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Newsom tries to clear misconceptions on gas price gouging penalties

'The industry is already pushing the same lies they've used for decades to protect their profits,' governor claims
A Chevron gas station in the East Bay on March 30, 2022.

Gov. Gavin Newsom last week attempted to clear the air on misconceptions about his proposed price gouging penalty against the oil industry for its unexplained spike in gas prices in California.

In early December, the governor held a special legislative session to expedite bills that would hold oil giants accountable for profiting off exorbitant prices at Californian gas pumps.

The discussion took place after California faced record-high gasoline prices of $6.42 -- almost $3 above the national average -- while the oil industry reached record-high earnings. Some companies reportedly doubled their year-over-year profits in the same time frame.

"California's price gouging penalty is simple -- either Big Oil reins in the profits and prices, or they'll pay a penalty," Newsom said on Dec. 5.

But critics said the punishments, though in line with the state's goals of ridding gas-powered vehicles by 2035, could come at the expense of Californians still dependent on the small amount of oil refineries in the state to power their cars.

Newsom's office said Thursday that the oil industry is "lying" to residents and policymakers that the penalty is another gas tax that will raise prices and further restrict supplies.

"The industry is already pushing the same lies they've used for decades to protect their profits," wrote Newsom's office.

Newsom assured that Californians won't pay a cent - rather, the penalty will discourage oil companies from excessively upping gas prices, and does not target the global supply of gas.

One proposal, introduced by State Sen. Nancy Skinner, D-Berkeley, would make excessive refiner margins illegal and punishable by civil penalty from the California Energy Commission.

"Putting the Governor's proposal in print allows the Legislature and the public to begin discussions on this important issue. No one can deny that California's gas prices were outrageously high compared to other states. And those high prices hurt California consumers and businesses," said Skinner in a statement.

Margin thresholds and penalty amounts are still to be determined, but any penalties would be set aside and given back to residents, said Newsom.

"The penalty is on Big Oil's excess profits and funds collected from it will go to Californians," stated his office.

Newsom's office argued that the state's gas taxes and fees are not the reason for high prices, and suspending tax would only benefit oil companies and prevent Californians from receiving savings.

The Legislature is also considering allowing state agencies more oversight on the refining, distribution and sale of gasoline in California.

If passed, the first-in-the-nation proposal would give CEC and the California Department of Tax and Fee Administration the authority to investigate and obtain data on costs and profits to prevent price shocks in the future.

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