Newsom Amends Oil Profits Penalty Proposal

New plan would empower state regulator to investigate oil prices and penalize companies.

Reader note: For more in-depth coverage of California energy policy, see The California Energy Transition.

Governor Gavin Newsom introduced an amended proposal to his oil profits penalty that would give the state regulatory increased oversight authority. The amended proposal marks the abandonment of his proposed legislation to penalize “excessive” oil company profits in response to record high gasoline prices in California. (see Newsom Opens Special Session with Proposed Oil Profits Penalty.)

The March 15, 2023, amended proposal would provide the California Energy Commission (CEC) with increased funding for a new oversight department with subpoena authority to monitor gasoline prices and investigate price spikes.

The CEC would be authorized to begin a rule-making process to impose on a penalty or other regulations to address high gasoline prices. It would not require the regulator to cap profits or penalize the industry. The new proposal would also require oil companies to provide more data to state regulators.

“What we’re asking for is simple: transparency and accountability to drive the oil industry out of the shadows,” Newsom said in a statement. “Now it’s time to choose whether to stand with California families or with Big Oil in our fight to make them play by the rules.”

The revisions come a few weeks after Newsom’s earlier proposal floundered. The legislature held one hearing in which lawmakers expressed concern of unintended consequences to gasoline prices given the complicated nature of the oil markets. Uncertainty about the right strategy prevented any action.