Dec 20, 2022

As Governor Newsom pushes for a new refinery tax scheme, his public statements are laced with false claims on oil companies and gas prices.

Energy policies have consequences and should be based in fact, not dishonest rhetoric – especially since economists are worried that Newsom’s proposals could lead to higher prices at the pump and major fuel shortages like the ones seen in the 1970s.

Here are three of the most egregious ways Newsom is misleading the public and policymakers in Sacramento:

1. Newsom repeatedly called for a new tax on oil companies (see here, here, here, here, here, here, and here), but now is trying to disguise his proposal as a “penalty.”

There are obvious political reasons behind the shift. For starters, a “penalty” may only require a majority vote to pass the legislature, whereas a tax would require a two-thirds vote. Second, voters generally don’t like new taxes.

But no matter what term Newsom wants to use, his proposal amounts to a new tax on refineries that will raise costs and discourage production of transportation fuels that California sorely needs.

The Golden State is in an energy crisis, paying the highest gas prices in the nation by far thanks to already-high taxes, expensive environmental mandates, and limited refining capacity due to an unfriendly energy policy environment. New taxes or “penalties” won’t address any of these fundamental drivers of high gas prices. In fact, experts say Newsom’s proposal could easily make matters worse.

The governor’s efforts to tax California out of its energy crisis will fail, and consumers and businesses will pay the price.

2. Newsom says oil companies are price gouging but can’t back up the claim (and neither can the courts or his own government).

Newsom’s entire rationale for his new refinery tax proposal is based on the faulty claim that oil companies are gouging prices at the pump, but the governor can’t point to any evidence to prove his assertion.

In fact, as Dan Walters reported in CalMatters, the staff of the California Energy Commission rebutted Newsom’s price gouging claims in a recent hearing:

“The commission’s staff largely bolstered oil industry assertions that global and in-state factors largely beyond their control, rather than arbitrary price-gouging, caused the sharp spike in pump prices [in October].

The factors include declining refinery capacity due to high operating costs, periodic maintenance outages in the few remaining refineries, an uptick in gasoline imports whose prices are affected by the global oil market and transport costs, and a gradual decrease in California’s gasoline demand.”

The courts have also rejected claims that California oil companies are gouging consumers.

3. Newsom claims there is no explanation for high gas prices despite widespread public discussion of key pricing factors by economists and experts.

The factors driving high gas prices in California are no mystery. Economists and experts have consistently pointed to the same fundamental factors: high taxes, expensive environmental mandates, and limited refining capacity.

Three energy experts who advised the state on transportation fuels in 2015 told the Los Angeles Times that the recent price spikes at the pump are due to poor planning by policymakers, not coordinated manipulation by oil companies.

One said: “The state has set aspirational goals for the energy transition, but it’s not very well planned.”

Amy Myers Jaffe, a former executive director for energy and sustainability at UC Davis, agreed, noting that gas price volatility is the result of the state shutting down its current energy infrastructure too quickly:

“Do I have the new infrastructure fast enough before I retire the old infrastructure, and what happens if you’re in the middle? … The way we’re doing it now is you just let the fuel costs go up and then we leave poor people with no ability to get anywhere. And then [politicians] grandstand against the oil companies — that’s not a solution.”

Separately, an industry representative testified for several hours in front of the state Energy Commission just two weeks ago, answering dozens of questions and providing information on both the causes of and solutions for high gas prices in California.


Newsom’s false narratives won’t lower gas prices for Californians, and neither will new taxes. Despite all the vitriol and rhetoric from the governor’s office, California’s oil companies stand ready to help fix the broken policies that are the real causes of high prices at the pump.