Gov. Gavin Newsom signed legislation on Monday that aims to prevent gas price spikes and save Californians money, but critics of the bill say it jeopardizes worker safety and will only lead to higher prices at the pump.
The bill, ABX2-1, allows the state to require oil refiners to maintain a minimum inventory of fuel to avoid supply shortages that create higher prices.
In addition, ABX2-1 authorizes the California Energy Commission to require refiners to plan for resupply during outages, the Governor’s office stated.
“Price spikes have caused Californians billions of dollars over the years, and we’re not waiting around for the industry to do the right thing,” Gov. Newsom said on Monday. “We’re taking action to prevent these price spikes and save consumers money at the pump.”
“Now, the state has the tools to make sure they backfill supplies and plan ahead for maintenance so there aren’t shortages that drive up prices,” Newsom continued. “I’m grateful to our partners in the Senate and Assembly for acting quickly to push this forward and help deliver relief for Californians.”
At a press conference on Monday, the Governor reiterated his stance on ABX2-1, calling the signing of the law “a big damn deal” and saying it targets big oil companies who “continue to lie…manipulate and take advantage of” California residents.
“They’re screwing you; they’ve been screwing you for years,” he said.
According to data from the Division of Petroleum Market Oversight analyzed by the governor’s office, if the proposal had been in effect last year, Californians could have saved “hundreds of millions — if not billions of dollars” at the pump in 2023.
ABX2-1’s signing wasn’t without controversy; after Newsom called for a special session in late August, California Senate President pro-Tempore Mike McGuire (District 2) initially stated that state officials would not be convening a special session immediately because the Senate “always had the votes” for the California Made and Clean Energy Package that had been in the works for months.
However, at the beginning of October, McGuire announced that the Senate would in fact be meeting for an Extraordinary Session, the second in two years.
Labor leaders, specifically those representing unionized workers in refineries, were in opposition to the bill and argued that the legislation would force oil companies to hold on to their supplies instead of releasing them.
They also claim that the bill would jeopardize worker safety, and if storage requirements are untenable for refiners, that could lead to mass job cuts.
“Maintenance must be done on a schedule based only on the condition of metals and infrastructure and the life cycle of equipment such as vessels, pipes and valves,” said Jeremy Smith, Chief of Staff for the State Building and Construction Trades Council, which represents many unionized refinery workers.
Trades Council president Chris Hannan told CalMatters that the worst-case scenario is a refinery explosion, citing a 2015 incident at an ExxonMobil refinery in Torrance that injured two workers and, according to Hannan, led to a spike in gas prices.
Refiners were also in opposition to the bill, saying that the move would only raise prices and require the construction of new storage tanks, which could take “the better part of a decade” and cost “tens of millions of dollars.”
“You’re asking a just-in-time system to slow down and back up the pipes just in case you have price volatility,” Mark Nechodom, the senior director of the Western States Petroleum Association, told CalMatters late last month.
Reaction from the industry on the legislation’s passing was swift; Chevron issued a letter to California legislative leaders on Tuesday urging them to reject the law, saying that it could create new costs and burden their California operations.
The governors of Nevada and Arizona also sent letters to Newsom expressing concern that the proposal would increase gas prices in their states.
As of Tuesday, California drivers are paying an average of $4.67 for a gallon of regular, the highest in the nation, AAA data indicates.
Gov. Newsom noted that the price drops won’t likely be seen until the summer of 2025 and that the legislation will be in effect until 2032 when lawmakers will decide to extend or nix the bill.
