Chevron, Shell, Exxon Mobil and other oil companies made more money than ever in 2022, showing just how massive a windfall they reaped as surging gas prices made it a struggle for drivers to afford filling up.
The billions in record profits they posted this week bolster the appeal of California Gov. Gavin Newsom’s effort to curb oil industry price gouging. Under a proposal he released late last year, the state would set a cap on oil refinery profit margins, penalizing excess profits and returning a percentage of it to consumers.
Such measures could rein in oil industry greed and save Californians money. Unfortunately, Newsom and the Legislature seem to have made little progress two months after convening a special session to focus on it.
It’s time for them to get moving to prevent oil companies from ripping people off while selling a harmful product that pollutes the air and overheats the climate. Last year’s spikes hit Californians especially hard, because they already pay the nation’s highest gas prices, and saw them jump even higher, reaching more than $8 a gallon at one Los Angeles gas station. They deserve real action to deter oil companies from squeezing out excessive profits from motorists at the gas pump.
The governor deserves some credit for pushing for tougher regulation of the state’s multibillion-dollar oil industry, which remains a powerful lobby in California, with allies in organized labor and considerable sway over some lawmakers. Since December, Newsom has continued to press for a price-gouging penalty, using unusually direct language to attack the industry and its practices.
“Big Oil has been screwing you,” the governor said in a video message last week.
Still, the proposal remains on a slow and uncertain path. A bill introduced two months ago by state Sen. Nancy Skinner (D-Berkeley) has yet to receive a hearing, though a committee is expected to take it up for the first time later this month. Some of its key provisions, including how high to set the cap on refiners’ profits, have yet to be worked out.
Newsom spokesman Daniel Villaseñor said “the Governor continues to work with the Legislature on the specifics of the policy and conversations are ongoing.”
Lawmakers who may be hesitant to push this legislation through should keep in mind that the interests of the oil industry are at odds with the interests of ordinary Californians who would benefit from a cap on profits. Oil companies are interested in protecting their bottom lines, spending millions last year trying to elect sympathetic state legislators and pushing a referendum to overturn a new California law that bans new drilling near homes and schools to protect people’s health. Limiting their ability to rip off consumers at the pump seems like the bare minimum to expect from our representatives in Sacramento.
Experts say it’s important to craft the penalty carefully to avoid disrupting the market or diminishing fuel supply, and given the industry’s likelihood of challenging any law that places limits on its profits. But that is no reason to hold back.
California’s gas prices reached new heights last year as the the Russian invasion of Ukraine, among other factors, pushed prices to an average of $6.44 in June 2022, the highest on record in the state, according to the American Automobile Assn. In October, Californians paid more than $2.60 a gallon higher than the average American to fill up at a time when people’s finances were already strained by economy-wide inflation. The current average price for regular gasoline in California is now $4.57 a gallon, but has been on the rise in recent weeks.
The proposal before lawmakers includes provisions to increase oversight and transparency by expanding state authority to collect data that could shed light on California’s mysteriously high gas prices, which regulators say there isn’t enough information to explain.
Stricter oversight of oil refining will be increasingly important in the coming years as California’s climate policies, including a zero-emission vehicle mandate, shrink demand for petroleum. Now is the time to start putting in place policies to ensure oil companies cannot manipulate fuel supply and prices to squeeze out more profits while they still can.
California has an opportunity to lead the nation and prevent oil industry opportunism from hurting consumers. Lawmakers should stop stalling and move quickly to adopt a law to stop price gouging at the pump.
