As gas prices in California soar well above the national average per gallon, Governor Gavin Newsom continues to accuse “greedy” oil companies of “ripping off” Californians at the pump.
California’s average price per gallon is $5.88, while the national average is $3.84, according to data from AAA.
The governor, who’s seeking reelection, is calling for a special legislative session to impose a windfall tax on oil companies so the money he says oil companies are raking in goes back to Californians.
“Crude oil prices are down but oil and gas companies have jacked up prices at the pump in California. This doesn’t add up,” Newsom said in a video. “We’re not going to stand by while greedy oil companies fleece Californians. Instead, I’m calling for a windfall tax to ensure excess oil profits go back to help millions of Californians who are getting ripped off.”
If approved, a windfall tax would set a cap on the profits that a sector can earn, and anything above the cap will be eligible for a higher tax rate. The proceeds from this will then be diverted back to California taxpayers through refunds and rebates.
As Newsom continues to put the blame on oil and gas companies while failing to show proof of price setting, many are pointing out that gasoline prices are higher in California because of a combination of factors that are unique to the state: the refining recipe of seasonal blends meant to minimize emissions, the already high taxes, the overall high cost of doing business, and more recently, a reduced capacity in its oil refineries as part of the legislation that pushes to phase out internal combustion engines.
These factors have caused the state’s fuel inventories to be at the lowest level in a decade, and the market’s to become so tight that if one refinery is offline for maintenance, supplies will dip, and prices will go up.
The solution then becomes obvious: if Newsom wants lower gas prices, the state would need to expand refinery production and cut taxes. In his response to Newsom’s ‘tin foil hat theory,’ author Michael Shellenberger quoted UC Berkeley energy economist Severin Borenstein. “If the goal is to help Californians hit specifically by high gas prices,” wrote Borenstein, “nothing will be nearly as well targeted as a gas tax holiday.”
Information for this briefing was found via Twitter, the LA Times, Cal Matters, and the sources and companies mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
