In last week’s column on oil companies gouging Californians on gas prices, I wrote that I supported Consumer Watchdog’s demand for Gov. Gav Newsom to call for a special legislation session to get the new law passed.
On Friday, Oct 7, Newsom said he will call state lawmakers back to Sacramento for a special session in response to escalating gas prices. The session will take place on Dec. 5.
“It’s time to get serious, I’m sick of this,” Newsom said last Friday. “This is one of the greatest fleecings for consumers in world history.”
The governor has requested the Legislature approve a measure that would require oil companies to pay back excessive profits to consumers through a new tax. The Legislature shutdown for the year on Aug. 31 and can’t begin action on lawmaking until January, unless the governor orders a special legislative session.
Newsom said last week he chose Dec. 5 because that is when the state Legislature was already scheduled to reconvene briefly to swear-in new state representatives after the November election. He said in a press release he wants time to make sure the proposal is on solid, legal ground in anticipation of lawsuits from the oil industry.
The proposal would require approval from two-thirds of the Legislature. Senate President pro Tempore Toni G. Atkins and Assembly Speaker Anthony Rendon, said in a press release that they looked forward to Newsom’s “detailed proposal.”
Recently, California’s Energy Commission demanded explanations from the major oil companies in response to runaway gas prices. The oil industry argues the latest increases at gas pumps is the result of “supply and demand issues.”
In a response letter to the state, PBF Energy’s Senior Vice President Paul Davis pointed to California’s mounting restrictions that have made it harder to refine oil and import gasoline.
Valero noted in their letter, “post-pandemic supply and demand” as a major contributing factor. “California is the most challenging market to serve in the United States for several reasons,” wrote Scott Folwarkow, the company’s Vice President of State Government Affairs.
The Western States Petroleum Association issued a statement on Friday arguing that a “better use” of a special legislative session would be to “take a hard look at decades of California energy policy and what they mean to consumers and our economy.”
“If this was anything other than a political stunt, the governor wouldn’t wait two months, and would call the session now,” the industry organization alleged. “This industry is ready to work on real solutions to energy costs and reliability if that is what the governor is truly interested in.”
And, of course, given that the solidly Democratic controlled state Legislature will be convened in a special session, the Republican National Committee couldn’t resist an opportunity to fire off a round or two at the opposition: “Gavin Newsom calling a special session to create a new tax on gasoline is the epitome of what’s wrong with California Democrats. Newsom and his supermajority are trying to distract voters from the fact that their policies made gas prices so high, but creating a new tax that will inevitably be handed down to taxpayers in the midst of historic inflation is a failing strategy.”
Take my word for it, the naysayers have it all wrong. Newsom was forced to act because up-against-the-economic-wall workers and the middle class demanded he do it. People are fed up with gouging and what is clearly rigging of gas prices. These are violations of existing laws. A tax on windfall profits is just a first remedial step that hopefully leads to enforcing those laws.
Public Comments On Windfall Profit Tax
My column also generated quite a few comments.. Here’s some of them:
George Hollister: “When considering a windfall profit tax, remember, if you want less of something, tax it. If you want more, subsidize it. There are unintended consequences here that make what we are doing worse in more ways than we know. Remember, also, the governor’s policy is to convert energy use away from fossil fuel to wind, and solar. This policy, in itself, has increased the price of gasoline, and everything else involving energy in California, and will continue to do so. So what’s the complaint? Isn’t the Governor getting what he wants with high gas prices? It should be noted that Chevron is moving its headquarters out of California. If California was a future profit center, would they be doing this? If we want gasoline prices to go down, then we want to see an increase in supply. Right? If we want to see gasoline prices go up, then we want to see a decrease in supply, like OPEC watchers know. California policy has been to reduce gasoline supply, and reduce long term investment in fossil fuels. Reducing supply has been done on multiple fronts. Prices have gone up. That is the intent of government policy. A significant increase in supply of gasoline in California to bring down prices is remote, with the current California policy. Does a tax on profit result in lower prices of gasoline? Does a tax on profit result in gasoline companies wanting to increase production, or make significant long term investments? I think we know the answers. It’s simple economics. Putting logical fallacies aside, if you voted for Governor Newsom, you voted for high gas prices. If you vote for him again, your vote is for higher gas prices. Don’t blame, and don’t complain. And don’t blame or complain, when California’s energy fantasy goes off the rails, which it likely will.”
Harvey Reading: “Funny about gasoline prices. California gasoline has sold for somewhat more than the cost in most of the rest of the country because it (supposedly) costs the robber barons more to refine the crude oil to California specs. I would suggest this little exercise: find out how much a dollar was worth in 1973, and then apply the result appropriately to the average cost of the various grades of gasoline sold today. It seems to me that in states outside California, the real cost of gasoline is about the same as it was during the ’73 “shortage”… Quit whining. During that “shortage,” I lived in Sonoma and bought my commute gasoline in Vallejo at a cut-rate station, or at the (cut rate) Beacon station in Sonoma. The longest I ever waited in line, was behind two cars. That wait happened exactly ONCE during the hyped-up “crisis.” The whole thing was blown up by the press into something it really wasn’t—just like what’s happening now, only this time around, we’re s’posed to blame the Russians. Then, it was those “horrid” Arabs. Grow up folks, and face reality rather than listen to drivel from politicians and the robber-baron-owned nooze media (and petroleum industry).”
Cotdbigun: “According to AAA, average price per gallon, California $6.30, US 3.90 ($3.65 if California is excluded). State with highest fuel related taxes, California. Solution? More taxes, because we know that the evil oil companies would never pass that extra cost on to the consumers. The improvement of our lives since Joe Biden took charge (wink wink) is something we should all be thankful for. Biden Newsom = good. Anything conservative = fascist.”
Bob Abeles: “Quick fact check, CA gasoline tax is $0.53/gallon which just doesn’t add up as the reason for CA gasoline to be so far above the national average. I’m gonna go for price gouging on the part of the refiners as the #1 reason for CA’s high prices, so clawing some of it back in the form of windfall taxes (taxes on profits) makes sense to me.”
(Jim Shields is the Mendocino County Observer’s editor and publisher, observer@pacific.net., the long-time district manager of the Laytonville County Water District, and is also chairman of the Laytonville Area Municipal Advisory Council. Listen to his radio program “This and That” every Saturday at noon on KPFN 105.1 FM, also streamed live: http://www.kpfn.org.)
It’s not a binary choice. CA obviously has a regulatory and taxing structure that creates the highest prices. And, judging by the record profits of late, the big oil companies are using the chaotic nature of the time to gouge. Newsom often makes no sense. He very recently signed a bill to set up a medical misinformation board to keep the doctors in line. We’re number one among equals again.
If you think supply and demand operates in the oil market you are out of touch with reality. My dad was the dynamite man on a seismograph crew back in the 40’s. They worked in Wyoming in the summer and down on the gulf in the winter. He said that the vast majority of the wells that produced oil were were capped off. The last thing the oil companies want to do is flood the market. However, it is worth noting what happened when the market was flooded when people cut down on driving during the pandemic. When the tankers were backed up unable to unload because the refineries had no room for more oil. they were still jacking up the price at the pump. This is clear;y contrary to supply and demand economic theory. It is obvious that the way to maintain stock value, CEO salaries, and profits when not selling as much gas is to jack up the price. And then for years OPEC has been controlling supply. When people have to have a product then supply and demand theory does not apply. Taxing excess profits is one way to stop the gouging and it is in the public interest for more reasons than reigning in the oil companies. It will help hold down inflation since 40% of the inflation is caused by the higher cost of energy. We should also consider how Norway shares ownership of their oil with all of their citizens. We also do it in Alaska.