Governor Gavin Newsom appoints new ‘oil watchdog’ to investigate potential gas price gouging

California’s gas prices are among the highest in the country. Governor Gavin Newsom has previously said price gouging by the oil industry could be partially to blame for spiking costs. In March, he signed Senate Bill X1-2 into law, which targets the issue. 

Tai Milder recently stepped into his new role as director of the Division of Petroleum Market Oversight, a position and office that were both established by the new law. He previously served as counsel to the assistant attorney general for the U.S. Department of Justice’s Antitrust Division. 

Gas prices in California and throughout the United States have been on the rise, but Milder said this doesn’t explain why California’s prices are particularly high. 

“Are we seeing normal market behavior or is something else going on?” he asked. “Sometimes prices go up and down as a natural response to supply and demand, and there's nothing to suggest that there's manipulation. But sometimes, the picture looks different.”

Milder said it’s important his office doesn’t “jump to conclusions.” But he added that he understands why Californians may question oil industry profits. 

“How has that money been earned? We're going to find out,” he said. “The data and the transparency that's required under this new law is a great tool.”

Experts say we do have some explanations for higher gas prices in California. Jerry Nickelsburg, a senior economist with UCLA’s economic forecasting organization, said the type of fuel Californians use — which he said is a special blend that results in lower emissions — is more expensive than fuel other states use.

“If you compare California gasoline prices to, let's say, Utah or Idaho, you find that Utah and Idaho have lower gasoline prices but worse air quality,” he said. “So they're trading off a higher incidence of respiratory issues for lower gasoline prices, and California has made the other choices to have cleaner air but higher gas prices.”

Nickelsburg added that there is less competition from independent gas stations in California — for reasons which aren’t entirely clear — and that could be another reason for higher gas prices. Even so, he said it “doesn’t explain all of the differential in gas prices.” 

Oil industry leaders have also blamed environmental regulations for rising prices in the past. Siva Gunda, vice chair of the California Energy Commission, said he agrees fees from environmental programs may add “a certain amount” to the state’s gas prices. 

“That’s not in debate,” he said. “The question at hand for this law is to explain the difference … Why are prices deviating between California and the rest of the United States?” 

Last year, California gas prices were particularly volatile. Gunda said the new department could help in understanding why and protecting customers, even as the state makes steps forward in its transition to zero-emissions vehicles. 

“We are in a transition and we want to make sure the consumers are protected during this transition by providing transparency, adequate long-term planning and near-term strategies to ensure what we have seen last year doesn't repeat over and over,” he said. 

State officials say they’ll publish regular reports on the information they gather.