California Delays Profit Cap Rule as Gas Prices Spike

State regulators postpone new law to police refinery profits amid concerns over supply and reliability.

Mar. 16, 2026 at 11:11pm

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California built a first-in-the-nation system to police refinery profits during price spikes, but regulators delayed implementing the new rules for five years. This comes as the state faces refinery closures and warnings of $8-per-gallon gasoline, with the governor directing officials to work closely with the oil industry to ensure a reliable fuel supply. Critics argue the state is leaving itself without the "hammer" it needs to prevent price gouging, while the industry says the real problem is California's status as an "energy island" losing refining capacity.

Why it matters

California's transition away from fossil fuels has created a "mid-transition" period where the state remains heavily dependent on gasoline while losing refining capacity. This leaves California vulnerable to global oil shocks, with experts warning prices could spike to $7 or even $10 per gallon if the Strait of Hormuz is closed. The state's decision to delay its profit cap rules has raised concerns that it is not using the tools it has to protect consumers from price gouging.

The details

In August 2022, California energy commissioners voted to delay the state's new profit cap rules for five years, citing a need to boost "investor confidence" in oil refiners and ensure reliable fuel supply. This came after Valero announced plans to close its Benicia refinery, which produces 10% of the state's gasoline. Regulators argued the real problem is California's status as an "energy island" losing refining capacity, not the need to police refinery profits. But critics say the state "panicked" and left itself without the "hammer" it needs to prevent price gouging during supply disruptions.

  • In August 2022, California energy commissioners voted to delay the state's new profit cap rules for five years.
  • Valero announced plans in 2022 to close its Benicia refinery, which produces 10% of the state's gasoline, next month.

The players

Siva Gunda

Vice chair of the California Energy Commission, who was directed by Governor Newsom to work closely with refiners on ensuring a reliable fuel supply.

Zachary Leary

A lobbyist for the Western States Petroleum Association, who argued the profit-cap measures "miss the real problem" of California losing refining capacity.

Jamie Court

President of Consumer Watchdog, who said the governor "panicked" and left the state without the "hammer" it needs to prevent price gouging.

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What they’re saying

“The real problem is California is an energy island — we're losing 17% of our refining capacity.”

— Zachary Leary, Lobbyist, Western States Petroleum Association (kqed.org)

“When you have this type of level of gas run up, you're going to need those tools.”

— Jamie Court, President, Consumer Watchdog (kqed.org)

What’s next

The California Energy Commission is expected to revisit the decision to delay the profit cap rules in the coming months as the state continues to grapple with refinery closures and the risk of price spikes.

The takeaway

California's transition away from fossil fuels has created a precarious situation where the state remains heavily dependent on gasoline while losing refining capacity, leaving it vulnerable to global oil shocks. The state's decision to delay its profit cap rules has raised concerns that it is not using all the tools at its disposal to protect consumers from potential price gouging during supply disruptions.