Senate Bill X1-2, the California Gas Price Gouging and Transparency Law, protects Californians from experiencing price gouging at the pump by oil companies. The law was signed by Governor Gavin Newsom in March 2023 and took effect June 2023.
This came after consumers experienced some of the highest gasoline prices ever recorded in California in fall 2022. The law helps the state understand and respond to gasoline price spikes. The law includes transparency and oversight measures to increase accountability of the petroleum industry. It provides additional resources to support long-term planning efforts.
The law:
- Authorizes the California Energy Commission (CEC) to set a maximum gross gasoline refining margin and a penalty for refiners that exceed it.
- Increases transparency by providing new data collection authority and creates an independent division to monitor petroleum markets and flag potential market manipulation.
- Requires an assessment of transportation fuel demand and discussion of methods to ensure an adequate, affordable, and reliable fuel supply as the state transitions away from petroleum fuels.
The key implementation activities that the law calls for fall under four areas, which are reporting, assessment, oversight, and investigation. The CEC’s Energy Assessments Division is taking the lead on implementing the reporting and assessment activities. The Division of Petroleum Market Oversight (DPMO), which is an independent division within the CEC, is responsible for carrying out the activities focused on oversight and investigation.
Requirements: Expands the CEC’s data collection authority for the petroleum industry.
Status: The CEC is collecting and publishing additional data from the petroleum industry including monthly and historical costs and profits, daily spot market transactions, and refinery maintenance reports. All this data helps expand the CEC’s knowledge about how the petroleum market works.
The CEC is required to publish aggregated reports for the monthly refiner data on gasoline production, sales, and cost. Staff analysis for each month is posted on the SB 1322 webpage.
At the October 18, 2023 business meeting, the commissioners voted to start a rulemaking focused on refiner maintenance.
At the February 14, 2024 business meeting, the CEC adopted regulations to increase reporting of spot market transactions for greater transparency. The regulations, which took effect February 26, 2024, will help provide information that can be used to better analyze market behavior and to help look at what actions can be taken to reduce gasoline price spikes.
Requirements: Authorizes the CEC to set a maximum gross refining margin and to impose a civil penalty for exceeding that margin.
Status: The law requires the CEC to conduct an analysis on the effects of a margin penalty. This analysis will require profit margin information, which refiners have begun providing.
At the October 18, 2023 business meeting, the commissioners voted to start a proceeding looking at whether to establish a maximum margin and penalty. The CEC held a workshop on April 11, 2024 to explore the structures for determining a maximum margin and penalty.
To determine whether to set a refining margin and penalty, the CEC is first analyzing the impacts and benefits of assessing a civil penalty on refiners that exceed a maximum gross refining margin. The final analysis will include a recommendation from the CEC’s Energy Assessments Division staff that will be presented to the commissioners for consideration at a business meeting. The recommendation on whether or not to impose a penalty is expected in 2024.
Requirements: Develop and submit the first triennial Transportation Fuels assessment by January 1, 2024.
Status: The assessment will identify methods to ensure a reliable supply of affordable and safe transportation fuels in California. The draft assessment was released April 2024. The CEC and the California Air Resources Board (CARB) are holding a workshop on May 3, 2024 to discuss the draft assessment and the Transportation Fuels Transition Plan.
Requirements: The CEC and the California Air Resources Board must develop and submit a Transportation Fuels Transition Plan by the end of 2024.
Status: The transition plan will incorporate the assessment that is being developed. The plan will identify how to plan for and monitor progress toward the state’s transition away from petroleum fuels. The CEC and CARB are holding a workshop on May 3, 2024 to discuss the draft assessment and the transition plan.
Requirements: The California Department of Tax and Fee Administration and the CEC must develop an annual report to examine the relationship between gasoline prices and state revenues.
Status: The first report is scheduled to be released in spring 2024.
Requirements: The CEC is consulting with the California Department of Industrial Relations on managing refinery turnaround to ensure safety and supply availability.
Status: The CEC is working on developing regulations that address refinery maintenance programs and related issues of ensuring adequate supply. The draft regulations are expected to be released in spring 2024.
Requirements: Create an independent committee to advise the CEC and DPMO. Appointees would come from the Governor, the Speaker of the Assembly, and the Senate Committee on Rules.
Status: Pending appointments.
Tai Milder started in August 2023 as the director of the DPMO after being appointed by Governor Newsom.
This independent agency within the CEC was created to monitor petroleum markets and flag potential market manipulation, market power abuse, or market design flaws. DPMO is the nation’s first independent watchdog agency overseeing the oil and gas industry.
DPMO is working on analyzing the petroleum market in California. It is also providing input and guidance for the petroleum market assessment and other reports called for in SB X1-2.
In response to the gasoline price spikes in September 2023, DPMO sent a public letter to Governor Newsom and state legislative leaders identifying flaws in the California gasoline market. Governor Newsom directed the DPMO to identify initial potential spot market reforms.
In January 2024, DPMO sent a public letter to Governor Newsom outlining two policy options that can help improve how California’s spot market functions and help protect consumers. The first proposal calls for the CEC to publish a California spot market price report that is available to the public. The second proposal is to impose minimum gasoline storage and resupply requirements for refiners. Doing so would provide a buffer to protect against price spikes when supply is disrupted.
To address these recommendations, the CEC plans to, among other things consider adopting regulations at upcoming business meetings.
As part of other upcoming rulemakings, the CEC will be exploring minimum inventory and resupply requirements for refiners.
- November 2023: Big Oil Hiked Gas Prices in Q3 and Made Huge Profits
- November 2023: CEC Holds Workshops on Implementing Senate Bill X1-2: the California Gas Price Gouging and Transparency Law
- September 2023: State Officials Provide Update on Gas Prices, Unusual Petroleum Market Transaction
- August 2023: Governor Newsom Appoints the First Director of New Oil Watchdog
- June 2023: Nation’s First Gas Price Gouging Law in Effect
- March 2023: Governor Newsom Signs Gas Price Gouging Law: “California Took on Big Oil and Won”
- November 2022: CEC Holds Hearing on Recent Gasoline Price Spikes and Measures to Protect Consumers
- September 2022: Governor Newsom Calls for a Windfall Tax to Put Record Oil Profits Back in Californians’ Pockets
- May 2020: Attorney General Becerra Announces Lawsuit Against Two Multinational Companies for Manipulating Gas Market, Costing Californians More at the Pump
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