How serious is Newsom on taxing ‘greedy’ oil companies? He’s calling a special session

A week after proposing to levy a new tax on oil companies, California Gov. Gavin Newsom on Friday called for state legislators to convene in Sacramento for a special session in December to hammer out the plan.

In response to a historic surge in gas prices in the Golden State, Newsom last week proposed a tax on oil companies to fund rebates for California taxpayers getting squeezed at the pump.

During a press gaggle on Friday, the Democratic governor announced the special session for Dec. 5 — about a month after dozens of new lawmakers will be elected to office.

Newsom announced the special session on the same day his administration began sending out billions of dollars in long-anticipated refunds to taxpayers, a move meant to help ease the pain of inflation and high gas prices Californians continue to face.

Lawmakers are already set to return to Sacramento for their new session on Dec. 5. Even so, Newsom said he’s declaring a separate special session — which he referred to as a “date with destiny” — to focus on developing the new tax.

“We want to create a framework,” Newsom said. “I want to move in that direction with a sense of urgency and clarity in terms of what we’re trying to achieve.”

Under the governor’s tax proposal, companies engaged in the extraction, production and refining of oil would pay a higher rate on earnings above a set amount each year. The revenue would go to California taxpayers in the form of rebates or refunds, the statement said.

“This is not sending out a letter,” Newsom said. “We’re lowering the costs, and we’re going after what’s driving it. And that’s greed, pure and simple.”

California gas prices surge

It is unclear what steps state legislators plan to take to prevent oil companies from passing the added costs of the tax onto consumers — and whether they would be effective. In 1980, after New York passed a new tax on oil companies, a federal judge overturned a provision that prohibited the companies from passing the cost onto consumers, ruling that it created an unconstitutional state-run price control rule.

As of Friday, California’s price at the pump is an average $6.39 to $2.50 above the national average of $3.89, according to data from AAA. In the span of just two weeks, gas prices in the Golden State have soared by nearly $1.



Following an order by the governor last week, oil refineries are making an early transition from summer to winter-blend gasoline, which Newsom said should bring down the price-per-gallon in California by at least 25 cents in the coming weeks.

The unprecedented spike in California gas prices has stumped elected officials, analysts — and even the state’s energy regulatory body.

In a Wednesday statement, California Energy Commission Chair David Hochschild called sudden increase in prices at the pump “unacceptable.”

“The oil industry’s lobbying group argued that gas prices increased because of drilling permitting issues, which is misleading,” Hochschild said in the statement. “And it does not explain the sudden gap between national and California prices.”

Some gas price analysts disagree with Newsom’s assessment of oil company behavior. They say California regulations and fees drive up prices in the Golden State.

“Greedy oil companies and yet NO STATE is within $1/gal of California,” said Patrick De Haan, GasBuddy head of petroleum analysis, on Twitter on Monday. “Thanks to California bureaucrats, you have the highest taxes in the country, the most stringent blend of gasoline required for the longest period of the year of any state, & cap&trade. But yeah, oil companies. Those ‘greedy’ oil companies are selling for $2.99/gal in Texas, but yeah I’m sure you’ll say they’re only greedy in California.”

In a statement released Friday afternoon, an organization representing the oil industry suggested that the legislature should spend the special session reviewing longtime energy policies that have driven up costs for Californians rather than pursuing yet another tax.

“If this was anything other than a political stunt, the Governor wouldn’t wait two months and would call the special session now, before the election,” the association wrote. “This industry is ready right now to work on real solutions to energy costs and reliability if that is what the Governor is truly interested in.”

Democrats and Republicans react to special session

Assembly Speaker Anthony Rendon, D-Lakewood, and Senate President Pro Tem Toni Atkins, D-San Diego, indicated tentative support for the governor’s proposal in a Friday statement.

“As stated last week, a solution that takes excessive profits out of the hands of oil corporations and puts money back into the hands of consumers deserves strong consideration by the Legislature,” Atkins and Rendon said. “We look forward to examining the governor’s detailed proposal when we receive it.”

Prior to Newsom’s announcement about a special session, he was already receiving pushback from some legislators.

In a letter to Newsom on Friday morning, the Assembly Republican Caucus advocated against a special session. They said it was “disturbing” to learn that state Democrats were once again seeking to increase taxes.

“The only reason why a Special Legislative session would be warranted would be to suspend the gas tax, reduce the fees and regulations that make California gas so much more expensive, and allow permits to increase production to lower gas prices,” Assemblymembers James Gallagher, R-Yuba City, and Vince Fong, R-Bakersfield, wrote in the letter.

On Friday, Republican National Committee spokeswoman Hallie Balch called Newsom’s special session and tax proposal “the epitome of what’s wrong with California Democrats.”

“Newsom and his supermajority are trying to distract voters from the fact that their policies made gas prices so high,” Balch said in a statement. “But creating a new tax that will inevitably be handed down to taxpayers in the midst historic inflation is a failing strategy.”

This story was originally published October 7, 2022 at 1:43 PM with the headline "How serious is Newsom on taxing ‘greedy’ oil companies? He’s calling a special session."