California may put the brakes on Gov. Gavin Newsom’s plan to penalize oil companies for excess profits, a top state energy official said Friday, citing concerns over high gas prices and fuel supply stability.
In 2023, Newsom signed legislation giving the California Energy Commission the authority to impose penalties on oil companies if their profits exceeded a to-be-determined threshold. The governor declared the measure a victory against “big oil,” but nearly two years later, no penalties have been enforced, nor has the commission defined what constitutes an excessive profit.
Now, Siva Gunda, the commission’s vice-chair, is calling for a pause in the program. In a letter to Newsom, Gunda recommended the state focus instead on policies to lower prices and ensure reliable fuel supplies as California transitions away from fossil fuels by 2045.
“Together, we will evolve California’s strategy to successfully phase out petroleum-based fuels by 2045 while protecting communities, workers, and consumers,” Gunda wrote.
While the pause must be approved by the full commission, the suggestion has sparked debate. Supporters of the penalty argue that without action, oil companies will continue reaping excessive profits at the expense of consumers, while critics warn the measure could drive prices even higher.
California continues to lead the nation in gas prices, with regular unleaded averaging $4.61 per gallon, compared to the national average of $3.20, according to AAA.
Despite proposing the pause, Gunda confirmed the commission will move forward with other measures to stabilize fuel availability, including requiring oil refineries to maintain minimum fuel reserves to avoid supply disruptions.
The recommendations follow recent refinery shutdown announcements from Phillips 66 and Valero, which together account for over 17% of California’s refining capacity — raising concerns about future fuel shortages as the state transitions to renewable energy.
Environmental and consumer groups swiftly condemned the idea of pausing the penalty. In a letter to Newsom and lawmakers, roughly 50 organizations called the move a “bailout” for oil refiners and urged the state to “finish the job” of holding companies accountable and preventing price spikes at the pump.
Newsom’s office responded by saying the governor would review the recommendations and remains committed to “safe, affordable, and reliable” transportation fuel policies for California.
