California’s unused gas‑price law faces criticism as pump prices hit $5.30 per gallon

California’s unused gas‑price law faces criticism as pump prices hit $5.30 per gallon

Governor Gavin Newsom’s 2023 law that lets California cap refinery profits and penalize price‑gouging has never been invoked, even as gasoline prices surged to $5.30 a gallon across the state in early 2026. The delay was cemented when the California Energy Commission voted in August 2025 to postpone the rules for five years, a move now under fresh scrutiny amid a global oil shock tied to the war with Iran. Consumer‑advocacy groups and environmental watchdogs say the state is “lying in wait for a hammer” that could protect drivers, while the oil industry argues the caps would push refiners out of California altogether.

The dispute highlights a growing tension in California’s energy transition: regulators must balance immediate consumer protection against longer‑term goals of reducing reliance on a dwindling in‑state refining sector, a challenge that could shape gasoline prices well beyond the current spike.

California’s 2023 legislation gave regulators authority to cap refinery profit margins and impose penalties for price gouging, a power Newsom hailed as a victory over “Big Oil.” Yet the law has remained dormant. In August 2025, the California Energy Commission voted to delay the profit‑cap rules for five years, a decision defended by vice‑chair Siva Gunda as necessary to preserve “investor confidence” and keep refining capacity in‑state.

“These are the moments we need them, because when the price of a commodity goes through the roof—be it crude oil or refined gasoline—those are the times companies make outrageous profits,” said Jamie Court, president of Consumer Watchdog, on the sidelines of a recent hearing.

Oil‑industry lobbyists counter that penalizing margins would drive refiners out, warning that California’s already shrinking refinery base—down about 17 % in recent years—leaves the state vulnerable to global price shocks. “The real problem is California is an energy island—we’re losing 17 % of our refining capacity,” said Zachary Leary of the Western States Petroleum Association.

The timing of the debate coincides with a sharp jump in global crude prices after the war with Iran pushed the benchmark up more than $25 a barrel. UC Berkeley energy economist Severin Borenstein warned that capping margins could backfire, “The last thing we need is to start trying to regulate refinery margins…people really hate gas lines.”

Compounding the supply crunch, major refineries are exiting the state. Phillips 66 shut its Los Angeles plant last year, citing an unsustainable California market, and Valero plans to close its Benicia refinery—responsible for roughly 10 % of the state’s gasoline—in April. Both closures threaten to tighten supplies further and could amplify price spikes when global crude prices rise.

Energy commissioners have also highlighted an unexplained gasoline premium of about 41 cents per gallon between 2015 and 2024, costing drivers an estimated $59 billion, according to a new oversight division. “Californians are at the mercy of a few powerful refiners,” said Kassie Siegel of the Center for Biological Diversity.

State officials argue the profit‑cap tools are not needed, pointing to the global nature of the current spike. “All of the change we’ve seen in the last couple of weeks is in line with the change in crude oil prices, and therefore is not California specific,” Borenstein said. Yet analysts note that with only a handful of refineries left, any disruption—whether from the war, a refinery shutdown, or a logistical bottleneck—will hit California harder than elsewhere.

Ryan Cummings of the Stanford Institute for Economic Policymaking warned that a prolonged closure of the Strait of Hormuz could push crude above $130 per barrel, potentially driving California pump prices toward $7 a gallon in a worst‑case scenario.

Proposals to mitigate the crisis include converting the Benicia site into an import terminal and advancing a Western Gateway pipeline that would bring Midwest gasoline into the state. Lawmakers have also floated expanding access to E85 ethanol blends, but timelines remain unclear.

With the profit‑cap rules still on hold until at least 2029, California’s ability to tinker with gasoline prices may hinge on whether policymakers finally activate the tools that Newsom once promised would protect “hard‑working families” from volatile fuel markets.