California governor wants a watchdog to investigate state’s high gas prices

California Gov. Gavin Newsom has proposed an independent watchdog within the California Energy Commission to monitor the state’s petroleum market on a daily basis.

The proposal represents a shift from his plan to place a cap on oil company profits, though it would give the commission more authority to investigate gasoline price spikes and the option, through a public hearing process, to place a cap on profits and penalize oil companies.

“What we’re asking for is simple: transparency and accountability to drive the oil industry out of the shadows,” Newsom said in a statement.

Newsom called a special session last year to investigate why the state’s gas prices are so much higher than other states, but failed to achieve wide support from the Legislature over his plan to penalize oil refinery profits.

The state has historically had some of the highest gas prices in the nation. The average price for gas in California was $4.87 per gallon Friday, compared to a national average of $3.45 per gallon, according to AAA. The state’s gas prices reached a high of $6.42 per gallon last fall, $2.61 more per gallon than the national average.

“Last fall’s spike occurred while crude oil prices dropped, state taxes and fees remained unchanged and gas prices did not increase outside the western U.S., so the high prices went straight to the industry’s bottom line,” according to the governor’s release. “This spike in gasoline prices resulted in record refinery profits of $63 billion in just 90 days.”

Newsom and Attorney General Rob Bonta met with 100 stakeholders Thursday to help flesh out a strategy to combat the state’s high gas prices.

“As many Californians struggle to make ends meet, oil companies like Chevron and Exxon continue raking in record profits on the backs of consumers,” said Bonta, co-sponsor of the governor’s proposal. “Enough is enough. I stand with the governor to defend hardworking California families and to provide greater transparency and oversight in the marketplace.”

The proposal would increase reporting requirements from refiners and give the watchdog division subpoena power to compel production of data and records that could reveal patterns of misconduct or price manipulation. It would also refer violations of law to the attorney general for prosecution.

The commission would be authorized to set a price gouging penalty after public hearings. It would establish a penalty structure that deters excessive pricing by imposing a civil penalty on refiners who charge more than a maximum allowable margin for gas.

“The emphasis of this proposal on creating an independent division that will investigate competition in the California gasoline market, and find the source of the mystery gasoline surcharge, is exactly what we need,” said Severin Borenstein, an economist at University of California-Berkeley.

The watchdog organization “needs substantial staffing and resources, as well as the power to compel companies to provide confidential information, all of which is in the proposal. I am strongly supportive of it,” Borenstein said.