(Bloomberg) — California will limit the amount of profit oil companies can earn in the state under legislation pushed by Governor Gavin Newsom to control soaring gasoline prices.
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The state Assembly on Monday passed a bill that allows the California Energy Commission to impose a penalty on refiners who charge more than an allowable margin for gasoline. It establishes a watchdog, vested with subpoena powers to obtain data and records, to monitor the market daily. The state Senate approved by bill March 23 and Newsom is expected to sign it into law Tuesday morning.
The bill gives the governor’s office unprecedented oversight over the industry and comes months after a surge in California gasoline prices led Newsom to accuse refiners of “ripping off” consumers while making record profits. During his reelection campaign last year, the Democrat excoriated each major refiner by name for jacking up prices.
At the time, prices in California skyrocketed to record levels, helping boost crude refiners’ profits to all-time highs. The fuel averaged $4.82 a gallon Monday in California, the highest in the nation, according to AAA. The state has seen a decline in refining capacity over the past few years as refiners are encouraged to move into renewables.
The Western States Petroleum Association, an industry group whose members include Exxon Mobil Corp. and Marathon Petroleum Corp., said earlier this month California’s action will likely lead to less investment in production, decreased supply and higher costs in the state.
The bill’s author, Senator Nancy Skinner of Berkeley, said in a statement the legislation contains the nation’s strongest transparency and oversight measures over the oil industry.
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