Newsom wants to penalize oil companies for record-high gas prices. Could it work?

An Arco station charges $5.69 per gallon of unleaded gas in Santa Ana, California, October 13, 2022. Photo by Amy Ta/KCRW

Governor Gavin Newsom has convened a special legislative session in Sacramento to address record-high gas prices and what he describes as price gouging. Meanwhile, he’s released a plan to claw back some of those profits. It includes penalizing oil companies that make more than a yet-to-determined profit cap.

Those funds would then be returned to consumers. Industry giants say they’re not profiteering and that they have to charge more because of California’s environmental rules and taxes, while Republicans say the proposal will only drive up prices at the pump.

The plan has sparse details, but it’s a clear example of Democrats feeling political pressure to address the issue. If successful, the concept could benefit Newsom politically. That’s all according to Politico reporter Jeremy White, who covers California politics.

Newsom describes the plan as a deterrent to oil companies, but it’s still unclear whether it could work.

Legal challenges should be expected, White suggests. “​I wouldn't be surprised if we even see opponents contest the definition as a penalty rather than a tax, given the governor was out there talking about a tax. We've certainly seen court cases before about the difference between a tax and a fee in the legislature, which directly affects the vote threshold. So I think purely aside from the political considerations of passing this now, should it pass, I have no doubt that we will see some legal questions raised.”



  • Jeremy White - Politico reporter covering California politics