Newsom's Plan to Prevent Pump-Price Spikes Faces 5-Year Delay

A driver refuels at a gas station in Hercules, California.

(Bloomberg) -- California is set to delay a cap on how much profit the state’s fuelmakers can earn, marking a significant victory for the oil industry.

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In a vote slated for Friday, the California Energy Commission plans to delay by five years a policy that would limit refiner margins, according to people familiar with the matter, The profit cap, passed by the legislature and signed by Newsom in 2023, aimed to mitigate price spikes for California drivers. Postponing it walks back years of regulatory scrutiny on the state’s oil and gas industry.

While the commission could still implement the profit cap during the five-year pause, doing so would require another vote and about 1.5 years of additional analysis, said the people, who asked not to be named discussing private matters.

State Bill X1-2, known as the refiner margin cap bill, gave the commission sweeping powers to determine an acceptable profit margin for fuel makers and penalize those who exceed it. This year, Newsom asked regulators to work with refiners on the state to keep a lid on gasoline prices and the commission’s vice chair, Siva Gunda, subsequently recommended pausing the policy bid to boost industry confidence in the state.

Two of the state’s major refiners recently announced they were closing plants, with one of them — Valero Energy Corp. — citing the state’s stringent regulatory environment. Valero plans to shutter its 145,000 barrel-a-day Benicia refinery, near the Bay Area, in April 2026 and Phillips 66 is closing its 139,000 barrel-a-day plant in Los Angeles later this year.

(Adds refinery closures in last paragraph.)

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