California Governor Proposes High Tax On Energy Companies

Last week, California Gov. Gavin Newsom (D) unveiled a proposal that would penalize oil companies for “excessive profits.” The governor said the new policy, which must be approved by the legislature before taking effect, would “deter excessive price increases and keep money in Californians’ pockets.”

The proposal is likely to be considered as part of a special legislative session, initiated by the governor, to address the issue of high gas prices, which has hit California particularly hard. According to The Hill, gas prices hit a record high of $6.44 per gallon in mid-June 2022 and last week were about $4.72 per gallon, a cost that is significantly higher than the national average of $3.38.

If approved by state lawmakers, the proposal would make it illegal for oil companies to charge excessive prices, and excessive refiner margins would be punishable by a civil penalty from the California Energy Commission. The definition of excessive prices would be determined through the legislative process. Any penalties collected would go to a “Price Gouging Penalty Fund” that would be redistributed to Californians.

The proposal also aims to improve transparency and oversight of the oil industry by the state and to expand the abilities of the California Energy Commission and the California Department of Tax and Fee Administration to obtain data about costs, profits, and pricing.