A letter has sparked a war between Nevada governor Joe Lombardo and California governor Gavin Newsom. The message, which originated from Gov. Lombardo’s desk, criticized Newsom’s new gas price policy, which he says will hurt Nevadans.
In return, a Gavin Newsom spokesperson has returned fire in a manner likely to aggravate tensions.
What Was in Lombardo’s Letter?
In his letter, Gov. Lombardo seemed to be looking out for Nevadans and Californians. He decried the hike in gas prices in both states, which he blamed on Governor Newsom’s recent policies.
“Dear Governor Newsom: I’m writing to you today to voice my concerns about rising gas prices, an area of acute concern for both Californians and Nevadans,” the letter began.
How Does California Gas Policies Affect Nevada?
Gov. Lombardo then reminded his counterpart of how closely connected both states are in terms of gas supply. As a result, Nevada will feel the impact of any gas policy that California introduces.
“Since 88 percent of Nevada’s fuels are delivered via pipeline and truck from refineries in California, it’s not surprising that California’s fuel policies significantly impact the costs and availability of fuel for Nevada’s residents and businesses,” Governor Lombardo stressed.
What’s the New Policy?
The major source of worry for Gov. Lombardo is a piece of California legislation called the SBX1-2. The Republican governor fears that the new law will lead to a hike in gas prices in both states and consequently increase the cost of living in both states.
“I wanted to express my concerns about the unintended consequences of California’s SBX1-2 legislation, which could further raise gas prices for both of our constituencies,” Lombardo’s letter read.
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What Does the SBX1-2 Say?
SBX1-2, which was passed by California lawmakers in March 2023, is a darling of Gavin Newsom. The law promotes his plan to curb the exploitative tendencies of gas companies in the state.
The legislation aims to protect consumers from price gouging practices that have made oil and gas companies notorious. On several occasions, oil and gas companies have manipulated the market for more profit.
Rigging the Supply System
Severally, oil and gas corporations have taken advantage of refinery maintenance periods by deliberately under-supplying products. Consequently, this artificial decline in supply results in scarcity and drives up prices.
As a result, the companies earn millions of dollars in additional profit. Newsom believes that SBX1-2’s regulations will discourage this practice.
Is SBX1-2 the Solution?
Gov. Newsom is confident that it is. In a statement, he predicted an end to “the oil industry’s days of operating in the shadows.” The law mandates gas companies to set up independent watchdog groups to monitor their commercial behavior and sets penalties for malpractice.
In addition, Newsom boasted that “California took on Big Oil and won. We’re not only protecting families, we’re also loosening the vice grip Big Oil has had on our politics for the last 100 years.”
Gov. Lombardo Thinks the Legislation is a Problem Rather Than a Solution
Lombardo believes that even though well intended, SBX1-2 produces a cobra effect on consumers. That is, rather than being down prices, it will do quite the opposite.
He specifically pointed at a provision in the law that empowers a state agency to impose profit caps on the oil firms, a decision many believe is imminent. The Nevada governor predicts that the move will hurt consumers even more.
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The Danger of Price Caps
Speaking about the potential price caps and their negative effects on prices, the governor wrote, “As my administration has followed this issue, it seems that the new state agency the legislation created is getting closer to announcing a profit caps structure.”
“I’m concerned this approach could lead to refiners either constraining supplies of fuels to avoid a profit penalty or even leaving our shared fuels market entirely,” he added.
Consumers May Suffer in the End
From Lombardo’s perspective, profit caps would hurt Californians and Nevadans in two ways. First, it could lead to more conservative supplies and its attendant scarcity.
Afterward, the drop in supply will drive up prices, making life more unbearable for residents. “Should this happen, I am sure Californians and Nevadans would share a demand for answers and relief from higher fuel costs and the impacts those costs could have across the economy.” Lombardo wrote.
Angry Backlash
Apparently, Lombardo’s letter enraged Gavin Newsom’s camp. The Democrat governor’s spokesperson wasted no time debunking the claims and firing his own shots.
Speaking to the press, Newsom Spokesperson Alex Stack referred to Lombardo’s move as a stunt designed to assuage the feelings of his big oil donors whose greedy appetites have been starved by Newsom’s policy.
An Insult From Newsom’s Camp
Stack took things to a more worrisome level when he threw an insult at Lombardo, implying that the governor is a parrot for the oil industry.
“He’s parroting their talking points, and he knows full well that oil refiners are driving up gas prices and making massive profits — harming residents of both of our states. Price spikes are profit spikes, and California is holding Big Oil accountable,” Stack said.
We Are Likely to See More Drama
Should we expect a response from the Lombardo camp? Well, based on the recent face-offs between blue and red state governors, the answer tilts more to the positive.
But beyond Newsom and Lombardo, the already highly controversial STX1-2 could face more opposition and lawsuits. Hopefully, residents of California and Nevada will ultimately benefit.
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