News23ABC In-Depth


Newsom signs oil anti-gouging bill, but experts are mixed on effectiveness

A local economist says the governor's plan could work "in theory," if people who understand the industry well enough are put at the front of the effort.
Posted: 6:54 PM, Mar 29, 2023
Updated: 2023-03-30 15:12:40-04
oilfield (File)

BAKERSFIELD, Calif. (KERO) — On Tuesday, March 28, California Governor Gavin Newsom signed a bill into law meant to tackle the record-high gas prices the state saw in 2022, high prices that came at the same time as record-high oil company profits.

The governor claims it's a situation of price-gouging by the oil companies, but industry experts, including Cal State Bakersfield economics professor Richard Gearheart, say there are many factors that go into what drivers pay at the pump.

"So, you had the Ukraine War, which limited Russian oil in the market. You had covid and supply chain constraints, and all the shipping through the Suez Canal, which limited how much oil there was," listed Gearheart. "You also had regulation in California which limited domestic production."

According to Professor Gearheart, all these factors decreased supply, which caused the price of gasoline to increase.

"So a large fraction of this massive increase in oil prices and oil profits were just forces beyond the oil companies' control. They were just the beneficiaries," said Gearheart.

Newsom says the oil companies were unfairly taking advantage of the low supply to gouge customers, and the bill he signed Tuesday will require oil refineries to report additional data to a new watchdog division of the California Energy Commission.

The governor's idea is that the commission will be able to prevent any future price gouging by the industry, something Gearheart says could be beneficial.

"In theory, it could help. In theory, if you got people who were familiar with the industry and educated on the ins and outs of the industry and all those other things, there are probably ways to improve outcomes across a variety of spectrums," said Gearheart.

Catherine Reheis-Boyd, President of the Western States Petroleum Association, said the governor's bill was rushed, and that the reporting requirements haven't been thought through.

"The reporting requirements in this bill are on every single piece of that supply chain," said Reheis-Boyd. "We are talking millions of transactions, some of these are on a daily basis, between trading and retail and wholesale."

Someone familiar with the retail aspect of the industry is Bakersfield gas station owner Aidin Okhovat, who operates Chester Fuel on South Chester Avenue just below the canal. He says he makes less than a dollar per gallon in profit.

"About 50 cents a gallon profit margin," said Okhovat. "But that's not always possible."

Okhovat says he hasn't heard much about the bill, but he likes the idea of increasing transparency from oil refiners.

"I think it's actually beneficial because it's kind of common knowledge that the biggest mafia out there is oil refineries," said Okhovat.

The governor's bill will go into effect in 90 days, but Newsom says that it will take 9 to 12 months to establish the new division of the California Energy Commission.


As the governor's new price-gouging law passes, 23ABC is taking an in-depth look into whether California's average gas prices have anything to do with the price of a barrel of oil.

The cost of crude oil is the largest factor in the retail price of gasoline. Because of this, changes in the retail price of gasoline typically track with changes in the global crude oil price.

According the the U.S. Energy Information Administration, the highest average retail price of a gallon of gas was at $6.03 back in June of 2022.

At that time, the average price of a barrel of oil was $113.77.

In the last 3 years, the average price of gas was at its cheapest in January of 2021, when it was $3.26 per gallon.

In January 2021, the average price of a barrel of oil was $49.47.