California’s Newsom Scores Win in Bid to Curb Oil Profits

(Bloomberg) — Governor Gavin Newsom struck a deal Monday with legislative leaders on a proposal to limit how much profit oil companies can make in California and establish a watchdog to monitor gasoline prices.

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Under the proposal, authored by state Senator Nancy Skinner, the California Energy Commission would be allowed to impose a penalty on refiners that charge more than an allowable margin for the price of gasoline, Newsom’s press office said in a statement.

The proposal represents a shift from a Newsom’s earlier goal to impose a windfall tax on oil companies. It would have required a super majority to be approved.

The bill, which needs a simple majority of the Democrat-controlled legislature to pass, would give the watchdog subpoena powers to obtain data and records “that could reveal patterns of misconduct or price manipulation.”

Read More: California’s Newsom Proposes Limit on Oil Refining Margins

Gasoline prices in California skyrocketed to record levels last year, helping boost crude refiners’ profits to all-time highs. The fuel averaged $4.85 a gallon Monday, the highest in the nation.

The governor’s latest move in his spat with fuelmakers over alleged price gouging was blasted by the Western States Petroleum Association, an industry group whose members include Exxon Mobil Corp. and Marathon Petroleum Corp.

“Empowering unelected bureaucrats and giving them the authority to tax, investigate and penalize refiners will likely lead to the same unintended consequences as his initial proposal — less investment in production, decreased supply, and higher costs for Californians,” association spokesperson Kevin Slagle said by email. “At a minimum, this needs thorough time for legislative analysis and discussion.”