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Gavin Newsom aims to punish oil companies for ‘rating hole’ as California gas prices hit $6.39 per gallon



California Governor Gavin Newsom said Friday he will convene a special session of the state Legislature in December to pass a new tax on the profits of oil companies aimed at punishing them. for what he calls “ranking price gouging”.

Gas prices across the country have skyrocketed this summer due to high inflation, Russia’s invasion of Ukraine and ongoing disruptions in global supply chains.

But while gas prices have recovered somewhat nationally, they continue to soar in California, averaging $6.39 per gallon on Friday — $2.58 higher than the national average. , according to AAA.

California has the second-highest gas taxes in the country, and other environmental regulations drive up fuel costs in the nation’s most populous state. However, Newsom said there was “nothing to justify” a price difference of more than $2.50 per gallon between gas prices in California and prices in other states.

“It’s time to get serious. I’m sick of this,” Newsom said. “We were too shy.”

The oil industry has pointed to California’s environmental laws and regulations to explain why the state regularly has higher gas prices than the rest of the country. Kevin Slagle, vice president of the Western Petroleum Association, said Newsom and state lawmakers should “take a hard look at California’s decades-old energy policy” rather than propose a new tax rate. .

“If this were anything other than a political stunt, the Governor wouldn’t wait two months and would convene a special session now, before the election,” Slagle said. “The industry is ready right now to work on real solutions to energy costs and reliability – if that’s what the Governor really cares about.”

Several states have chosen to suspend their gas taxes this summer, including MarylandNew York and Georgia. Newsom and the Democrats who control the State Legislature have refused to do that, opting instead to send $9.5 billion in refunds to taxpayers – starting to show up in bank accounts in this week.

It’s unclear how the tariffs Newsom is proposing will work. Newsom said he is still working on the details with legislative leaders, but said Friday he wants the money to be “returned to taxpayers,” possibly by using money from taxes to pay for more discounts.

The state Legislature briefly considered a proposal earlier this year to impose an “earnings tax” on oil companies’ gross revenue when the price of a gallon of gasoline was “unusually high compared to at the price of a barrel of oil”.

That proposal would require state regulators to determine the tax rate, ensuring that it recovers the profit margins of any oil company in excess of 30 cents a gallon. The amount from the tax will then be returned to the taxpayer through rebates.

Newsom did not comment on that proposal when it was introduced in March, and lawmakers quickly shelved it. However, it could act as a blueprint for the new proposal being negotiated between Newsom and legislative leaders.

The Legislature’s two top leaders – Senate Speaker Pro Tempore Toni Atkins and Speaker of Congress Anthony Rendon – said in a joint statement that legislators “will continue to consider all options.” other to help consumers.”

“A solution that takes excessive profits from the oil corporations and puts money back into the hands of consumers deserves strong consideration by the Legislature,” they said. “We look forward to reviewing the Governor’s detailed proposal when we receive it.”

California Republicans – who do not control enough seats to influence policy decisions in the Legislature – have called the tax “stupid.”

“Who here thinks another tax will bring down your gas prices? Will any costs be reduced in this state? It’s not going to happen,” Congressional Republican Leader James Gallagher told reporters Wednesday.

Last month, regulators at the California Energy Commission wrote a letter to five refineries – Chevron, Marathon Petroleum, PBF Energy, Phillips 66 and Valero – ask for an explanation for why the price of gasoline increased by 84 cents in a 10-day period even when the price of oil fell. The commission wrote that the oil industry has “failed to provide a full and transparent explanation for this price spike, which is causing real economic hardship to millions of Californians.”

On Friday, Scott Folwarkow, Valero’s vice president of state government affairs, responded that “California is the most expensive operating environment in the country and a very hostile regulatory environment for oil refining”. He said that has caused refineries to close and tighten supply because California requires refineries to produce a specific fuel blend.

He declined to provide details about the company’s operations based on concerns about going against the same trust. However, he said the company arranged appropriate supply as some refineries shut down for maintenance.

Newsom dismissed those arguments, saying that still doesn’t take into account the $2.50 difference between California’s gas prices and gas prices in the rest of the country.

“These guys are playing us for fools. They’ve been there for decades,” Newsom said.

The California Legislature usually meets from January through August, where it considers bills on a variety of topics. The Governor has the power to convene a special legislative session at any time by issuing a statement. When convened in a special session, legislators can only consider matters mentioned in that declaration.

The last time a California governor convened a special legislative session was in 2015, when the Government. Jerry Brown asks lawmakers to pass health care and transportation bills.

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