California Governor Gavin Newsom has requested a special legislative session to discuss a bill aimed at requiring oil refineries to maintain stable inventories. This move comes as California's gas prices continue to surge, in contrast to the stabilization of gasoline prices across the nation due to falling oil prices.

According to the LA Times on the 2nd, the California state government announced on August 31st that "Governor Newsom has requested a special session to address the malign issue of skyrocketing gasoline prices and help Californians save hundreds of millions of dollars annually."

The proposed bill being pushed by the state government focuses on requiring the California Energy Commission (CEC) to mandate that oil refineries maintain a minimum inventory of refined fuel throughout the distribution network. Additionally, the CEC would be granted the authority to plan resupply in cases where refineries undergo maintenance. This measure is intended to prevent gas price increases caused by inventory shortages. In a statement, Governor Newsom criticized the oil refineries, saying, "It's common sense for oil refineries to stockpile supplies before shutdowns for maintenance to avoid price spikes." He further accused "Big Oil" of allowing price hikes to maximize profits. He added, "Oil companies are using outdated scare tactics to maintain the status quo. By calling this session now, the legislature can start working immediately to establish the necessary rules to prevent price spikes next year and beyond."

Newsom explained that the state government and legislature could collaborate to draft laws to curb gasoline price spikes. He also noted, "If this bill had been in effect last year, California drivers could have saved hundreds of millions of dollars." According to the American Automobile Association (AAA), while the national average gasoline price has decreased by $0.02 to $3.33 per gallon over the past week, California's gasoline price has increased by $0.05 to $4.65 per gallon.

This marks the second time in two years that Governor Newsom has requested a special session focused on the oil economy. In 2022, Newsom called for a special session to impose penalties on oil refineries that profited excessively from the spike in gasoline prices.

The bill that eventually passed in March last year, known as "SBX 1-2," established an independent watchdog under the CEC to crack down on price gouging by oil companies. The law also set a cap on refinery profit margins, allowing the state government to impose fines on companies that excessively profited.

However, according to the LA Times and other media outlets, it is unclear when the special session will begin, and the bill faces strong opposition from Republican politicians and oil companies. Oil companies, in particular, have expressed concerns that building new storage tanks, which the bill would require, would incur astronomical costs that would ultimately be passed on to consumers.

Chevron CEO Andy Walz sent a letter to the CEC warning that "it would take 10 years and $35 million to build just one new storage tank. These costs are likely to be passed on to consumers." He added, "Given the current state regulations, there is little opportunity to recoup the capital invested in additional tanks, which could be the last chance for energy market investors."



<Hongyong Park>