California Pauses Refinery Profit Cap to Support Fuel Supply and Jobs

The California Energy Commission (CEC) voted to suspend for five years its authority to impose a profit cap on gasoline refiners. Activists had labeled the proposal a “price gouging penalty.” The cap originated from a 2023 law championed by Governor Gavin Newsom after California drivers paid more than $2 above the national average per gallon in 2022. As the CEC investigated the situation, they increasingly became aware that it is government policy, not profit margins, that are making California gasoline expensive.

The rule never took effect because the CEC had not completed its rulemaking. Meanwhile, two refinery closures were announced earlier this year, fueling concerns about shrinking supply and the risk of even greater price volatility if additional facilities exit California.

In response, state leaders have been trying to figure out how to deal with energy production within the state. The California Independent Petroleum Association (CIPA) has been meeting with policymakers and regulators to emphasize the importance of protecting good-paying jobs, evaluating the economic impact of a shutdown industry, and ensuring California sustains enough in-state production to meet demand.

As CIPA members know, this debate is far from one-sided. Powerful environmental groups are determined to eliminate oil production regardless of the consequences. For many, it has become a religion, even if it results in higher fuel costs and increased reliance on imports.

We need to continue working toward a shift in policy that focuses on stability and ending the uncertainty in our energy market.