A price gouging law enacted last year in California has the potential to drastically increase gas prices in neighboring Nevada. The law, which came into effect in June 2023, grants the California Energy Commission (CEC) the authority to establish a maximum profit limit for gasoline refineries within the state. If the CEC imposes strict regulations, experts warn that the ripple effect could result in prices at Nevada gas pumps skyrocketing to as high as $10 per gallon.

According to the Las Vegas Review-Journal, although the law is in place, the CEC has yet to determine a specific profit cap. However, it plans to announce a concrete plan later this year. Patrick De Haan, the head petroleum analyst for GasBuddy.com, explained that the severity of the price increase depends on how much the market is tightened due to the regulations.

Nevada, which heavily relies on California refineries for approximately 88% of its fuel supply, is uniquely vulnerable to the effects of this new regulation. In May, Nevada Governor Joe Lombardo expressed deep doubts about implementing price caps in a letter to California Governor Gavin Newsom. Lombardo, a Republican and former sheriff of Clark County, voiced concerns about the unintended consequences of the law, including potentially higher fuel costs for both Californians and Nevadans.

Governor Newsom's office responded to Lombardo's letter by accusing him of pandering to "Big Oil donors" and claimed that oil refiners are the ones driving up gas prices and making substantial profits at the expense of residents in both states.

Shell, as well as other major oil companies, reported significant profits in the first quarter of 2024, boosted in part by strong gasoline margins. This further fueled the debate surrounding the price gouging law in California.

Peter Krueger, the state director for the Nevada Petroleum Marketers and Convenience Store Association, expressed concerns about Nevada being at the whim of California regulators. He noted that seeking alternative fuel sources or trucking in fuel from other states would be impractical and costly. Building more refineries within Nevada became the sole viable option, making the state more self-sufficient like California, where 90% of consumed gasoline comes from in-state refineries.

Legislators in Arizona also share concerns about their dependency on California refineries to meet their state's gasoline needs.

Experts attribute the impending decision on profit caps by the CEC to the fundamental concept of supply and demand. De Haan highlighted that discouraging refineries from producing fuel could result in lower supply in the long run. Additionally, even if a profit cap is established by the CEC this year, it will take several years for consumers to feel the impact on gas prices.

As California's price gouging law looms, Nevada and other neighboring states face uncertain futures regarding fuel supply and prices, leaving residents to brace for potential higher costs at the gas pump.