In response to a new California law, passed this spring to prevent what lawmakers say is price gouging at the pump by oil companies, the California Energy Commission is exploring its elements but held off on establishing penalties for oil companies and refineries that exceed profit margin limits.
The new measure, called the California Gas Price Gouging and Transparency law, now requires committee oversight of petroleum markets using data collection to identify potential market manipulations.
“A critical part of [the law] is data transparency and making sure [the commissions] has the requisite data to continue to shine light on what exactly is the market doing in terms of both profits and margins and what is resulting in volatility at the pump for average Californians,” Siva Gunda, energy commission vice chair, said during a Nov. 3 meeting of the California Energy Commission, which will oversee the new law. “This very important work is aimed at protecting the consumers in California with earnest and deliberative process.”
Previously, commissioners voted on studying profit margin limits and penalties, as the new law authorizes, but have yet to come to decisions on both of those issues, suggesting more information is needed to consider impacts.
“The penalty is very important,” Ryan Eggers, supervisor of the commission’s transportation, fuels, data, and analysis division, said during the meeting. “There is data being collected that will inform that decision.”
Data collection will be overseen by a newly-established division advised by a new Independent Consumer Fuels Advisory Committee made up of six members appointed by the governor and one each by the speakers of California Assembly and Senate.
According to the new law, a variety of stakeholders will also be included, with labor, consumers, environment, and the industry represented by one member each and a spot for an academic with an economic background, and another for an expert in antitrust law.
California Gov. Gavin Newsom celebrated the new law as historic when he signed the measure in March.
“With this legislation, we’re ending the oil industry’s days of operating in the shadows. California took on Big Oil and won,” Mr. Newsom said in a press release announcing the new law. “We’re not only protecting families, we’re also loosening the vice grip Big Oil has had on our politics for the last 100 years.”
Some say such regulation is needed to curb high fuel prices that are impacting Californians and driving high inflation in the state—as the price of all goods delivered is affected by rising fuel costs.
Californians pay around $5.14 per gallon while the national average hovers near $3.41, as of Nov. 7, according to the automobile-based organization AAA.
Taxes and fees account for more than $1.25 of the discrepancy, leaving a little more than half a dollar as potential profit for manufacturers, according to experts.
Supporters of the new law suggest some oil companies and refineries are raising prices in California to pad profits, with the new regulations designed to increase transparency and penalize those who exceed set margin guidelines.
But critics say government control rarely results in market stability and suggest the new law will result in higher prices at the pump, as any fines or fees will be passed on to consumers.
“Penalizing oil companies would make California even more expensive and exacerbate the affordability crisis,” business advocate group the California Chamber of Commerce wrote earlier this year in opposition of the law it described as a “job killer.”
