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California Governor Gavin Newsom proposed a “first-in-the-nation” plan on Thursday (15 August) to prevent sudden price spikes that “create massive profits for Big Oil”.  

The proposal would authorise the California Energy Commission (CEC) to enforce a requirement for petroleum refiners to hold a minimum fuel reserve to prevent supply shortages that lead to higher consumer prices.  

According to the proposal, gas price surges are mainly the result of refineries going offline without an adequate plan to make up for the shortfall in supply. This cost Californians more than $1bn at the pump last year alone. 

If this measure had been in place in 2023, Californians could have saved more than $650m on gas expenses from price spikes caused by refiners, the government statement said.  

Under California’s anti-price gouging law, refiners must report maintenance schedules but are not obliged to maintain a backup supply. 

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However, the new proposal details that refiners would be penalised for not meeting resupply obligations and maintaining minimum inventory requirements. Any penalties collected will be deposited into the Price Gouging Penalty Fund and distributed to consumers.   

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Tai Milder, director of the division of petroleum market oversight for the CEC, said: “The data is clear: oil refiners have been racking up profits by planning maintenance that reduces supply during our busy driving seasons. The Governor’s proposal gives us new tools to require refiners to plan responsibly and prevent price gouging during maintenance.”  

“Price spikes at the pump are profit spikes for Big Oil. Refiners should be required to plan and backfill supplies to keep prices stable instead of playing games to earn even more profits.” 

The government statement noted that the state’s new oil and gas oversight tools have helped minimise price surges and ensure that major oil companies are held accountable.  

As a result, prices have been lower this year than last year and the year before. California residents saved approximately $728m on gasoline compared with the same period in the previous year.  

In addition to these existing measures, the government hopes the new plan will offer additional protection for consumers at the gas pump and help stabilise the market in the long run.