December 9, 2023

California Gov. Gavin Newsom said Friday he would convene a special session of the state legislature in December to pass a new tax on oil company profits to punish them for “rank price gouging.”

Gasoline prices soared across the country this summer due to high inflation, Russia’s invasion of Ukraine and ongoing disruptions in global supply chains.

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But while gas prices have recovered somewhat nationwide, they have continued to rise in California, averaging $6.39 per gallon on Friday — $2.58 more than the national average, according to AAA.

California has the second highest gas tax in the country and other environmental regulations that increase fuel costs in the nation’s most populous state. Still, Newsom said the price difference of more than $2.50 per gallon between California’s gas and prices in other states is “nothing to justify.”

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“It’s time to get serious. I’m sick of it,” Newsom said. “We’ve become very timid.”

The oil industry has pointed to California’s environmental laws and regulations to explain why the state regularly has higher gas prices than the rest of the country.

Kevin Slaggle, vice president of the Western States Petroleum Association, said Newsom and state lawmakers should “take a close look at the decades of California energy policy” instead of proposing a new tax.

“If it was anything but a political stunt, the governor would not wait two months and call a special session now before the election,” Slag said.

“This industry is ready right now to work on real solutions to energy cost and reliability – if that’s what governors are really interested in.”

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Several states, including Maryland, New York and Georgia, chose to suspend their gas taxes this summer. Newsom and his fellow Democrats, who control the state legislature, refused to do so, opting instead to send taxpayers $9.5 billion in rebates — which began showing up in bank accounts this week.

It is unclear how the tax proposed by Newsom would work. Newsom said he was still working out details with legislative leaders, but said on Friday he wanted the money “returned to taxpayers”, possibly using money from the tax to pay more exemptions. For.

The state legislature briefly considered a proposal earlier this year that would have imposed an “unforeseen profit tax” on oil companies’ gross receipts when the price of a gallon of gasoline was “unusually compared to the price of a barrel of oil.” was more.”

That proposal would require state regulators to set a tax rate to ensure it recovers any oil companies’ profit margins by more than 30 cents a gallon. The money from the tax would then have been returned to the taxpayers through rebates.

Newsom did not comment on the motion when it was introduced in March, and lawmakers immediately adjourned it. However, it could serve as a blueprint for a new proposal for talks between Newsom and legislative leaders.

The top two leaders of the Legislature – Senate Speaker Pro Tempore Tony Atkins and Assembly Speaker Anthony Rendon – said in a joint statement that lawmakers “will continue to examine all other options to help consumers.”

“A solution that takes enormous profits out of the hands of oil corporations and puts money back in the hands of consumers deserves strong consideration by the legislature,” he said. “We look forward to examining the governor’s detailed proposal when we receive it.”

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California Republicans – who do not control enough seats in the Legislature to influence policy decisions – have called the tax “silly.”

“Who in here thinks another tax is going to lower your gas prices? Is there going to be any cost reduction in this state? That’s not going to happen,” Republican Leader of the Assembly James Gallagher told reporters on Wednesday.

Last month, regulators from the California Energy Commission wrote a letter to five oil refiners — Chevron CVX.
Marathon Petroleum MPC,
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and Valero VLO,
– Seeking an explanation for the 84 cents hike in gas prices over a 10-day period despite the drop in oil prices. The commission wrote that the oil industry “has not provided an adequate and transparent explanation for this price increase, which is causing real economic hardship to millions of Californians.”

On Friday, Valero’s vice president for state government affairs, Scott Folvarco, responded that “California has the most expensive operating environment in the country and a very hostile regulatory environment for refining.” He said it has closed refineries and tightened supplies because California requires refineries to produce a specific fuel blend.

He declined to give details about the company’s operations based on the same anti-trust concerns. But he added that when some refineries are shut down for maintenance, the company makes proper arrangements to source supplies.

Newsom dismissed those arguments, saying it still doesn’t account for the $2.50 difference between California’s gas prices and the rest of the country.

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“These people are playing us fools. They have for decades,” Newsom said.

The California Legislature usually meets between January and August, where they consider bills on a variety of subjects. The Governor has the power to call a special legislative session at any time by issuing a proclamation. When called to a particular session, legislators can consider only the issues mentioned in that proclamation.

The last time a California governor called a special legislative session was in 2015, when then-Gov. Jerry Brown asks lawmakers to pass bills about health care and transportation.