Rising Gas Prices Prompt New Calls for Curbs on Oil Company Profits

‘California is the most expensive operating environment in the country and a very hostile regulatory environment for refining,’ one oil company official told state officials complaining about high gas prices.

AP Photo/Morry Gash
High gas prices on Wednesday, May 11, 2022, at Milwaukee. AP Photo/Morry Gash

American drivers are paying more to fill up their gas tanks than they were a month ago, and the politicians who have to answer for it at the polls in next month’s midterm elections are not happy about it.

The American Automobile Association says the national average for a gallon of gas on Tuesday is $3.92. One week ago, it was $3.80; a month ago it was $3.71. Average prices are highest in the western states, with California leading the pack at $6.28 a gallon. Prices were lowest in southern states, with Georgia leading the way for the entire country at $3.25 a gallon.

Democrats up to and including President Biden have blamed the rising prices, which many thought the country had put behind it since they peaked at $5.01 a gallon in mid-June, on the oil companies and gas station retailers. Last week’s decision by the OPEC+ cartel to cut production is likely to increase the price of crude — and costs at the pump — even further, and left the White House scrambling for options.

Congressman Ro Khanna, who speaks for the progressive wing of the Democratic Party, called on legislators to end fossil fuel subsidies and impose an “excess profits” tax on oil companies. Oil companies, he said in a video circulated by an anti-oil activist group, are using those profits to “corrupt our political processes.”

“For decades, Big Oil has spread lies about the climate crisis,” Mr. Khanna added, “and that disinformation campaign continues today, with the help of some of the world’s largest PR and ad agencies.” 

Enter the governor of California, Gavin Newsom, a Biden ally. Mr. Newsom has threatened to call a special session of the California state legislature to consider new taxes along the lines of what Mr. Khanna wants out of Washington.

“It’s time to get serious. I’m sick of this,” Mr. Newsom said. “We’ve been too timid.”

The chairman of California’s energy commission, David Hochschild, also raged against the increases, demanding answers last week from the oil companies for what he described as the “sudden, unprecedented spike in gas prices over the past month.”

Why, Mr. Hochschild asked in a letter to the heads of several oil refining companies in the state, are prices rising while the cost of crude oil falls? (Prices had been creeping down until the OPEC+ announcement.) Additionally, he said there are no maintenance-related outages at the major refineries, and no new taxes or fees have been imposed on gasoline retailers.

“In need of explanation is the amount of refinery costs and profits that people pay for every gallon of gas — ballooning by $1.54 for every gallon of gas over the past month,” Mr Hochschild said.

“All options are on the table to ensure Californians aren’t paying higher gas costs at the whims of the oil industry,” he warned the oil refiners. 

A vice president of one of those refiners, Scott Folwarkow, had a simple explanation: California lawmakers have only themselves to blame. Prices are driven by supply and demand, he said, coupled with government-imposed costs and specifications. California, he said, has far too many of the latter.  

“California is the most expensive operating environment in the country and a very hostile regulatory environment for refining,” Mr. Folwarkow said in his letter. “California policy makers have knowingly adopted policies with the expressed intent of eliminating the refinery sector.”

Among the rules and regulations that make California “the most challenging market to serve in the United States,” as Mr. Folwarkow put it, are high carbon cap-and-trade fees and low carbon fuel standards imposed in the name of curbing climate change. The state also has some of the most expensive and restrictive environmental rules in the world, he said.

“With the backdrop of these policies, not surprisingly, California has seen refineries completely close or shut down major units,” he added. “When you shut down refinery operations, you limit the resilience of the supply chain.”

Mr. Folwarkow ended his letter with a warning to California’s energy commissioner that could just as easily be addressed to lawmakers in Washington: “Adding further costs, in the form of new taxes or regulatory constraints, will only further strain the fuel market and adversely impact refiners and ultimately those costs will pass to California consumers.”


The New York Sun

© 2025 The New York Sun Company, LLC. All rights reserved.

Use of this site constitutes acceptance of our Terms of Use and Privacy Policy. The material on this site is protected by copyright law and may not be reproduced, distributed, transmitted, cached or otherwise used.

The New York Sun

Sign in or  Create a free account

or
By continuing you agree to our Privacy Policy and Terms of Use