Gavin Newsom Unveils Proposal That Would Require Minimum Fuel Reserve

California Governor Gavin Newsom has proposed a controversial plan to require petroleum refiners to maintain minimum fuel reserves.

At a Glance

California Gov. Newsom unveiled a plan for petroleum refiners to keep minimum fuel reserves to avoid supply shortages and stabilize gas prices.
The California Energy Commission will enforce these requirements.
Refiners could face fines for non-compliance, while criticisms label the proposal as politically motivated.
Newsom says the plan could save Californians $650 million annually in gas costs.

Newsom’s Proposal to Stabilize Fuel Prices

California Governor Gavin Newsom has announced a new proposal requiring petroleum refiners to maintain a minimum fuel reserve to prevent gas supply shortages and price spikes. According to Newsom, inadequate refilling of supplies during maintenance periods has led to profit spikes for oil companies and higher prices for consumers.

The California Energy Commission (CEC) will be authorized to set and enforce these minimum supply requirements. Petroleum refiners who fail to meet them could face significant fines.

This proposal follows a new set of regulations from the state’s California Gas Price Gouging and Transparency Law, which reports that similar minimum inventory requirements in other countries have successfully stabilized fuel prices.

California oil refineries must stockpile gasoline to avoid price spikes, Gavin Newsom says https://t.co/OftwFhU61S

— The Sacramento Bee (@sacbee_news) August 15, 2024

Blame and Criticism

Critics argue that Newsom’s plan unfairly targets petroleum refiners. Catherine Reheis-Boyd, president and CEO of the Western States Petroleum Association, called the proposal a “political attack.” Assembly Republican Leader James Gallagher blamed high gas prices on state policies, citing burdensome regulations and high taxes.

Newsom, however, argues that regulating refiners will help Californians. In a statement, he said, “Price spikes at the pump are profit spikes for Big Oil. Refiners should be required to plan ahead and backfill supplies to keep prices stable, instead of playing games to earn even more profits. By making refiners act responsibly and maintain a gas reserve, Californians would save money at the pump every year.”

This plan also follows a special legislative session on oil prices that fell short of imposing a cap on industry profits. Opponents claim it is politically motivated and logistically challenging. Given the Democratic lean of California’s legislature, the fate of the proposal remains uncertain.

Other Opinions and Legislative Support

Energy experts such as Severin Borenstein emphasize the need for careful implementation of Newsom’s proposal. Borenstein mentioned that the proposal would require extensive study and expertise to ensure it effectively stabilizes fuel prices without unintended market disruptions.

Tai Milder, Director of the Division of Petroleum Market Oversight for the CEC, argued, “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.”

The California Division of Petroleum Market Oversight supported the Governor’s proposal, highlighting recurring issues of refinery maintenance without adequate resupply plans leading to predictable price spikes.