California's Newsom calls for windfall tax on oil companies amid high gas prices

Governor's suggestion comes as gas prices rose by 84 cents in California in just 10 days.

Updated: September 30, 2022 - 11:19pm

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With California experiencing a spike in gas prices in recent days, Gov. Gavin Newsom called for a windfall tax on oil companies to put money "back in Californians' pockets."

Over the last 10 days, gas prices increased by 84 cents in California despite crude oil prices being down, according to the governor's office. The average price for a gallon of gas in California reached $6.29 on Friday, up from an average of $6.18 on Thursday, according to AAA.

"Crude oil prices are down but oil and gas companies have jacked up prices at the pump in California. This doesn't add up," Newsom said in a statement. "We're not going to stand by while greedy oil companies fleece Californians. Instead, I'm calling for a windfall tax to ensure excess oil profits go back to help millions of Californians who are getting ripped off."

Opponents of previous windfall tax proposals at the national level say they discourage investment that would increase supply and lower costs.

In a news release, the governor's office said it is working with the Legislature to enact a windfall profits tax on oil companies, who will end up paying a higher tax rate on their earnings above a certain threshold. Then the "recouped windfall profits" would be directed to rebates or refunds to California taxpayers impacted by high gas prices.

It's unclear exactly when lawmakers will be able to vote on a windfall tax measure, as the Legislature is in recess. The governor's office did not immediately respond to The Center Square's request regarding whether or not the governor would call a special session.

Democratic lawmakers attempted to gut-and-amend a bill earlier in the session to impose a windfall profits tax on fossil fuel corporations, though that bill failed to advance.

The California Taxpayers Association issued a statement asserting that a new tax on oil production would further drive up gas prices.

“California’s high taxes are part of the problem for motorists, not the solution,” CalTax President Robert Gutierrez said in a statement. “Another tax increase that makes the production process more expensive would result in even higher prices for drivers.”

Newsom's proposal comes about a week before millions of Californians will begin seeing payments of up to $1,050 deposited into their bank account through the Middle Class Tax Refund. However, as previously reported by The Center Square, parents who are behind on their child care payments may not see that payment in their account long.

Newsom also announced Friday that he directed the California Air Resource Board to allow refiners to transition to a "winter blend" of gas earlier than usual. Typically, the winter blend is allowed after October 31.

Following the governor's request, the California Air Resources Board announced Friday that it will allow refiners to immediately distribute winter-blend gasoline.

The last time California took this action in 2012, gas prices declined by 25 cents per gallon within 13 days and 47 cents per gallon after 20 days, according to the governor's office.