The Governor of California Signs Legislation Giving the Energy Commission Control Over Oil Firms

On Tuesday, California Governor Gavin Newsom signed a bill into law that grants the state’s energy commission the authority to investigate claims of oil company price gouging and bring criminal charges against those responsible.

“Why is it that we are paying at peak $2.61 more per gallon of gasoline than the national average?” As Newsom put it on Tuesday,

“You should not have had to endure these price spikes, you should not have to endure them in the future. We are going to get under the hood, and we are going to address this issue like no other jurisdiction has in this country.”

When crude oil prices began to drop last year, Newsom said that oil companies were still exploiting Californians. On Tuesday, Newsom said at a press conference that it was “one of the greatest rip-offs in modern American history.”

According to the governor’s office, the new law establishes a new department inside the California Energy Commission (CEC) to  “investigate industry’s sales and pricing activities and can refer violations to the Attorney General for prosecution,”  Their agency has the authority to fine oil corporations if it finds evidence of price gouging.

California Governor Signs Bill Giving Energy Commission
California Governor Signs Bill Giving Energy Commission

According to the law, the commission’s investigation will include a determination of the appropriate penalty level. Legislators who worked on the proposal said it will provide much-needed insight into the state’s petroleum industry and the pricing practices of oil firms.

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“California has sent a clear message to the oil industry – open your books and prove that you’re not price gouging. Otherwise, you, big oil, will pay the price, not consumers,”, as California state senator Nancy Skinner put it.

According to a statement released by Chevron spokesman Ross Allen, “Chevron believes California deserves affordable, reliable, and ever-cleaner energy.”

“But this legislation does not address the fundamental production and supply shortage in California markets,” Allen said. “The high energy prices this bill purports to address are a function of an under-supplied, isolated market for specialized gasoline blends. The state’s own regulators have found time and again that California’s high gas prices are caused by regulation, policy and geography.”

The bill will take effect in 90 days, but Newsom estimates that it will take another nine to twelve months to “set up” the new division. He emphasized that this commission section is not a quick cure but would focus on long-term solutions to ensure that Californians are not subjected to excessively expensive pricing.

After first calling on the legislature to impose a windfall tax on oil firms, Newsom requested a special session to discuss a possible “price gouging penalty”  in November of last year. On March 20th, the governor and legislative leaders announced an agreement giving the CEC supervisory authority and allowing it to set sanctions.

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