Newton Urges Legislation: Imposing Minimum Supply Levels on Oil Refineries

California Governor Gavin Newsom urged the state legislature on August 15 to pass new regulations for oil refineries in the final two weeks of this legislative session. The proposed regulations would require setting a minimum supply level to curb drastic fluctuations in future oil prices.

If the bill is passed, it would become the first of its kind in the country, allowing the California Energy Commission to penalize refineries that do not comply with the minimum supply requirements.

Refineries would also be required to submit plans to the state government detailing how they would make up for production losses during equipment maintenance.

This proposal is an extension of Newsom’s “Fight big oil” campaign. In June 2022, gasoline prices soared to a historic high of $6.44 per gallon. In response, Newsom established an oil market oversight department, overseen by the Energy Commission, to enforce strict regulations on refineries within the state.

In a press release on August 15, Newsom stated, “The skyrocketing prices at the pump are directly correlated to the soaring profits of big oil companies. Refiners should be required to plan and replenish their inventories in advance to stabilize prices, rather than manipulating the market for greater profits.”

According to Newsom, the Energy Commission found that California refineries had inadequate gasoline supply for 63 days in 2023, resulting in price hikes.

The Governor claims that the new regulations would save Californians $650 million in gasoline costs, although he did not provide further details.

California has the highest gas prices in the United States. According to data from the American Automobile Association (AAA), the average price of gasoline in California on August 15 reached $4.60 per gallon, $1.20 higher than the national average. California also imposes the highest gasoline tax in the country and requires oil industry to produce and use special summer blend fuels, further elevating gasoline costs during the summer.

Newsom’s bill quickly drew criticism from the non-profit trade organization, the Western States Petroleum Association.

Catherine Reheis-Boyd, President and CEO of the association, told Epoch Times via email, “Imposing new operational requirements on energy producers based on such falsehoods is regulatory overreach and ignores the logistical challenges and costs that such plans bring.”

Reheis-Boyd argued that the proposal for minimum supply levels is “simply a political attack on consumers and our industry.” She also pointed out that Newsom’s claims regarding maintenance schedules during peak driving seasons are misleading and demonstrate his lack of understanding of the industry.

According to Newsom’s office, the Governor’s proposal was modeled after similar regulations in Australia, Japan, and the European Union.

On August 2, Chevron Corp. announced it would relocate its headquarters from California to Texas by the end of the year, joining a recent exodus of oil companies leaving California to avoid high taxes and stringent climate policies.

Following objections to its oil extraction and refining operations in California, Chevron made the decision to relocate.

The oil giant, registered in San Francisco in 1879, will retain employees at its current Northern California headquarters in San Ramon to support California operations. Chevron operates oil fields, technical facilities, and two refineries in California, supplying fuel to over 1,800 retail gas stations in the state. ◇