In late August, California energy regulators announced the deferment of a plan to penalize oil companies for high profits. The delay, until 2030, reverses portions of state legislation signed into law in 2023.
What's happening?
Regulators at the California Energy Commission paused the profit penalties "after two oil refineries accounting for roughly 18 percent of the state's refining capacity" signaled intentions to close, according to the Associated Press. Officials were reportedly concerned that closures could lead to insufficient fuel supplies.
The move rolls back portions of the California Gas Price Gouging and Transparency Law, which took effect in 2023, though the commission has yet to apply any associated penalties to oil companies.
The penalty portion of the law was considered a landmark piece of Governor Gavin Newsom's administration in the state's quest to address rising global temperatures, advance clean energy transition goals, and protect consumers, the AP reported.
CEC vice chair Siva Gunda told the outlet that the state isn't "walking back" its pledge to shift away from dirty fuels. Instead, Gunda said, the move was about supporting consumers' access to affordable fuel.
Why is the move so significant?
This appears to be yet another win for the oil and gas industry, which has already seen considerable support this year from the current administration.
Oil and gas companies continue to generate billions of dollars, despite declining profits and investments in the face of clean energy growth. And the postponement of the penalty provisions has divided opinion.
Jamie Court, the president of Consumer Watchdog, told the AP that the delay is "basically a giveaway to the industry."
"I'm really disheartened and disgusted by Newsom," Court said. "I feel like this is just a total about-face. And in the end, it's going to result in greater price spikes."
San Diego station CBS 8, meanwhile, reported that Newsom's office called the move a "prudent step." And while the Western States Petroleum Association had first sought a 20-year instead of a five-year postponement, its chief executive officer, Catherine Reheis-Boyd, applauded the delay.
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No way 🙅 "The vote demonstrates the CEC's understanding that imposing this failed policy would have likely exacerbated investment concerns contributing to California's recent refinery closures," Reheis-Boyd said in a statement.
What's being done about the situation?
While the move has been concerning to environmental and consumer advocates, others think it could be a necessary evil while the state continues to shift away from dirty fuels.
And yet, the tide may be turning. The International Energy Agency has estimated that global clean energy investment may reach $2.2 trillion by the end of this year, surpassing fossil fuel investments.
These investments have the potential to expand access to not only cleaner but also more affordable and resilient energy supplies for consumers, with sources like solar able to provide cost savings and reliable power in the face of traditional grid outages.
Julia Stein, deputy director of the Emmett Institute on Climate Change & the Environment at the University of California, Los Angeles, told the AP that state officials remain focused on advancing more sustainable energy supplies, despite this setback.
"But I think there is also a sense at the state level that we're entering a different phase of the transition where some of these problems are going to be presented more acutely," she said.
"And folks are kind of now trying to understand how they're going to approach that in real time."
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