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California plans to target oil companies with new tax for ‘rank price gouging’

On Friday, California’s governor Gavin Newsom said that he would call for a special legislative session, in December. The session would consider a new tax that would be levied on profits of oil companies in the Golden State for what he described as “rank price gouging.” Although gas prices recovered across the nation, prices remain higher in California, when compared with the rest of the nation.

According to the AAA, the average gas price in California, on Friday was $6.39 per gallon. This price is $2.50 higher than the average price in the nation which was $3.89. Newsom said that there was “nothing to justify” such a high price difference between California and other states in the nation.

Governor Newsom forcefully said that it was time to get serious and that he was tired of the gas price in the state. He added that they had been “too timid.”

The unprecedented rise in oil price has confused officials, analysts as well as the energy regulators in the state. Early in a statement on Wednesday, California Energy Commission Chair David Hochschild said that the sudden increase in the pump price was “unacceptable.

The oil industry, in California meanwhile justified the higher prices in the states and said that it was a result of the environmental laws and regulations in the state. Oil companies have also blamed a recent refinery fire, geopolitical events and Hurricane Ian, for high prices in the state.

California’s Energy Commission is demanding a more direct explanation on how there is a low level of supply and why have there been recent spikes in gas prices, especially when the rest of the nation is facing much lower gas prices.

The commission also noted that there were recent maintenance interruptions at oil refineries. However, it also pointed out that refineries had prepared for such issues, in the past years.

The Commission awaits replies from oil companies, which may shed additional light on the recent surge in prices. However, Governor Gavin Newsom’s proposal of a new windfall tax might not fructify till January as California’s legislature will meet in early December, after the midterms, to discuss the proposed new legislation.

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