Gov. Gavin Newsom plans to call a special legislative session in December to push for a tax on oil industry profits, the latest escalation in a feud over soaring gasoline prices that Newsom calls greedy and manipulative.
Newsom said on October 7th that he would convene the special session on Dec. 5, the same day that a new class of lawmakers is sworn in. The work will take place on a separate track from the regular session to focus attention on what Newsom said has become one of the most urgent priorities for Californians: an “inexplicable” gap between gas prices in California and the national average that has grown to a record $2.50 a gallon.
“This is just rank price-gouging,” Newsom told reporters following a speech in Sacramento, adding, “There’s nothing to justify it. Nothing. Not one thing.”
Gas prices in California have soared in recent weeks to an average of $6.39 per gallon, as of Friday, according to AAA, near the highest they’ve ever been. That compares to a national average of $3.89 per gallon.
Analysts have blamed maintenance-related shutdowns at several refineries in California, constricting the supply of a special blend of gasoline mandated by the state to reduce pollution.
But Newsom said that the stoppages had knocked less than 6% of production offline, not nearly enough to justify the surge in costs at the pump. He said oil companies were clearly taking advantage of the situation to manipulate prices and pad their profits.
“This is one of the greatest fleecings for consumers in world history,” he said.
In a statement, a representative for the oil industry said the Legislature could better use its time reconsidering decades of energy policy that have driven up costs for Californians, rather than passing another tax that would only raise prices further.
“If this was anything other than a political stunt, the governor wouldn’t wait two months and would call the special session now, before the election,” said Kevin Slagle, a spokesperson for the Western States Petroleum Association. “This industry is ready right now to work on real solutions to energy costs and reliability if that is what the Governor is truly interested in.”
Newsom, who originally unveiled his plans for a “windfall profits tax” on oil companies a week ago, had few additional details to share this week. He said he had been studying examples from other countries, including Italy, Spain and the United Kingdom, and exchanging ideas with legislative leaders over the past few days. The plan could take the form of an excise tax, he said, with revenue being returned to taxpayers as rebates.
Despite his urgency, he said convening the special session in two months would give his team time to “get our ducks in a row” — developing a strategy that can get through the Legislature, where a two-thirds vote by both houses is required for any tax measure, and stand up to expected legal challenges by the oil industry.
“It’s about doing it right, not fast,” he said. “We want to be deliberative.”
While Newsom’s proposal was cheered by environmental groups, it remains to be seen what level of enthusiasm there will be in the Legislature, where the governor twisted arms to pass a sweeping package of climate measures over the summer. (The oil industry has already filed a referendum to overturn one of those, a setback requirement around oil and gas wells.) Dozens of new lawmakers will be taking office in December and the first issue they will now be asked to consider is a tax.
Senate President Pro Tem Toni Atkins, a San Diego Democrat, and Assembly Speaker Anthony Rendon, a Lakewood Democrat, noted in a joint statement that California began on October 7th sending out $9.5 billion worth of tax rebates to help residents cover the rising cost of living.
“We will continue to examine all other options to help consumers,” Atkins and Rendon said. “A solution that takes excessive profits out of the hands of oil corporations and puts money back into the hands of consumers deserves strong consideration by the Legislature. We look forward to examining the Governor’s detailed proposal when we receive it.”
Republicans, who comprise a superminority of the Legislature, criticized the tax plan as insulting and said that it would drive up prices further because oil companies would pass on the cost.
“The only reason to call a special legislative session would be to suspend the gas tax, reduce the fees and regulations that make California gas so expensive, and allow permits to increase production to lower gas prices,” Assemblymember Vince Fong, a Bakersfield Republican who is vice chairperson of the Assembly budget committee, said in a statement.
Last week, Newsom once again rejected calls to suspend the state’s 54-cent-per-gallon gas tax, because he said oil companies would simply pocket the savings. He said a windfall profits tax was the bold approach needed after years of “too timid” studies and investigations into excessive gas prices in California.
“That just offsets their greed and avarice,” he said of suspending the gas tax, “when in fact we should be going after that greed and addressing the anxiety of people at the same time.”