Gov. Newsom unveils plan to require oil companies to maintain minimum fuel reserves

California Gov. Gavin Newsom on Thursday announced a first-in-the-nation plan to require petroleum refiners to maintain a minimum fuel reserve to avoid supply shortages he says create higher prices at the pump.

According to Newsom, profit spikes for oil companies are overwhelmingly caused by refiners not backfilling supplies when they go down for maintenance. The state’s proposal would authorize the California Energy Commission (CEC) to require that refiners maintain a minimum supply, which would help prevent gas price spikes and save Californians hundreds of millions of dollars every year.

“Price spikes at the pump are profit spikes for Big Oil,” Newsom said in a statement. “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.”

Refiners could face fines for falling below minimum requirements.

A spokesperson for Newsom said the governor’s office is working with the Legislature on a bill to put the plan in place and it will be taken up in the current session.
The CEC found that last year, there were 63 days when California refiners maintained less than 15 days of gas supply — driving up prices.

Newsom said that if the new plan had been in effect last year, Californians would’ve saved upward of $650 million in gas costs due to refiners’ price spikes.

Catherine Reheis-Boyd, the president and CEO of the Western States Petroleum Association, a Sacramento-based group representing all major refiners and oil companies in California, called Newsom’s supply announcement “nothing more than a political attack on consumers and our industry.”

“To impose new operational mandates on energy producers based on such falsehoods is regulatory malpractice, and ignores the logistical challenges and costs associated with such a plan,” said Reheis-Boyd in a statement. “When this administration is ready to have a serious discussion about the facts and the policies this state has imposed that affect consumer costs, we will be there.”

But, Reheis-Boyd said “collaboration is not a value of this administration.”

“Once again, they have proposed wide-ranging and costly new laws in the final few weeks of the legislative session, putting legislators, stakeholders and industry in an impossible position to deliver effective policy,” she said in a statement.

Newsom’s proposal comes just a year after the California Gas Price Gouging and Transparency Law went into effect. The law aims to protect Californians from gas price gouging by creating an independent watchdog to root out potential gouging and authorizing regulators to penalize the oil industry for wrongdoings.