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California Governor Gavin Newsom proposes to limit the profits of oil companies operating in the state by reducing their gross refining margins, according to proposed legislation introduced Monday in a special session of the state senate.
The proposal omits key details, including how much profit is too much and the size of whatever fine the companies would be required to pay for exceeding it; Newsom’s office said the details would be worked out later with lawmakers.
The proposal classifies the fine as a “civil penalty” and not a tax, a crucial distinction because only a simple majority would be needed for passage, instead of the two-thirds majority needed to raise taxes.
California motorists always pay more for gasoline than in other states because of taxes, fees and environmental regulations that other states do not have, but in October, the state’s average price of a gallon of gasoline exceeded the national average by more than $2.60, the biggest gap ever.
Companies most affected by the legislation would be Marathon Petroleum (NYSE:MPC), Valero Energy (NYSE:VLO), Phillips 66 (PSX) and PBF Energy (NYSE:PBF), the latter recently criticizing Newsom for the “politicization” of high gas prices in the state.
