Coast Democrats Eye New Limits on Oil Company Profits To Curb ‘Price Gouging’

California lawmakers will consider a potential windfall profit tax for oil companies at a hearing Wednesday, mirroring similar policies enacted in Europe.With the backing of environmentalists, consumer advocates, and the governor, the state is pushing toward implementing a measure that would set a maximum profit margin on gasoline.“California’s price-gouging penalty is simple — either Big Oil reins in the profits and prices, or they’ll pay a penalty,” Governor Newsom said. “Big Oil has been lying and gouging Californians to line their own pockets long enough.”The proposal would work by establishing a “maximum gross gasoline refining margin” per gallon, which has yet to be decided. It would also establish a commission to oversee the enforcement of this rule.The state senator who introduced the proposal to the state Senate, Nancy Skinner, says the measure is intended to help lower the cost of gas in California, a state that consistently sees some of the highest gas prices in the country.“No one can deny that California’s gas prices were outrageously high compared to other states,” Ms. Skinner said. “And those high prices hurt California consumers and businesses.”Many economists have a simple explanation for California’s high gas prices, though, and it has nothing to do with price gouging — high state taxes on petroleum products, as well as regulations on the refining industry. California has passed a number of measures in recent years in the name of combating climate change that have driven up retail costs in the state.A study by the conservative Hoover Institution says California requires a special blend of gasoline mandated nowhere else in the country that is intended to reduce pollutants. The regulation adds 30 cents to the price of each gallon of gas.A cap-and-trade system on carbon dioxide emissions adopted by California in 2013 adds another 24 to the cost of each gallon of gas, according to the report, and emissions standards imposed by the California Air Resources Board add an additional 22 cents to the wholesale cost of gasoline in the state.Then there are the taxes. In 2017, the state raised the excise tax and linked it to inflation. Residents of the state now pay about 73 cents in state taxes on each gallon of gas, compared to the national average of about 39 cents a gallon.The windfall profits tax bill is opposed by California Republicans, though they do not control enough seats in either the state assembly or the senate to influence lawmaking.“The last thing that we need to do is increase the cost on Californians who are already paying far too much,” the state assembly minority leader, James Gallagher, said.The proposal would also require more transparency from oil companies in California, which advocates say would allow regulators and researchers to more clearly analyze and address issues with oil prices.The measure comes after months of debate in California over how to tackle the state’s high gas prices, with Mr. Newsom calling for a tax on the “windfall profits” of oil companies back in October.The new measure is not being called a tax, but rather is classified as a “civil penalty,” which means that only a simple majority of votes in the legislature is needed to enact the proposal.While the policy would not technically be a tax, it is still seeing heavy opposition from oil lobbyists and organizations representing oil companies.“Whatever Governor Newsom wants to call it, this is a tax and it’s going to have the same impact that all taxes do on consumers, and that is to raise costs, not bring them down,” the Western States Petroleum Association spokesman, Kevin Slagle, said.Even though Republicans can’t mount meaningful opposition to the bill, it’s unclear whether it is likely to pass, with the hearing Wednesday being the first real test of the measure’s popularity in the state legislature. Outside of the state capitol, the proposed measure appears to be popular with Californians, according to a report from Consumer Watchdog. A poll conducted by the group suggests that 60 percent of Californians back the proposal.The measure, if enacted, would mirror provisions with similar goals in Europe, where several countries have enacted windfall profit taxes on energy companies.A 33 percent tax on windfall profits that exceeded their 2018 to 2021 average was agreed to in the European Union, though some countries are planning to go beyond this measure.The United Kingdom, Spain, France, Germany, the Netherlands, Poland, Italy, Greece, and a handful of other countries have passed or are debating plans aimed at driving down energy costs while discouraging price gouging.

Coast Democrats Eye New Limits on Oil Company Profits To Curb ‘Price Gouging’

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