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Newsom Signs Bill Penalizing Oil Companies For Price Gouging

A gray gas pump meter reads $100 and 16.132 gallons. The top of the pump bears the 76 gas station logo, a small orange circle with the number 76 in blue lettering.
The price tag at the pump after filling up at a gas station in northeast Los Angeles on March 23, 2022.
(Leslie Berestein Rojas
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Gov. Gavin Newsom signed a California bill to penalize oil companies for price gouging at the pump on Tuesday after it got the green light from lawmakers.

“With this legislation, we’re ending the oil industry’s days of operating in the shadows. California took on Big Oil and won. 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," Newsom said in a statement.

The bill is the result of a special legislative session called by Newsom to address oil company profiteering and high gas prices, which peaked at an average of nearly $6.50 last year. When prices spiked, so did oil company profits.

The bill passed the California Assembly 52-19 on Monday. It cleared the state Senate last week.

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What will the bill do?

The measure would authorize the California Energy Commission to determine a penalty for oil companies that make excessive profits and to create a watchdog group to monitor the oil market. The commission is appointed by the governor.

"We’re going to hold Big Oil accountable for ripping off Californians at the pump," Newsom said in a statement on the bill. "This represents some of the strongest and most effective transparency and oversight measures in the country, and the penalty would root out price gouging."

Five companies supply 97% of the state's oil. According to the governor's office, last fall oil companies made $63 billion in just 90 days. The measure is not retroactive, but Jamie Court with Consumer Watchdog says it will help prevent future price gouging.

"The idea is to create a deterrent to this type of extreme price spikes, extreme profit spikes, so it doesn't happen again," Court said. "When a minimum wage worker fills up at $4 a gallon, it costs them 9% out of their out-of-pocket income. When they fill up at $6 a gallon, it costs them 15%. That's a huge difference."

Where will money from the penalties go?

The California Energy Commission will determine when a price gouging penalty will be imposed, and the legislature will decide exactly what is done with the money collected from those penalties.

California gas prices have already dropped significantly since the fall. But Californians continue to pay more than most Americans for gasoline. Some of that extra cost is due to high state taxes and an environmental tax. But there's also a “mystery gas surcharge” that emerged in 2015 after a refinery fire in Torrance. Court says the new law will help get to the bottom of this price hike, too.

What questions do you have about Southern California?

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