Role and Responsibilities
The new watchdog agency is a key part of Governor Gavin Newsom’s anti price-gouging law to protect Californians from gasoline price spikes. The law, Senate Bill X1-2, was approved during a special legislative session in March 2023 and took effect June 2023.
The Division of Petroleum Market Oversight’s role is to monitor the petroleum industry to identify irregular or illegal behavior and refer any violation of law – including industry misconduct or market manipulation – to the California Attorney General for prosecution. The division also works to protect consumers by identifying market design flaws and market power abuses.
SB X1-2 includes transparency and oversight measures that increases oversight of the petroleum industry and additional resources to support long-term planning efforts.
The law authorizes the CEC to set a maximum gross gasoline refining margin and a penalty for refiners that exceed it. The law requires the CEC to conduct an analysis before any penalty is set. That work, which is being led by the CEC’s Energy Assessments Division, would include a recommendation that would be presented to the Commissioners for consideration at a business meeting.
Tai Milder started in August 2023 as the inaugural director of the Division of Petroleum Market Oversight after being appointed by Governor Newsom.
The division will be a cross-disciplinary team consisting of attorneys, economists, analysts, and investigators. The division plans to hire staff with experience in the oil and gas industry, but also specialists in antitrust, consumer protection, commodities manipulation, fraud, and other areas of the law.
The division staff will follow the facts to determine if there is potential market manipulation. The staff will engage in a three-step process if they see something in the market that suggests a problem:
- Analyze is the first step. Is it normal market behavior or something else? Sometimes prices go up as a natural response to supply and demand. Here, the division will rely on industry specialists, analysts, and economists.
- If there might be a problem, then the staff will investigate, which may mean using its subpoena power.
- If the facts show a legal violation, the division will move to the last step to refer for prosecution. Or, if is not a legal violation but still a problem, the division will report the conduct for a rulemaking or to policy makers to consider as a basis for a change in the law.