With California battered by high gas prices, Newsom wants to penalize big oil companies

The Legislature opens the special session Monday to consider approving penalties on oil companies that make excessive profits. Newsom has accused the oil industry of intentionally “price gouging” consumers at the pump as retribution for the state’s policies to phase out dependence on fossil fuels in an effort to curb climate change. Though Newsom first called for “a windfall tax on oil companies that would go directly back to California taxpayers” on Sept. 30, the governor’s office has yet to publicly release any details of his plan — and is pivoting away from calling it a “tax.” At this point, it’s unclear if Newsom’s proposal will become a nation-leading example of how to successfully implement a penalty and drive down gas prices, or more of a political maneuver to bolster his progressive image in a high-profile battle with the industry. Oil companies have already coined the effort “Gavin’s new gas tax.” In a recent state hearing on gas price spikes, state regulators said Californians usually pay the highest retail gasoline prices in the nation because of higher taxes, production and environmental costs, the isolation of the market, more expensive costs for crude oil and more expensive retail gasoline brands. “If they want to make a windfall profit in California, they can’t, but making a reasonable profit in California should be enough incentive to continue to make gasoline in California.” Jared Walczak, vice president of state projects at the Tax Foundation, said the U.S. government instituted a windfall profit tax in 1980 under Jimmy Carter that ultimately “reduced domestic oil production, increased reliance on foreign oil and drove up costs.” He said it’s hard to pinpoint examples of a successful windfall tax, or a profits penalty.