As gas prices soar, Newsom demands tax on ‘rip-off’ oil companies, switch to winter blend

As gas prices in California soar, Gov. Gavin Newsom on Friday called on lawmakers to introduce a windfall tax on “rip-off” oil companies and urged state air regulators to allow refineries to produce cheaper winter-blend gasoline to help boost supplies and cut prices.

“Crude oil prices are down. Oil industry profits are up. Yet gas prices in CA have increased by record amounts. It doesn’t add up,” Newsom said in a tweet accompanying a video message. “We’re calling for a windfall tax so these profits go back to Californians paying for this oil company extortion.”

Despite Newsom’s message, any proposed laws wouldn’t be introduced until January, when the Legislature is back in session after an end-of-calendar recess that began in late August.

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To offer some current relief to Californians, Newsom, who is running for reelection, also called on the California Air Resources Board to allow refineries to distribute cheaper winter-blend gasoline a month earlier than usual, which is expected to boost oil supplies. Refineries typically switch from the summer-blend fuel on Oct. 31.

Over the last week, the average price per gallon of gas has jumped by more than 70 cents in the state, according to data from the AAA. On Friday morning, Californians woke up to an average price of $6.29 per gallon — 11 cents more expensive than the previous day — nearly double the national average of $3.79 per gallon.

Anlleyn Venegas, a spokesperson for the Automobile Club of Southern California, attributed some of the recent spikes to planned and unplanned maintenance at refineries, which have tightened fuel supply.

“West Coast fuel inventories are at the lowest level in about a decade, according to [the U.S. Energy Information Administration],” Venegas said after another recent spike in fuel costs.

Other reasons that oil companies have blamed high prices on were a recent refinery fire, Hurricane Ian on the East Coast and other geopolitical events, said the Air Resources Board in a statement announcing the switch in fuel blends.

But the state’s Energy Commission pushed oil industry executives, demanding a more direct explanation for the low oil supply levels and recent spikes in gas prices. The commission said it is aware of the recent maintenance interruptions at refineries but noted that in previous years, refineries have prepared for such issues.

“This degree of divergence from national prices hasn’t happened before, regardless of planned or unplanned refinery maintenance, and no explanation has been provided,” the commission wrote in a Friday letter. “The oil industry owes Californians answers.”

Newsom’s proposed windfall tax would apply to any company that extracts, produces and refines oil in the state. Under the proposal, the state would set a cap on a company’s profits, and any money made above the cap would be taxed at a higher rate. Profits from those taxes would then be funneled to rebates and refunds to California taxpayers.

Gas in California is typically more expensive than in other states for several reasons, such as state laws that call for specific seasonal blends, largely to limit carbon emissions during warmer months. The state also has a tax on motor fuels, signed into law in 2017 by then-Gov. Jerry Brown, which was intended to fix roads and bridges in disrepair. Under the law, the tax increases each year on July 1 based on the growth in the California Consumer Price Index.

When gas prices and inflation started spiking this year, largely due to oil supply affected by the war in Ukraine and COVID-19-related effects on the economy, Republican state lawmakers called for repeal of the tax, in hopes of bringing relief to drivers.

Instead, Newsom and state lawmakers approved a $9.5-billion tax refund program in June that will provide one-time payments of up to $1,050 for some families, arguing that a more robust relief was needed, even beyond the pump.

The state expects to distribute the payments in October and will carry on until January.

To be eligible, residents must have filed their 2020 tax returns by Oct. 15, 2021, lived in the state for six months or more in 2020 and could not be claimed as a dependent in 2020. Recipients must also be a California resident on the date the payment is issued. Payments are automatic if you qualify; residents do not need to apply.