New state law requires refiners to increase fuel reserves in an attempt to stabilize gas prices
SACRAMENTO, Calif. – On Monday, Assembly Bill X2-1 (ABX2-1) cleared the state legislature and was signed into law requiring refineries to maintain minimum fuel reserves and increasing reporting requirements concerning supplies of transportation fuels.
"This landmark legislation is a win for consumers, and a win for accountability in the state’s gasoline market," said Assemblymember Gregg Hart who coauthored the bill. "ABX2-1 will save working California families billions at the gas pump. This common sense solution has received broad public support because consumers know that when gas prices spike in California, the oil industry unfairly profits."
The bill was passed following an extraordinary session of the California Legislature called by Governor Newsom to respond to rising gas prices in the state.
Bills passed during an extraordinary session of the state legislature take effect 90 days after passage.
"[I]n September and October of 2022 and 2023, gasoline refiners and retailers in California drastically raised the prices that Californians pay at the pump, despite state taxes and fees remaining unchanged at the time, leading to record oil company profit," stated the Governor's Proclamation to convene a special session. "[T]he California Energy Commission and Division of Petroleum Market Oversight calculated that for 63 days in 2023, refiners allowed total statewide inventory (including both storage and product throughout the distribution chain) to drop under 15 days of gasoline supply-the level below which price spikes become increasingly likely-driving last year's price spike."
ABX2-1 authorizes the Energy Commission to establish requirements for refiners statewide to maintain specified levels of already-refined transportation fuel, including feedstocks and blending components used in the refinement process.
The bill prohibits Energy Commission inventory levels that would require a refiner to build additional storage facilities and the provisions imposed would expire on Jan. 1 of 2033.
"Legislators still fail to understand our industry or what drives high gas prices. Regulators remain fixated on controlling businesses with more taxes, fees, and costly demands," said President and CEO of the Western States Petroleum Association Catherine Reheis-Boyd in a statement before the passage of ABX2-1. "California’s energy infrastructure remains under threat from government neglect and is on the brink of failure, which will send prices even higher."
Almost all of California's in-state fuel supply comes from less than 15 refineries across the state.
"Price spikes have cost Californians billions of dollars over the years, and we’re not waiting around for the industry to do the right thing — we’re taking action to prevent these price spikes and save consumers money at the pump. Now, the state has the tools to make sure they backfill supplies and plan ahead for maintenance so there aren’t shortages that drive up prices," said Governor Newsom regarding the passage of ABX2-1 Monday.
Attempts to restart oil platforms and refinement facilities on the Central Coast have been slowed by the California Coastal Commission after Houston-based Sable Offshore acquired local production infrastructure from ExxonMobil in February of this year and came to a conditional settlement with the County of Santa Barbara concerning safety requirements.
"With this new law, big oil companies are now responsible for stabilizing prices at the pump. It’s a critical accomplishment, but our work is not done," said Assembly Speaker Robert Rivas. "I will continue to fight to lower the cost of living, because housing, groceries and everyday necessities must be more affordable for all Californians."
