California Passes Law to Fine Oil Companies Over Price Gouging

In a swift manner of action, California has passed a law that prohibits companies from price gouging at the gas pump, meaning companies will face civil penalties for hiking up fuel costs. The new bill also establishes an independent watchdog division within the California Energy Commission (CEC) and gives CEC authority to impose penalties as needed.

According to the office of California Governor Gavin Newsom, oil companies hiked state gas prices up to $6.42 per gallon in 2022. This was $2.61 per gallon more than the average cost per gallon nationally. In the same year, oil and gas companies reported record profits in the trillions of dollars.

“Record high retail gas prices — and record-breaking profits for Big Oil — hurt those who can least afford it most of all,” California Attorney General Rob Bonta said in a statement. “For too long, Californians have been left in the dark when it comes to the practices of the gas industry. And while oil companies have been lining their pockets, many Californians are struggling to make ends meet.”

While California gas prices are typically higher than the rest of the U.S. because of state regulations and higher gas taxes to promote cleaner air, the price discrepancies between state and national gas price averages seen in 2022 were far greater.

In response, California proposed a bill, SBX1-2, last week to fine oil companies over price gouging. The bill quickly passed through the state legislature and was signed into law by Governor Newsom this week.

Now, oil companies are subject to transparency and oversight by the newly established division of the CEC, which will include investigators, market experts and economists. The division will analyze the petroleum market and can investigate industry sales and pricing activities, according to the governor’s office. Oil companies must also report pricing information to the division. If the division finds companies to be price gouging, it can refer them to the Attorney General. Those that violate the law will face financial penalties.

“Californians faced outrageously high gas prices last year, prices that strained family budgets an extra $600 or more a month,” Senator Nancy Skinner (D-Berkeley), author of the bill, said. “With SBX 1-2, California has sent a clear message to the oil industry: Open your books and prove you’re not price gouging, otherwise Big Oil will pay the price — not consumers.”

Certain instances of price gouging are already prohibited in California by Penal Code Section 396, which prevents price hikes over 10% for many goods and services in times of emergency. The new law prohibiting fuel price gouging will go into effect June 26.