Newsome’s gas price proposal up for grabs at special legislative hearings – East Bay Times

Lawmakers gathered in Sacramento this week to try to prevent a spike in gas prices in the Golden State.

The first two hearings of a special session of the state Assembly to consider Gov. Gavin Newsom’s proposal to prevent gas price spikes by ordering refineries to supply are taking place amid criticism from oil companies that the new rules will create artificial fuel shortages in California.

Newsom, a second-term Democrat who has been accused by conservatives of seeking to regulate gas prices to score political points, wants refineries to maintain a backup supply so that when they are taken offline for routine and emergency maintenance and supply is reduced, gas prices don’t rise dramatically. Last year, the lack of a surplus of crude oil cost Californians more than $2 billion, while refineries netted $50 billion, Newsom said in a statement.

“Right now, Big Oil can and does allow supply to shrink, artificially driving up prices at the pump and allowing oil companies to profit,” the governor said. “This proposal does the opposite — it would require companies to hold stockpiles so they can draw down during supply disruptions to avoid shortages.”

But the Western States Petroleum Association, which represents the oil industry, said such an order would lead to “bad regulation” that would hurt consumers.

“Governor Newsom’s order on refinery deliveries will create artificial fuel shortages in California, Arizona and Nevada by forcing refiners to withhold fuel from the market,” Catherine Reheis-Boyd, the group’s president and CEO, said in a statement. “Legislators who vote for this order will be voting to raise the cost of gas for their constituents.”

The governors of Arizona and Nevada have spoken out against the proposal to mandate oil drilling, fearing that approval of Newsome’s plan would also result in higher gasoline prices in their states.

Reheis-Boyd said that “California already faces a de facto production ban, forcing more than 75 percent of the crude oil our state uses to import from overseas.”

In addition, Reheis-Boyd said upcoming shipping regulations set to take effect in a few months could worsen supply problems by restricting shipping and causing a significant drop in supplies of crude oil and other transportation fuel products needed to meet the state’s energy needs.

David McCuan, a political science professor at Sonoma State University, said the special session is more about policy than political strategy.

“This is a series of power plays by a governor who wants to go and doesn’t want to be seen as a lame duck,” McCuan said. “(This) is about much more than the politics of the present and what’s next, about gas prices, oil refineries, the fuel mix.”

However, gas prices are rising.

The latest price increase came in Northern California, where the price of gasoline rose from $4.76 on Aug. 20 to $5.02 last week, $1.92 more than the national average, according to AAA.

Last week, a new oil market regulator within the Division of Petroleum Market Oversight, an independent division of the California Energy Commission, reported that refinery maintenance, low inventories and spot market volatility are driving up gas prices in California even as crude oil prices and national gas prices are falling.

The group said these are the same market conditions that are driving up retail gasoline prices in 2022 and 2023. During that time, California residents paid at least $2.25 more per gallon than residents of other states.

“We are concerned that the oil industry could exploit this situation to make excessive profits at the expense of California consumers,” Tai Milder, director of the regulatory division, said in a statement. “We will continue to monitor the market, investigate industry activity and expose speculative behavior.”

The state’s oil regulator said many refineries across the state have experienced maintenance issues in the past few weeks, resulting in a drop in supplies of about 12% since the end of June, tightening supply and preventing prices from stabilizing.