Gov. Newsom unveils plan to require oil companies to maintain minimum fuel reserves

California Gov. Gavin Newsom on Thursday announced a first-in-the-nation plan to require petroleum refiners to maintain a minimum fuel reserve to avoid supply shortages he says create higher prices at the pump.

According to Newsom, profit spikes for oil companies are overwhelmingly caused by refiners not backfilling supplies when they go down for maintenance. The state’s proposal would authorize the California Energy Commission (CEC) to require that refiners maintain a minimum supply, which would help prevent gas price spikes and save Californians hundreds of millions of dollars every year.

“Price spikes at the pump are profit spikes for Big Oil,” Newsom said in a statement. “Refiners should be required to plan ahead and backfill supplies to keep prices stable, instead of playing games to earn even more profits. By making refiners act responsibly and maintain a gas reserve, Californians would save money at the pump every year.”

Refiners could face fines for falling below minimum requirements.

The CEC found that last year, there were 63 days when California refiners maintained less than 15 days of gas supply — driving up prices.

Newsom said that if the new plan had been in effect last year, Californians would’ve saved upward of $650 million in gas costs due to refiners’ price spikes.

Newsom’s proposal comes just a year after the California Gas Price Gouging and Transparency Law went into effect. The law aims to protect Californians from gas price gouging by creating an independent watchdog to root out potential gouging and authorizing regulators to penalize the oil industry for wrongdoings.

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A rule to establish a financial penalty on price gouging has yet to be put in place, but the state says the law is still working. This summer, Californians spent an estimated $728 million less on gasoline than the same period last year. The new proposal would further protect consumers at the pump and help stabilize the market for the long-term, according to Newsom.

Oil representatives have been steadfast in their opposition to the law and have spoken out against penalties and caps on oil companies in California.

Newsom started pushing for gas pricing safeguards in 2022 when consumers saw some of the highest gasoline prices ever recorded in California. During the fall, the average gas price reached a record high of nearly $6.50 per gallon. In some areas, prices were even higher, with a station in Mendocino approaching $10 per gallon, and one station in San Bernardino County reaching $8.35 a gallon, according to Gasbuddy.com.

This is a developing story. Check back for updates.