On Monday morning, Oct. 14, Gov. Gavin Newsom signed Assembly Bill 2X-1, which is intended to help prevent gas price spikes and to improve overall fuel supply in California.

Earlier that morning the Assembly approved the bill after the State Senate had amended it slightly when it passed the bill Friday, Oct. 11.

This bill would require the State Energy Commission to consider the effects of the size of a refiners’ inventory of fuel and feedstocks and blending components on the price of transportation fuels in California.

The bill authorizes the CEC to impose requirements for State refiners to maintain minimum levels of inventories of refined transportation fuels. Creation of this inventory should limit the gyrations in the gasoline spot market whenever refiners need to shut for maintenance or repair. The bill does prohibit requiring a refiner to construct additional storage infrastructure in order to meet the inventory requirement.

“I am signing this bill because the state’s experts and independent experts agree that providing for a more stable gasoline supply in California will prevent price spikes and benefit consumers overall. I am directing the CEC to ensure that consumer benefit and worker safety are also priorities with respect to the transition to any new regulations adopted under this bill, and that implementation timelines are properly calibrated to avoid unintended,” Newsom said in his signing statement.

“Price spikes have cost Californians billions of dollars over the years, and we’re not waiting around for the industry to do the right thing — we’re taking action to prevent these price spikes and save consumers money at the pump,” Newsom said in a press release about the bill’s signing. “Now, the state has the tools to make sure they backfill supplies and plan ahead for maintenance so there aren’t shortages that drive up prices.”

In January, the Division of Petroleum Market Oversight, an independent agency within the CEC, sent Gov. Newsom and the legislature a letter outlining specific proposals to reform California’s gasoline spot market, which included a minimum inventory requirement to prevent price spikes due to lack of stable supply.

“These spikes have been generally driven by periodic episodes of undersupply of gasoline (in the form of reduced refinery production, lower inventories of stored gasoline, or both) that are exacerbated — and sometimes exploited — by the dynamics of trading and reporting on the spot market.” the letter stated.

The bill signing was the culmination of a six-week effort to address this issue of gasoline price spikes. When the two legislative houses could not act before adjournment on Aug. 31, the Governor hoped to achieve a bill by calling for a special session limited to Petroleum and Gasoline Supply at the end of August.

The Assembly quickly convened and held two days of informational hearings in the middle of September. At the end of the month, a day was spent debating nine separate bills focusing on this issue. Democrats had their bills and Republicans offered their bills. On Oct 1, two bills passed the Assembly.

Senate President pro Tempore Michael McGuire (D -North Coast) did convene his colleagues on Oct. 7. The Senate held two days of hearings and debate and passed the legislation on Oct. 11.

The Senate vote was 23-9, with 8 abstentions. One Democrat, Sen. Melissa Hurtado, from Bakersfield, opposed it. The other eight “Nay” votes were Republican. However, of the eight abstentions, seven were Democrats. The sole Republican abstention was Sen. Kelly Seyarto, who represents the Hill.

“Rising gas prices impact everyone in California and nearly every facet of our lives – from how much we’re paying at the pump to the cost of what we’re buying at the store,” McGuire said in a press release after the Senate’s approval. “Putting mechanisms in place to help prevent costs from spiking and sending family budgets into a tailspin benefits us all, and working together, we’ve been able to do just that,”

There was no vote on the second Assembly bill, AB 2X-9, a measure, passed by the Assembly along with AB 2X-1. AB 2X-9 would have directed the California Air Resources Board to study increasing the ethanol blend from 10% to 15% in gasoline and other strategies for expanding supply. McGuire removed it from consideration before the Senate hearings began.

“While the goals of this legislation are laudable, and we’re grateful to the Assemblymember’s leadership, a more thorough analysis and additional work is needed on the proposal,” McGuire said in a statement.

The Assembly passed AB 2X-1 on a 44-18 vote, with 17 members not voting. Its passage was not strictly along party lines. Several Democrats opposed it or abstained, including local Assemblywoman Sabrina Cerevantes (District 58) of Corona. They also had concerns about the effect of this legislation on prices and supply. There will be no immediate price adjustment.

“The bill fixes an issue with oil supply and demand. When refiners don’t set aside adequate fuel in advance of shutdowns, gas prices spike for Californians. This bill will help avoid those spikes by requiring refiners to store a minimum amount of fuel during shutdowns,” said Daniel Barad, western states policy manager at the Union of Concerned Scientists. “Establishing requirements for minimum fuel storage is a critical step in planning for a safe and equitable petroleum phaseout as gas consumption declines in California and the state moves toward zero-emission transportation.”

Neither Republicans nor the oil and gas industry supported this legislation. Prior to the Governor signing the bill, Assembly Republican Leader James Gallagher (Yuba City), said in a press release. “Democrats know these new regulations will do nothing to actually lower gas prices. Make no mistake, they have the power to lower gas prices today. But instead of passing any meaningful proposals, Democrats are doing the governor’s bidding.

The oil and gas industry also expressed its opposition to the legislation. ““We are here to solve problems, and the oil and gas industry has always been ready to collaborate in good faith. Californians want leaders who tackle issues head-on and bring people together, not those who tear others down for political gain,” claimed Catherine Reheis-Boyd, President and CEO of the Western States Petroleum Association, in a statement. “It’s time to put politics aside and focus on what truly matters—delivering affordable, reliable energy while addressing the challenges of climate change. . .

“In the meantime, we will ensure Californians aren’t being fleeced into believing this administration is focused on lowering gas prices. High gas prices are by design, driven by state policies meant to force a switch to Zero Emission Vehicles,” Reheis-Boyd added.

On Oct. 19, the average cost of a gallon of gasoline in California was $4.65 compared to a $3.18 nationwide average. A year ago, the average cost of a gallon of regular gas in the State was $5.52. Last week, in Riverside County, the average cost of a gallon was $4.45.

Aftermath

On Wednesday, Oct. 16, Philips 66 announced that it would close its Los Angeles-area refinery in the fourth quarter of 2025, which supplies about 8% of the fuel market in California

”As the California Energy Commission’s analysis has indicated, expanding supply capabilities will be critical. Phillips 66 supports these efforts and will work with California to maintain current levels and potentially increase supplies to meet consumer needs,” Philips 66 said in its press release announcing the refinery’s closure. “The company will supply gasoline from sources inside and outside its refining network as well as renewable diesel and sustainable aviation fuels from its Rodeo Renewable Energy Complex in the San Francisco Bay area.”