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The California legislature is set to convene in a special session Monday called by Gov. Gavin Newsom, who is urging lawmakers to impose fines on oil companies' profits when they reach a certain level in an effort to combat the state's high fuel prices.
Newsom announced the special session last week, accusing energy firms of price gouging while pointing to record-high profits in the industry amid a surge in gasoline prices in the fall.
Gavin Newsom, governor of California, speaks during the United Nations Climate Action: Race to Zero and Resilience Forum in New York, on Wednesday, Sept. 21, 2022. (Michael Nagle/Bloomberg via Getty Images) (Photographer: Michael Nagle/Bloomberg via Getty Images / Getty Images)
Oil industry representatives do not deny that energy firms have seen a surge in profits this year, but say market forces and government policies against fossil fuels are to blame.
"Nobody likes high gas prices. No one wants to hear about companies making a lot of money when things are tough, but it really comes back to the market," said Kevin Slagle, spokesperson for the Western States Petroleum Association. "When there's high demand, earnings are going to be higher. When there's low demand, earnings are going to be lower."
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Opponents say Newsom's push to implement a windfall tax and further regulations on the energy industry will only drive Californians' cost at the pump up further. The state already has the second-highest fuel tax in the nation and the highest regulations against the fossil fuel industry.
According to AAA, the average price for a gallon of gas in California is $4.77 on Monday, more than $1.35 higher than the national average of $3.40.
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Slagle told FOX Business Newsom has been on the warpath against energy producers for years, and says the governor's previous actions such as successfully implementing a ban on selling cars with gas engines by 2035 discourage energy companies from investing further in the state and is contributing to higher prices already.
Vehicles pass the Phillips 66 Los Angeles Refinery Wilmington Plant on November 28, 2022 in Wilmington, California. (Photo by Mario Tama/Getty Images) (Photo by Mario Tama/Getty Images / Getty Images)
"When you have a governor saying, 'we don't want you here, we're going to get rid of you, we're going to ban fuels'… those signals also affect costs," Slagle said, pointing out that California regulations have made it increasingly difficult to produce and transport fuel in the state, and therefore more costly to do so.
"So, adding a windfall profits tax on an already difficult situation, you know, that's not a recipe for prices going down," he argued.
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The governor's office did not immediately respond to FOX Business' request for further details on the plan, such as where the profit threshold might be set for triggering fines.