Gov. Newsom’s Artificial Gas Shortage Plan: Playing Politics with Fuel

California’s Assembly Democrats voted Tuesday to pass Governor Gavin Newsom’s proposal to decrease the state’s gas supply, which will clearly result in even higher gas prices at the pump.

Californians are already paying the highest gas prices in the entire country – even higher than Hawaii, according to AAA today.

Texans pay $2.73 per average gallon of gas. That’s a difference of nearly $2.00 per gallon that Californians pay a premium for.

California Governor Gavin Newsom called for a special legislative session after accusing California’s oil refineries of price gouging. The governor claimed that “Gas price spikes on consumers are profit spikes for oil companies, and they’re overwhelmingly caused by refiners not backfilling supplies when they go down for maintenance.”

ABX2-1 will give the California Energy Commission more authority to impose new mandates for oil storage requirements on oil refineries in California, even as California is on the verge of an energy crisis with the push for electrification by 2035, as John Kabatek, California State Director, National Federation of Independent Business warned last week. “The regulation requirements in ABX2-1 will artificially create a fuel shortage crisis due to limiting the distribution of fuel.”

Catherine Reheis-Boyd, President and CEO of the Western States Petroleum Association shared her statement over passage of ABX2-1 today in the Assembly:

“As California’s special session unfolds, the notion of mandating refineries to store fuel supplies may seem like a simple fix to price spikes, but the reality is far more complex. The math behind this proposal is incomplete and fails to address key operational questions. For example, how many days of supply will refiners be forced to withhold from the market? What will the storage costs be? And crucially, what happens if a price spike never materializes—are Californians then stuck paying more year-round for no reason?

“This theory of cost savings is just that—a theory. Without a deep understanding of the complexities of refinery operations, policymakers are gambling with consumers’ wallets. We, as an industry, are ready to roll up our sleeves and address the root causes of California’s volatile energy market, which has been shaped by decades of policies. We call on legislators to do the same. Californians deserve solutions grounded in reality, not rushed ideas pushed through during a special session. This bill lacks the time, detail, and diligence required to truly address the problem.

“We must take the time to find a better way forward—one that balances the need for affordable energy with the complexities of our energy infrastructure, rather than relying on untested economic theories that put consumers at risk.”

 

Assemblyman Tom Lackey (R—Palmdale) said:

“Californians are working hard to put food on the table, pay the rent and keep the lights on. They are driving as much as two-hours each way to earn a paycheck.

“Hardworking Californians deserve better than the Governor’s experiment.

“The Governor should listen to his own administration. In their 87 page report, his appointees said his proposal could create artificial supply shortages, and inadvertently increase gas prices.

“Families are struggling with inflation and an affordability crisis. California leaders should be focused on immediately lowering costs for consumers. It can be done by suspending the $0.60 per gallon state gas tax.”

California Republican Party Chairwoman Jessica Millan Patterson:

“I wish I could say I was surprised by Assembly Democrats’ reckless decision to pass Governor Newsom’s radical refinery storage mandate, but supporting a bill that is expected to raise gas prices and cause shortages is perfectly on brand for them. Californians are already paying the highest gas prices in the nation, and instead of working with Republicans on commonsense solutions to lower energy costs for everyone, Democrats doubled down on their incompetent agenda. Voters won’t forget Democrats’ slap in the face to hardworking Californians struggling to make ends meet.”

Assembly Republicans had this to say:

Today, Assembly Democrats passed Gavin Newsom’s refinery storage mandate — a reckless proposal that his own Energy Commission, fuels market experts, and the governors of Arizona and Nevada warned could increase prices and cause gas shortages.

“Gavin Newsom is continuing his legacy of driving up costs for drivers and Assembly Democrats are once again enabling his pricey agenda,” said Assembly Republican Leader James Gallagher (Yuba City). “Newsom’s scheme won’t do a damn thing to lower gas prices, and he knows it. As long as Democrat politicians refuse to stand up to the governor, costs at the pump are only going to increase.

As Ed Ring reported for the Globe last week:

…much of the high price for gasoline in California is caused by higher taxes. In July 2024, when the average price per gallon in California was $4.49, state taxes, fees, and programs added $1.23 to the price, along with another $0.18 of federal excise tax. The cost of crude oil added $2.04 and “industry costs and profits” added $1.04. Included in that last number are not only refinery operating costs, but also distribution and marketing costs.

California’s state government collects corporate income tax on oil company profits, which adds to the $1.23 they collect in direct taxes and fees on a gallon of gas. So one may ask, since our governor is so concerned about California’s consumers getting gouged at the pump, why the amount the state collects on every gallon of gasoline is grossly in excess of not only industry profits (before taxes), but profits plus total operating costs. Who, then, is gouging who?

As the Globe has asked repeatedly, “If the ‘Big Oil’ companies are so greedy, why are they only greedy in California and not greedy in every state?”