair of the California Energy Commission, now suggests the state should pause this effort in favor of exploring other policies to lower prices and ensure a steady oil supply, all while still working to phase out fossil fuel dependence by 2045.
“Together, we will evolve California’s strategy to successfully phase out petroleum-based fuels by 2045 while protecting communities, workers, and consumers, and foster market conditions that support the industry’s ability to operate safely, reliably, and successfully to meet demand through the transition,” Gunda wrote in a letter to Newsom.
This recommendation will require approval from the full commission. Newsom’s plan to penalize oil companies for high profits has received backlash, with critics arguing that it would only lead to higher gas prices.
Gas Prices Remain High
California’s gas prices are the highest in the nation, mainly due to taxes and stringent environmental regulations. On Friday, the cost of regular unleaded gas was $4.61 per gallon, compared to the national average of $3.20, according to AAA.
New Rules to Ensure Fuel Availability
Despite the pause on penalties, the commission plans to set new rules that would require oil refineries to keep a minimum level of fuel in stock to avoid supply shortages during maintenance shutdowns.
This proposal is based on a law Newsom signed last year after convening a special session to tackle gas price spikes.
These recommendations follow Newsom’s directive in April to energy regulators to work with refiners to ensure the state maintains a reliable fuel supply as it transitions away from fossil fuels.
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Concerns Over Refinery Shutdowns
Two major oil companies, Phillips 66 and Valero, announced plans to close refineries in California over the past year.
These closures create uncertainty regarding the state’s ability to maintain a stable fuel supply as it shifts toward renewable energy sources. The two refineries account for over 17% of the state’s refining capacity.
Environmental and Consumer Groups Push Back
Around 50 environmental and consumer groups criticized the proposal to pause the penalty, arguing that it would amount to a bailout for oil refiners and that the state should “finish the job” of preventing price hikes at the gas pump.
“California oil refiners do not need a bailout,” the groups wrote in a letter to Newsom and legislative leaders.
What are your thoughts on how California should handle oil companies and gas prices in the state? Let us know your opinion in the comments below.
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