Commentary by
Terry P Rodriguez
PCDCC Chair, Legislation Committee
Consumerism becomes victim of drastic inflationary cost of living due to either corporate greed or globally affected material shortages. During the pandemic years, American household pocketbooks suffered under rapidly climbing food, services, and product prices. In June 2022 the Consumer Price Index reached its highest point at 9.1%, ending the year with a Cost-of-Living Adjustment (COLA) of 8.7%.[1] According to the Bureau of Transportation Statistics, auto gasoline prices rose 49% and diesel fuel increased 55% during the first half of that year. [2]
In response to these economic issues, Governor Gavin Newsom expedited SBX 1 – 2 into the State Senate. Authored by Senator Nancy Skinner on December 5, 2022, she referred to this legislation as a decisive, immediate action enacting oversight and transparency over oil companies, preventing them from increasing their profits at the expense of consumers.[3] The legislative process started on March 20, 2023, and was completed on March 28, 2023, and signed into law by Governor Newsom. This was decisive action to address an immediate need amid the current inflationary atmosphere. However, questions remain on whether or not this will solve inflationary spikes in fuel cost.
Senator Skinner argued despite the cost of crude oil lowering, consumers in 2022 were paying $2.61 per gallon above the national average, while petroleum companies reaped more than $200 million in profits. She called for the establishment of an “independent watchdog” to monitor the industry. Empowered to “…access new information required by law, subpoena power to compel data and records that would reveal shady practices, and direction to refer violations of law to the Attorney General for prosecution. Oil companies found engaging in making excess profits will be fined a “price-gouging penalty” which might discourage oil companies from engaging in increasing corporate profits at the expense of the consumer.[4]
Attorney General Robert Bonta supports SBX 1-2 but is countered by a “coalition of 50 organizations” who are opposed. He states his support comes from “[a] coalition of over 100 environmental justice, consumer, faith, labor, and clean energy organizations who advocate for its passage while the “California Chamber of Commerce, several local chambers, business associations, and the Western States Petroleum Association,” oppose it. The opposition argues this legislation will not bring relief at the pump, will increase prices, reduce inventory, lead to job losses, and affect funding to local communities.[5] Todd Stevens, Chief Executive of Black Knight Energy LLC calls this legislation as Governor Newsom “grandstanding” on this issue, arguing he is creating a costly new bureaucracy, the costs of which will be passed onto the consumer. He feels the California fuel problems were based on other factors requiring serious discussions. He feels California is a “fuel island” unto itself “without interstate pipelines,” subject to “high taxes on gasoline, and “paying for carbon policies” due to the special summer blend needed to reduce gas emissions.[6]
It’s a matter of argument as to who is right and who is wrong on this topic. Each side has its arguments on the “why” the rise in fuel cost from $1.00 in the past to the current $6.00 per gallon. The article by Julia Stein, published in the Legal Planet, “Not Quite a ‘Windfall Tax,” sums it up.
“So where does this leave us? SBX 1– 2 would be a big step forward for transparency around price-setting in the transportation fuels market, allowing the [California Energy Commission [CED]…access to key information it’s never had before. It would also require the CED to work with the Air Resources Board, in consultation with fuel
producers and refiners, to prepare a Transpiration Fuels Transition Plan to endure that fuel supply is ‘affordable,
reliable, equitable, and adequate to meet demand’ as California transitions away from petroleum fuels over time.
And its penalty-setting provisions could deter future unreasonable price hikes. These are good things.[7]”
Ms. Stein concluded “Attorney General Bonta has acted in policing oil price increases in the oil industry, with the legal powers he currently exercises. His efforts have not reflected success at the gas pump, with fuel cost still rising. He has never taken legal actions against those price increases. Our State Attorney General has a new source of tools under SBX 1-2 to attain transparency on why those prices spike and can legally take those legal actions. Time will tell if this legislation has any effect on the consumer’s wallet. “Californians won’t see spent dollars back in their pocketbooks anytime soon.”[8]
[1] “Consumer Price Index Historical Tables for U.S. City Average,” U.S. Bureau of Labor Statistics, https://www.bls.gov/regions/midatlantic/data/consumerpriceindexhistorical_us_table.htm, (Accessed May 11, 2023).
[2] “Record Breaking Increases in Motor Fuel Prices in 2022,” U.S. Department of Transportation, Bureau of Transportation Statistics, https://www.bts.gov/data-spotlight/record-breaking- increases-motor-fuel-prices- 2022, August 18, 2022 (Accessed May 11, 2023).
[3] “Governor Newsom Signs Gas Price Gouging Law: California Took on Big Oil and Won,”
Office of Gavin Newsom, https://www.gov.ca.gov/2023/03/28/governor-newsom-signs-gas-price-gouging-law- california-took-on-big-oil-and-won/March 28, 2023 (Accessed May 11, 2023).
[4] “Assembly Floor Analysis,” California Legislation Information, According to the Author,
https://leginfo.legislature.ca.gov/faces/billAnalysisClient.xhtml?bill_id=202320241SB2, March 20, 2023, (Accessed May 21, 2023)
[5] Ibid. (Note: Meaning reference citation #4)
[6] Madler, Mark, Industry Slams Passage of Oil Law, Los Angeles Business Journal, Berkeley Law UCLA Law https://labusinessjournal.com/featured/industry-slams-passage-of-oil-law/, April 3, 2023 (Accessed May 21, 2023)
[7,8] Stein, Julia, Not Quite a “Windfall Tax,” Legal Planet, Environmental Law and Climate Insights, https://legal- planet.org/2023/03/23/not-quite-a-windfall-tax/, March 23, 1948 (Accessed May 21, 2023).