California wants to combat gasoline price spikes by requiring refineries to maintain fuel reserves

The fuel reserve would help stabilize prices when refineries are closed for planned maintenance

California Governor Gavin Newsom has announced a plan to stabilize gasoline prices.
The proposal requires refineries to maintain a minimum fuel reserve to prevent price spikes caused, for example, by maintenance-related downtime.
The move could save drivers hundreds of millions of dollars each year, but the details of the plan remain unclear.

It's no secret that California is one of the states with the highest gas prices. According to AAA, regular unleaded gasoline in the Golden State costs an average of $4.598 per gallon, which is $1.187 more than the national average. The only state with more expensive gas is Hawaii, where regular unleaded gasoline costs an average of $4.656 per gallon.

Governor Gavin Newsom is hitting back with a new proposal to “prevent price spikes and save Californians money.” The plan would allow the California Energy Commission (CEC) to require petroleum refineries to “maintain a minimum fuel reserve to avoid supply shortages that result in higher prices for consumers.”

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The proposal comes after the commission found that refineries had less than 15 days' supply on 63 days in 2023. This reportedly drove up prices and cost oil companies millions of dollars.

Tai Milder, CEC's director of oil market supervision, was even more direct, claiming: “Oil refiners have made profits by scheduling maintenance that reduces supply during our busiest seasons.” He went on to say that the proposal would “require refiners to plan responsibly and prevent price gouging during maintenance.”

Michael Gauthier / CarScoops

The details are unclear, but the proposal includes penalties for refineries that fail to maintain sufficient fuel supplies. However, it is not clear whether these penalties would be harsh enough to have an impact. However, the governor's office claimed the proposal would have saved Californians over $650 million (£500 million/€586 million) in gasoline costs if it had been enacted last year.

In a statement, Newsom said: “Price spikes at the pump mean profit spikes for the oil industry. Refineries should be required to plan ahead and replenish their inventories to keep prices stable, rather than playing games to make even more profits. If refiners were forced to act responsibly and maintain a gas reserve, Californians could save money at the pump every year.”

The refineries are not happy and Reuters quoted the CEO of the Western States Petroleum Association as saying the plan was “nothing more than a political attack on consumers and our industry.”