The plan would force oil refineries to maintain minimum inventories to avoid price spikes at California’s gas pumps.
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California Governor Gavin Newson unveiled a proposal on Friday to force oil refineries to maintain minimum inventories. The goal is to stabilize supplies and avoid sudden price spikes at California gas stations.
The plan, touted as a “nationwide first,” would authorize the California Energy Commission to mandate minimum fuel reserves at oil refineries “to avoid supply shortages that result in higher prices for consumers,” according to a statement from the governor’s office.
“Price spikes at the pump mean profit spikes for the oil industry,” Newsom said. “Refineries should be required to plan ahead and replenish their inventories to keep prices stable, rather than playing games to make even more profit. If refineries acted responsibly and maintained gas reserves, Californians could save money at the pump every year.”
If the proposal had taken effect in 2023, California drivers would have saved more than $650 million in gasoline costs, officials said.
A CEC study found that there were 63 days in 2023 when California refineries had less than 15 days’ supply, leading to higher prices, the statement said.
Officials pointed out that similar regulations have been adopted in the European Union, Japan and Australia.
Maintenance planning request
Newsom’s plan would also allow the CEC to require refineries to demonstrate that they have adequate plans to deal with production outages when performing maintenance on their refining facilities.
Tai Milder, CEC’s petroleum market supervision department, said such a policy is necessary to prevent oil refineries from taking advantage of maintenance work to increase profits.
“The data is clear: oil refineries have made profits by scheduling maintenance that reduces supply during our busy seasons,” he said. “The governor’s proposal gives us new tools to require refineries to responsibly schedule and prevent price gouging during maintenance.”
Previous efforts to rein in the industry
Friday’s announcement is the latest in a series of efforts to “keep the industry in check,” according to Newsom’s office.
A law signed by Newsom last year created a watchdog group within the CEC to monitor and punish companies for price gouging.
In 2022, he proposed imposing a “windfall tax” on oil companies that what his office called “excessive oil profits.”
Highest petrol tax in the country
Meanwhile, California’s gasoline tax increased by 2 cents to 60 cents per gallon in July.
The state gasoline tax is the highest in the country.
This does not include an additional federal excise tax of 18 cents per gallon.
