Democratic California Gov. Gavin Newsom made a sudden reversal this week on his effort to hit oil companies with price gouging penalties amid record-high gas prices and an energy crisis.

Newsom unveiled a proposal Thursday creating a new watchdog arm within the California Energy Commission (CEC) that would monitor daily petroleum market price fluctuations to ensure that market participants “play by the rules.” The proposed CEC office would be granted broad authorities to analyze refinery data, subpoena for other information and directly refer cases to the state’s attorney general.

“We’re making major progress with the Legislature to hold Big Oil accountable for fleecing Californians at the pump,” Newsom said in a statement. “With a coalition representing hundreds of organizations and local leaders backing our proposal to impose strong and effective oversight measures on oil companies, the momentum is on our side to get this done for California families.”

“What we’re asking for is simple: transparency and accountability to drive the oil industry out of the shadows,” he continued. “Now it’s time to choose whether to stand with California families or with Big Oil in our fight to make them play by the rules.”


Democratic California Gov. Gavin Newsom said he is “making major progress with the Legislature” on a revised proposal to punish Big Oil for high prices. (Tom Williams/CQ-Roll Call, Inc via Getty Images.)

However, while the governor branded the proposal as a “stronger” action, it represents a pared-back version of a separate proposal to punish oil companies. Ultimately, it could also indefinitely delay implementation of a state price-gouging penalty, which Newsom has aggressively pushed, according to The Sacramento Bee.


In December, Newsom announced aggressive actions to punish oil companies for “lying and gouging Californians to line their own pockets.” The comments came after he called on the state’s legislature to develop legislation cracking down on excessive energy price increases and called on the California Senate Committee on Energy, Utilities and Communications to hold a hearing on the topic.

The legislation that Newsom backed would hit companies with a financial penalty if they were found to increase gasoline prices “excessively.” However, the legislation hit significant roadblocks after experts and state lawmakers, including Democratic leaders, expressed concern that it would have unintended consequences impacting consumers.

A worker walks past pump jacks operating at the Kern River Oil Field in Bakersfield, California.

A worker walks past pump jacks operating at the Kern River Oil Field in Bakersfield, California. (AP Photo/Jae C. Hong)

“Enacting SBX1-2 is not in the best interests of the consumer, will not reduce retail pump prices and is not in the best long-term economic interests of California,” Michael Mische, a professor at the University of Southern California Marshall School of Business, said during a hearing last month. “There are better alternatives.”

“Enacting it will reduce supply, force out producers and reduce employment in a high-paying sector,” Mische continued, adding that gas and energy prices would increase as a result of the bill.

Democratic state Sen. Steve Bradford argued during the hearing that lawmakers must “ensure our actions that we take first [do] no harm to consumers.”


Over the course of the last year, California has consistently recorded the highest average gas prices of any state, even surging past $6 per gallon in both June and October, according to data from the Energy Information Administration. Although pump prices have fallen considerably in the state over the last two months, to an average of $4.87 per gallon, they are still by far the highest in the nation.

Newsom’s office didn’t respond to a request for comment.

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