Governor Gavin Newsom announced Thursday a new initiative aimed at preventing gas price spikes by requiring California oil refineries to maintain additional fuel reserves. This plan, part of Newsom’s ongoing effort against oil companies, directs the California Energy Commission (CEC) to mandate that refiners hold a minimum inventory of gasoline. The goal is to stabilize fuel supplies and prices, especially during refinery maintenance periods that have historically led to price increases.
Newsom argues that past price spikes were due to low supply during maintenance and claims that if this regulation had been in place in 2023, drivers could have saved up to $650 million on gasoline. “Price spikes at the pump are profit spikes for Big Oil,” Newsom stated. He emphasized that refiners should plan ahead to maintain supply stability rather than exploiting maintenance periods for higher profits.
The proposal has faced criticism from the oil industry. Catherine Reheis-Boyd, president and CEO of the Western States Petroleum Association, labeled Newsom’s claims as misleading and criticized the plan as impractical. She argued that the proposal fails to address the logistical and financial challenges of maintaining additional reserves.
Newsom’s office pointed to international precedents, noting that Australia, Japan, and the European Union have similar regulations requiring fuel reserves. The proposal is rooted in a 2022 price spike that led to a special legislative session addressing alleged price gouging. In response, Senate Bill X1-2 was signed in 2023, creating a watchdog division within the CEC and appointing Tai Milder as the state’s ‘oil czar.’
Milder’s earlier recommendations, including the new storage requirements, were based on observations of market volatility and a 50-cent-per-gallon price spike attributed to a suspicious trade. Newsom’s plan requires refiners to present resupply strategies to the CEC and face penalties for non-compliance, with funds redirected to consumers.
Currently, the average price of gasoline in California is $4.61 per gallon, reflecting a decrease from the previous month and year, according to AAA. Severin Borenstein, director of the Energy Institute at UC Berkeley’s Haas School of Business, noted that while the regulations may help mitigate price spikes, they are unlikely to align California’s gas prices with national averages due to ongoing higher baseline prices.
Borenstein also pointed out that the issue of high gasoline prices in California involves more than just price spikes, with a significant part attributed to a persistent, unexplained surcharge beyond occasional fluctuations.
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