The California Senate on Friday passed a bill to give the state’s energy commission the authority to require oil refiners maintain minimum levels of gasoline supply, in the hopes of preventing price spikes at the pump.
Assembly Bill X2-1 passed on a floor vote, 23-9 in a special session called by Gov. Gavin Newsom, who urged lawmakers in Sacramento to pass the legislation.
In its own extraordinary session, the Assembly on Oct. 1 approved AB X2-1 in a 44-17 vote.
Before heading to Newsom’s desk, however, AB X2-1 will go back to the Assembly for a concurrence vote, which is expected to be held on Monday.
According to the bill, refiners who do not comply to the minimum storage requirements face penalties of at least $100,000 to a maximum of $1 million per day.
If signed into law, the legislation would be the first of its kind in the U.S.
Newsom was pleased, releasing a statement moments after Friday’s Senate vote saying, “Californians are one step closer to getting the protections they need against Big Oil’s price spikes.”
Senate Republicans countered by pointing out that AB X2-1 barely cleared the 21-vote threshold to pass in the 40-member chamber. Eight senators did not cast a vote.
The GOP also referenced an upcoming meeting of the California Air Resources Board to consider stricter limits on the carbon intensity of fuels, which could raise gas prices across the state.
An assessment last year by CARB estimated the change, if implemented, could boost the average price of a gallon of gas 47 cents in 2025.
The Los Angeles Times reported that one outside analyst estimated a jump as much as 65 cents, although CARB’s executive officer said the board will “look at all the economic impacts” including economic growth, job creation and public health before making any decisions.
The CARB meeting is scheduled for Nov. 8.
“It’s simple economics — when supply goes down, prices go up,” Senate Minority Leader Brian Jones, R-San Diego, said in a statement after Friday’s vote. “The worst part? Californians will be the ones to pay the price — literally — for these political games when they’re faced with even higher gas costs.”
As for AB X2-1, its supporters say California refiners have not maintained adequate gasoline supply during peak summer months nor when refineries shut down for maintenance, which led to price spikes in 2022 and 2023.
One of the bill’s sponsors, Sen. Nancy Skinner, D-Berkeley, cited a California Energy Commission report saying there were 63 days last year when state refiners maintained fewer than 15 days of gas supplies.
Skinner said the energy commission’s minimum inventory requirements could come only when certain thresholds are met, such as ensuring the regulations lead to greater fuel supply in California and lower average retail prices on an annual basis.
“Just like the federal government has a Strategic Petroleum Reserve, AB X2-1 will enable California to have a strategic gasoline reserve … so that when demand at the pump is high, we don’t face a gasoline shortage which can drive up prices,” Skinner said.
But Republicans predict AB X2-1 will have the opposite effect.
“It’s unaffordable to live in California; it’s the politics that come out this building that makes it happen,” said Sen. Shannon Grove, R-Bakersfield. “Sending this regulatory authority to an unelected, bureaucratic agency is just going to increase the cost of fuel.”
According to a CEC report released in August, nine refineries are in operation across the state. There were 13 in 2006.
Earlier this week, Chevron sent a letter to the chairs of the respective Assembly and Senate committees on fuel supplies and price spikes, disputing that refiners manipulate gasoline inventory to generate more profit.
AB X2-1 takes “significant supply” off the market, Andy Walz, Chevron’s president of Downstream, Midstream and Chemicals wrote, blaming supply shortages in California on “20 years of bad policy” decisions.
The director of the state’s recently created Division of Petroleum Market Oversight fired back, saying that since Chevron and three other firms control most of the supply, providing a buffer will help avoid fuel shortages.
“Thanks to new data and analysis, we know the real story,” Tai Milder said in an email to the Union-Tribune. “Refiners let supplies dwindle over the summer, reduce output through maintenance, and sell at inflated prices.”
The cost of gasoline in the Golden State has long been a hot-button topic. The average price for a gallon of regular Friday came to $4.668, according to AAA. The national average stood at $3.209, a difference of almost $1.46 a gallon.