California’s unused gas price law draws new scrutiny amid record-high fuel costs
Three years after California enacted a first-in-the-nation law granting regulators power to cap refinery profits during price spikes, the measure remains dormant even as gas prices top $5.30 per gallon statewide. The delay has created a policy paradox: the state possesses tools to protect drivers from market volatility but has chosen not to use them while losing refining capacity and facing global oil shocks.
The 2023 law, signed by Governor Gavin Newsom, was heralded as a major consumer protection. “California took on Big Oil and won,” Newsom proclaimed. Its author, then-Senator Nancy Skinner, called it a “landmark law” that would “allow us to hold oil companies accountable if they pad their profits at the expense of hard-working families.”
But the California Energy Commission voted last August to delay implementing the profit-cap rules for five years. The decision came as refinery closures loomed and warnings of $8-per-gallon gasoline circulated in Sacramento. Since then, Phillips 66 has closed its Los Angeles refinery, and Valero plans to shut its Benicia facility next month — reducing in-state production by about 17%.
“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 — that’s when companies make outrageous profits,” said Jamie Court, president of Consumer Watchdog. He accused the administration of “panicking” and leaving the state without the “hammer” it now needs.
Administration officials and some economists counter that the delay was a necessary concession to prevent further refinery exits. “The last thing we need is to start trying to regulate refinery margins,” said Severin Borenstein, a UC Berkeley energy economist. “As much as people don’t like high gasoline prices, they really, really hate gas lines.”
The recent price surge reflects the Iran war’s impact on global oil markets, not a policy change unique to California. International crude prices have climbed more than $25 per barrel since the conflict began — typically translating to about 60 cents per gallon at the pump. But analysts note California’s shrinking refinery base means global shocks land harder here than elsewhere.
The Energy Commission’s own oversight division found an unexplained gasoline premium of about 41 cents per gallon between 2015 and 2024, costing drivers an estimated $59 billion. The commission’s August decision to delay the rules aligned with industry arguments that the real problem is California’s status as an “energy island” losing refining capacity.
“If you start losing refineries — as we are going to — and you don’t have an alternative source of supply, we’re going to start getting price spikes when there’s any sort of disruption at one of our refineries,” Borenstein explained.
Governor Newsom has directed the commission to work with refiners on ensuring reliable fuel supply after Valero’s closure. Meanwhile, the profit-cap rules remain on hold until 2029 unless commissioners rescind the delay.
Some experts suggest converting closed refineries to import terminals as a solution. “If I was in the Legislature right now, all of my energies and effort would be built on, one, making sure that Benicia gets turned into an import terminal — and two, making sure whoever owns or operates that is not an incumbent,” said Ryan Cummings of the Stanford Institute for Economic Policymaking.
Other proposals include a Western Gateway Pipeline that could bring gasoline from Midwest refineries — a first for California, which has relied on in-state production and marine imports. None have clear timelines.
The situation underscores the difficult middle of California’s energy transition: how to protect consumers today from an industry the state can’t yet afford to lose while still making good on its promise to leave that industry behind. By the time the profit-cap rules might take effect in 2029, California may have lost more refineries — and may still be grappling with the problem Newsom once promised to solve.