In a rare win for the oil and gas industry in California, the state’s regulators are expected to delay the enforcement of a cap of refinery profits, Bloomberg reports, citing sources with knowledge of the plans.
The California regulator, the California Energy Commission, plans to vote on Friday a five-year delay to the so-called refinery profit cap, passed in the state in 2023 with the goal to limit spikes at the pump for Californian residents.
Senate Bill X1-2, the California Gas Price Gouging and Transparency Law, was designed to protect Californians “from experiencing price gouging at the pump by oil companies.” The law was signed by California Governor Gavin Newsom in March 2023 and took effect in June 2023. Under the law, the California Energy Commission (CEC) is authorized to set a maximum gross gasoline refining margin and a penalty for refiners that exceed it.
The CEC could still impose the profit cap during the expected five-year pause, but this would require another vote and more than a year of additional analysis, according to Bloomberg’s sources.
California saw record-high gasoline prices in 2022 when oil prices spiked to $100 a barrel at the start of the Russian war in Ukraine. Back then, Governor Newsom took aim at the oil industry, accusing refiners of gauging pump prices.
California’s assault on the oil and gas sector backfired after several major refiners decided to discontinue gasoline production at refineries in the state, due to the Californian mandates for clean energy vehicles and changed market dynamics.
Phillips 66, for example, is set to begin shutting down its 139,000-bpd Los Angeles-area refinery as soon as next week. Units at the plant will idle in phases through Q4 2025, with the facility permanently offline by year-end.
Between Phillips 66’s LA facility and Valero’s Benicia refinery, scheduled to close in 2026, the state is set to lose roughly 17% of its refining capacity—and that’s likely to drive the high gasoline prices even higher.
By Charles Kennedy for Oilprice.com
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