California to consider oil 'price gouging' bill

California governor Gavin Newsom (D) has called for the state's legislature to reconvene on 5 December for a special session to consider putting a "price gouging penalty" on oil companies.

The special session will consider legislation meant to "deter price gouging" by hitting oil companies with a "financial penalty on excessive margins," according to a proclamation Newsom signed this week calling for the special session. Any penalties would be returned to state residents, the proclamation says.

"Big oil is ripping Californians off," Newsom said. "A price gouging penalty is needed to hold them accountable for profiteering at the expense of California families."

California lawmakers as part of the session will also consider giving regulators at the California Energy Commission and state tax offices greater authority to "closely review and evaluate" costs, profits and pricing across the supply chain for gasoline in the state, the proclamation says.

Newsom also wants lawmakers to expand oversight of the industry, with a goal of avoiding supply shortages and price spikes.

Newsom in early October called for the state to place a windfall profits tax on oil producers and refiners that would apply to earnings above a set amount each year. California consumers at the time were paying an average of $6.21/USG for regular grade gasoline.

But prices in the state have since declined to an average of $4.81/USG for regular grade for the week ended on 28 November, according to data from the US Energy Information Administration. Newsom said legislation was warranted partly in response to record-high profits that some oil companies reported in the third quarter.

The California Energy Commission this week held a hearing focused on price spikes. Five top refiners — Chevron, Marathon, Phillips 66, PBF Energy and Valero — declined to attend.

Oil industry officials have attributed recent price spikes to refinery maintenance issues, California's unique fuel specification requirements and dwindling crude production in the state. The industry has warned that imposing new costs on the sector will likely be passed along to consumers in the form of higher prices.

By Chris Knight