California energy regulators have decided to delay plans that would penalize oil companies if their profits rise above certain levels, pushing the implementation of any such measure back to 2030. The California Energy Commission made this decision after two refineries, which together represent about 18% of the state’s refining capacity, announced they will close in the coming months.
The commission has the authority to enact penalties on oil companies but is not required to do so. This pause comes as Governor Gavin Newsom’s administration tries to balance efforts to reduce reliance on fossil fuels with maintaining a stable and affordable fuel supply for consumers. Newsom had previously called this initiative a major achievement against large oil companies and has also proposed temporarily easing approvals for new oil wells within existing fields.
Siva Gunda, vice chair of the commission, explained that consumer protection at gas stations must take priority during this period. “I personally truly believe that this pause will be beneficial to ensure that this mid-transition is smooth,” Gunda said.
Meanwhile, the commission plans to move forward with regulations requiring refineries to keep a minimum inventory of fuel on hand, aiming to prevent shortages when facilities go offline for maintenance.
Jamie Court, president of Consumer Watchdog and a supporter of the penalty law, criticized Friday’s vote: “The energy commission’s vote is ‘basically a giveaway to the industry.’ I’m really disheartened and disgusted by Newsom,” Court added. “I feel like this is just a total about-face. And in the end it’s going to result in greater price spikes.”
Industry groups have advocated for longer delays or outright repeal of penalties. Catherine Reheis-Boyd, CEO of Western States Petroleum Association, stated: “While today’s action by the CEC stopped short of a full statutory repeal or a 20-year pause, it represents a needed step to provide some certainty for California’s fuels market. The vote demonstrates the CEC’s understanding that imposing this failed policy would have likely exacerbated investment concerns contributing to California’s recent refinery closures.”
Governor Newsom convened lawmakers in 2022 for a special session following record-high gasoline prices in California and signed legislation granting penalty authority over oil company profits in 2023. However, since then no penalties have been imposed nor has there been an official definition established for what constitutes excessive profit.
Julia Stein from UCLA School of Law noted ongoing commitment from state officials toward reducing fossil fuel use but acknowledged new challenges as refineries close: “But I think there is also a sense at the state level that we’re entering a different phase of the transition where some of these problems are going to be presented more acutely,” she said. “And folks are kind of now trying to understand how they’re going to approach that in real time.”
California continues to lead U.S. states with its high gasoline prices due mainly to taxes and environmental rules; regular unleaded was $4.59 per gallon on Friday compared with $3.20 nationally according to AAA data (https://gasprices.aaa.com/).
Severin Borenstein, an economist at University of California, Berkeley cautioned that introducing penalties could backfire by discouraging production and potentially driving prices higher.
