“They’re taking advantage of you,” Newsom said during a Friday press conference
By Eliyahu Kamisher, MERCURY NEWS
October 7, 2022
Gov. Gavin Newsom said Friday he will convene a special legislative session to pursue a “windfall profits tax” on oil companies amid an escalating battle with the oil industry over who bears responsibility for California’s surging gas prices.
During a news conference, Newsom said he wants the legislature to hash out a “framework” for the new tax beginning Dec. 5, but he offered few details on how it would be structured aside from promising the money would “go right back to the taxpayers.”
“Every single one of us should be outraged and disgusted by these folks,” Newsom said of oil companies. “They’re taking advantage of you and they’re fleecing you for billions and billions of dollars.”
The announcement won tepid approval from Democratic leaders with Senate President Toni Atkins and Anthony Rendon, the assembly speaker, saying a new tax on oil companies “deserves strong consideration.” Republican and oil industry leaders blasted the move as a political stunt.
The governor’s increasingly combative rhetoric comes as he faces re-election in November and with California’s gas prices just cents away from an all-time record at $6.39 a gallon, according to AAA. While the state’s gas prices are historically the highest in the nation due to taxes and environmental regulations, the price gap between the Golden State and the rest of the country has surged to $2.50 a gallon, well above the normal price differential.
It also comes as the state begins sending Californians gas rebate payments to ease the pain at the pump.
Data provided by the California Energy Commission on Thursday shows that $2.18 of every gallon sold in the last week of September went to oil refiners, up from 64 cents a gallon in August.
Energy analysts know that the recent price spike is linked to reduced gas production among the state’s oil refiners, which have reported some mechanical hiccups and scheduled maintenance. The limited supply and strong fuel demand caused gas prices to surge on the commodity market.
But the California Energy Commission has admitted that it is scratching its head at the dramatic price increase, which at one point surged 96 cents in two weeks even as gas prices around the country plummeted. The commission said the price hike is not fully explained by the maintenance and refinery outages and last week called on major oil companies to provide an explanation.
Only two oil refineries, PBF Energy and Valero, have publicly responded to the CEC. In a letter on Thursday, Paul Davis, a vice president at PBF Energy, blamed California’s environmental regulations and declining oil-refining capacity in the state for the severe price hike. But Davis declined to provide a more detailed explanation, citing state and federal antitrust laws that shield much of the oil industry’s pricing and operations decisions.
Newsom said claims that the price hike is due to mechanical issues or the state’s environmental regulations is “nonsense.”
“I’m sick of them defining the terms, defining the narrative,” he said. “We’ve been too timid. All these studies and reports, all these investigations, they amount to nothing.”
But the oil industry said Newsom was simply motivated by politics.
“If this was anything other than a political stunt, the Governor wouldn’t wait two months and would call the special session now, before the election,” Kevin Slagle, a vice president for the Western States Petroleum Association, said in a statement. “This industry is ready right now to work on real solutions to energy costs and reliability if that is what the Governor is truly interested in.”
A portion of California’s high gasoline costs is explainable. The state’s 54-cent gasoline excise tax is among the highest in the country. There are also strict environmental regulations and special fuel blends that have drastically improved air quality in cities. These higher fees typically widen the price gap between the Golden State and the country by about 60 cents to 70 cents, according to varying estimates.
California Republicans on Friday also railed against Newsom’s proposal, saying the best way to save drivers money is to pause the state’s gas tax. Democrats, who hold a supermajority in Sacramento, have refused to eliminate the tax, saying such a move would upend an important source of transportation funding.
“It’s official. Newsom is calling a Special Session of the Legislature for the sole purpose of raising taxes,” said Kevin Kiley, an Assembly member from Rocklin. “Parody and reality have become indistinguishable.”
Consumer Watchdog, which has backed a windfall profits tax on oil companies, praised the governor’s decision.
“Now it’s time for the legislature to answer the Governor’s call with a windfall profits tax that takes back the outrageous profits oil refiners have been making off Californians’ pain at the pump,” Jamie Court, the Consumer Watchdog president, said.
Eliyahu Kamisher is the transportation reporter for The Mercury News. He got his start in journalism covering the Israeli police and then as a foreign correspondent for the German Press Agency. Before joining The Mercury News, Eliyahu worked as a freelancer with stories across California. He is a graduate of UC Santa Barbara.