California Governor Gavin Newsom has called on the state’s lawmakers to pass new regulations and requirements on oil refineries throughout the Golden State.
This proposal sets up yet another battle between Newsom and big oil companies that do business in California.
Maintaining Accurate Fuel Reserves
California is now entering the last two weeks of this year’s legislative session. Newsom has called on these lawmakers to pass new regulations on the oil refineries and companies in the state.
Newsom has proposed a mandate that would require all oil companies to keep an accurate amount of fuel reserves to ensure no supply shortage occurs.
Shortages Lead to Gas Prices Skyrocketing
According to Newsom, oil supply shortages within the state often lead to gas prices increasing — and the California governor believes that oil companies have done this on purpose.
Newsom further alleged that many big oil companies have used these shortages to their benefit as they look to increase profit.
Profit Spikes for Big Oil
Newsom released a news release explaining his proposal and why oil companies in California should be ordered to keep fuel reserves.
“Price spikes at the pump are profit spikes for Big Oil,” Newsom said. “Refiners should be required to plan ahead and backfill supplies to keep prices stable, instead of playing games to earn even more profits.”
Helping Californians
Furthermore, Newsom explained that this proposal would help locals in the state save money.
He added, “By making refiners act responsibly and maintain a gas reserve, Californians would save money at the pump every year.”
Planning Maintenance and Creating Shortages
Tai Milder, the director of the Division of Petroleum Market Oversight for the California Energy Commission, stated that this proposal will help keep oil refiners from planning maintenance and creating oil shortages on purpose through these endeavors.
Milder said, “The data is clear: oil refiners have been racking up profits by planning maintenance that reduces supply during our busy driving seasons. The Governor’s proposal gives us new tools to require refiners to plan responsibly and prevent price gouging during maintenance.”
Holding Oil Companies Responsible
This proposal by Newsom comes months after the division released a letter recommending that the state impose regulations that ensure oil companies resupply their inventory accurately.
According to the division’s findings, many oil companies were not accurately maintaining fuel reserves. As a result, they did not have enough refined gasoline — which would help raise prices in the event of a shortfall, thereby leading to profit increases for these companies.
Price Spikes on Gas Seen in California
In this letter released by the division, much discussion was focused on the amount of price spikes that Californians have seen on gas in the past decade.
“Unfortunately, California has been experiencing more frequent and extreme price spikes that seem to be driven by price swings in the spot market,” the letter read. “The market has seen gasoline price spikes in 2012, 2015, 2019, 2022, and 2023.”
Oil Refineries and Exploitation
The letter also alleged that companies were exploiting these low supplies to ensure they could raise the price of gasoline and earn more profits.
The letter added, “These spikes have been generally driven by periodic episodes of undersupply of gasoline (in the form of reduced refinery production, lower inventories of stored gasoline, or both) that are exacerbated — and sometimes exploited — by the dynamics of trading and reporting on the spot market.”
Policy Must Be Discussed
Though Newsom wants this proposal passed and dealt with, others have come forward to explain that policy needs to be accurately discussed when it comes to this matter.
“It’s not just requiring a certain amount, it’s also deciding when those reserves will be released during a price spike,” Severin Borenstein, a University of California, Berkeley Hass School of Business professor, said. “Somebody needs to make that decision.”
Big Oil Criticisms
The Western State Petroleum Association has come out to criticize this proposal released by Newsom.
“To impose new operational mandates on energy producers based on such falsehoods is regulatory malpractice, and ignores the logistical challenges and costs associated with such a plan,” the association said.
Big Oil Will Face Penalties
This proposal also stated that oil refineries that didn’t follow these new regulations would face penalties.
These penalties would then be deposited into a fund which would be “distributed to consumers.”
