California lawmakers advance Newsom’s plan to prevent gas price spikes

The California State Senate on Friday advanced Gov. Gavin Newsom’s (D) controversial proposal to tighten rules on refinery fuel storage — an attempt to avoid future supply scarcity as well as price hikes at the pump.

“Californians are one step closer to getting the protections they need against Big Oil’s price spikes,” Newsom said in a statement following the proposal’s passage in a special legislative session.

“I’m grateful to our partners in the Senate for helping to save Californians money at the pump,” the governor continued. “Price spikes cost consumers more than $2 billion last year, and we’re taking the action necessary to help put this to an end.”

The ABx2-1 bill, which received Assembly approval earlier this month, would allow the state to require oil refiners to maintain a minimum inventory of fuel. Doing so, the governor’s office explained, could help prevent supply shortages that create higher gasoline prices for consumers.

While the legislation still must go back to the Assembly for a final concurrence vote, it would authorize the California Energy Commission to require refiners to plan for resupply during maintenance outages.

“Rising gas prices impact everyone in California and nearly every facet of our lives — from how much we’re paying at the pump to the cost of what we’re buying at the store,” Senate President Pro Tempore Mike McGuire (D) said in a statement.

“Putting mechanisms in place to help prevent costs from spiking and sending family budgets into a tailspin benefits us all,” McGuire added. 

Nonetheless, the bill did not pass unanimously in either chamber, where some Democrats joined Republicans in either voting against the proposal or abstaining from the vote.

Following the passage of ABx2-1 on the Assembly floor earlier this month, the Western States Petroleum Association, a trade group representing oil firms, characterized the proposal as rushed and incomplete.

Catherine Reheis-Boyd, president and CEO of the group, questioned how many days of supply the refiners would be required to withhold from the market and how high storage costs would be.

“This theory of cost savings is just that — a theory,” she said in a statement. “Without a deep understanding of the complexities of refinery operations, policymakers are gambling with consumers’ wallets.”

The day before the state Senate vote, representatives of multiple labor unions sent a letter to lawmakers to express their opposition to the bill.

The writers particularly took issue with the fact that the California Energy Commission, an unelected, ratepayer-funded entity, would gain “unprecedented regulatory authority to bureaucratically dictate safety maintenance at in-state refineries.”

“We have collectively attempted to voice our legitimate safety concerns over ABX2-1 but have been dismissed, gaslighted, and told by those same lawyers and economists that we have nothing to worry about,” the representatives added.

State Sen. Brian Dahle (R) expressed concern that the bill would “create artificial shortages by limiting supply,” describing the proposal as “a scheme to collect money from oil refineries and consumers at the pump.”

Yet in an editorial for The Sacramento Bee, a group of Stanford economists credited Newsom’s proposal as “on the right track,” citing past price spikes and shortages as “a gut punch for millions of Californians.”

“With so much market power, the incentives to build up robust reserves are limited,” the economists said.