California Governor Proposes Refiners Maintain Spare Supply to Combat Gas Price Spikes

California Governor Proposes Refiners Maintain Spare Supply to Combat Gas Price Spikes

California Governor Gavin Newsom has put forward a groundbreaking proposal that requires oil refiners to maintain minimum distribution reserves. This move is aimed at reducing the volatility of gas prices at the pump, which have long been a source of frustration for Californians.

The California Energy Commission (CEC) will enforce these requirements, which include maintaining sufficient supply during maintenance outages and proving that refiners have resupply plans in place. Penalties will apply to those failing to comply with the new stockpiling and planning mandates.

“If this proposal had been in effect in 2023, Californians would’ve saved upwards of $650 million in gas costs due to refiners’ price spikes,” according to a statement from the governor’s office. This follows a year where, for 63 days, refiners in California maintained less than 15 days’ worth of gas supply, exacerbating price hikes.

While trade groups like the California Fuels + Convenience Alliance (CFCA) and the California Independent Petroleum Association have yet to comment, Consumer Watchdog, a non-profit advocacy group, praised the proposal as a vital measure to shield Californians from future price spikes. “Recent price spikes have been sparked by inventories dipping under 15 days," said Consumer Watchdog president Jamie Court. "This is a necessary and landmark reform."

The proposal is a result of recommendations from the Division of Petroleum Market Oversight (DPMO), which identified several market flaws that contributed to the recent surge in gas prices. Refiners failed to maintain adequate inventories of refined gasoline or compensate for production shortfalls, leaving the state vulnerable to price shocks.

California’s new Gas Price Gouging and Transparency Law, enacted in June 2024, mandates that fuel traders report supply and spot market transaction information. It also allows the CEC to impose sanctions on companies that inflate prices beyond the state’s maximum refining margins.

California’s unique gasoline blending requirements, reliance on imports, and regulatory burdens already contribute to higher prices compared to the national average. Governor Newsom’s proposal seeks to build a stronger buffer against future price spikes, offering consumers some much-needed relief from soaring fuel costs.

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