The California Chamber of Commerce is opposing a state Senate bill backed by the governor that would cap oil refinery profits and financially penalize companies for reaping excessive profits.

Sen. Nancy Skinner, D-Berkeley, introduced SBX1 2 in December. The bill creates a system of enacting penalties, a concept first proposed by Gov. Gavin Newsom, who has been calling out oil companies for price gouging since October when gas prices in California soared. He also convened a special session that began this year.

The state Chamber announced Tuesday it has placed the bill on its 2023 job killer list saying the proposed cap to oil refinery profits and financial penalties is “effectively a tax on the manufacturer of products critical to the daily lives of Californians and employers in the state and would not provide any relief at the pump.”

“The predictable consequence of taxing the production of California oil and gas will be less production, higher prices and eventually more expensive imports,” said Cal Chamber’s policy advocate Brady Van Engelen in a letter sent to Skinner. 

It establishes a playbook for state government to arbitrarily determine what a reasonable profit is, Van Engelen wrote. ”That is appropriately the role of the market in competitive industries, not government.”

Newsom has claimed that oil companies have been price gouging to rack up excessive profits, harming Californians who pay the highest prices in the nation at the gas pump.

“California’s price gouging penalty is simple — either Big Oil reins in the profits and prices, or they’ll pay a penalty,” Newsom said when the bill was introduced.

California gas prices on Tuesday were averaging $4.65 cents a gallon, compared to a national average of $3.40, according to AAA. But California’s gas prices soared to nearly $8 in some regions of the state in October 2022, the highest in the nation.

“No one can deny that California’s gas prices were outrageously high compared to other states,” Skinner said. “And those high prices hurt California consumers and businesses.”

The proposal would make it unlawful to charge prices resulting in what Newsom has deemed are excessive profits, and excessive profit margins would be punishable by a civil penalty from the California Energy Commission.

The amount of the maximum margin and the amount of the penalty will be determined through the legislative process. Any penalties collected would go into a Price Gouging Penalty Fund, enabling the state to return the excess to taxpayers.

With the possibility of a recession on the horizon, “we should collectively be identifying solutions that can reduce costs and bring more jobs to the state, which ultimately increases revenue,” Van Engelen said. “Unfortunately, this measure will do the exact opposite and likely deter job growth in a sector that historically has competitive high-paying wages.”

CalChamber’s letter claims that similar proposals have been tried and failed in every instance — both at the state and federal level.  The efforts were repealed in all cases for failing to generate additional revenue and doing nothing to impact the price of gasoline.

The state Senate’s Utilities Energy and Communications Committee has scheduled the first hearing on the measure for Feb. 22.

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