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California Gov. Gavin Newsom unveils plan to cap oil refinery profits

California typically has the highest average gasoline price in the continental United States.

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California Gov. Gavin Newsom wants so-called Big Oil to pay a penalty for excessive profits, accusing them of fleecing his constituents. Photo by Eric Thayer/UPI
California Gov. Gavin Newsom wants so-called Big Oil to pay a penalty for excessive profits, accusing them of fleecing his constituents. Photo by Eric Thayer/UPI | License Photo

Dec. 6 (UPI) -- California Gov. Gavin Newsom has a message for oil companies -- either stop padding their own purses with hefty profits to the detriment of consumers or accept a penalty.

Newsom was joined by fellow Democrat, state Sen. Nancy Skinner, in proposing a penalty for major energy companies, complaining of "unexplained gas price hikes," price gouging and excessive profits.

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"California's price gouging penalty is simple -- either Big Oil reins in the profits and prices, or they'll pay a penalty," the governor said. "Big Oil has been lying and gouging Californians to line their own pockets long enough. I look forward to the work ahead with our partners in the legislature to get this done."

Newsom's proposals tasks state lawmakers with developing a profit cap based on what a refiner is earning from wholesale gasoline sales. The state energy commission, meanwhile, would be asked to develop the penalty that would be imposed if the measure becomes law.

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"Putting the governor's proposal in print allows the Legislature and the public to begin discussions on this important issue," Sen. Skinner said.

Because of high state taxes, California typically has the highest state average retail price for gasoline in the continental United States. Travel club AAA reported a state average price of $4.71 for Tuesday, a price that's nearly a dollar higher than the national average.

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Despite Newsom's claims of price spikes, the state average price is far below month-ago levels of $5.46 per gallon. Apart from taxes, transportation and refining costs, it's the price of crude oil that largely determines the price at the pump. The price for Brent crude oil, the global benchmark for the price of oil,was trading at around $82 per barrel early Tuesday, down from month-ago levels of near $97 per barrel.

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Those declines in prices reflect concerns about a global economic recession more than corporate profits, though energy companies have come under fire for returning more value to shareholders than investing in production.

Exxon Mobil reported its fourth straight quarter of strong returns, with its $19.7 billion in profits in the third quarter topping the prior quarter by nearly $2 billion. The company added that it was able to increase production, but it also returned some$15 billion to shareholders in the form of dividends this year, much to the consternation of President Joe Biden.

"Can't believe I have to say this but giving profits to shareholders is not the same as bringing prices down for American families," the president said from his official Twitter account in October.

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Biden later threatened oil companies with a higher tax on "windfall" profits if they do not start increasing production to bring down gas prices.

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