February 2023

But the GOP is also entertaining hope that the president shows a shred of openness to taking its demands seriously, even as very few of its members specify what they want Biden to negotiate on. A rare Republican with a concrete proposal was Texas Rep. Chip Roy, who on Tuesday called directly for federal spending caps.

“It’s a lot of work. We got to do it. We’re in a big hole because of irresponsibility on both sides of the aisle,” said Roy, who has also specified that the cuts shouldn’t touch the Pentagon’s budget or programs like Medicare or Social Security. “But there is a path, and we ought to sit down and figure it out.”

That growing fiscal slash-and-burn pressure from the GOP’s right flank leaves both parties in a state of high-stakes uncertainty as Congress veers towards a summertime cliff that draws parallels to the Obama administration’s flirtation with debt calamity more than a decade ago. And this time around, Biden’s lead negotiating partner won’t be his generational counterpart Mitch McConnell but the younger speaker from California, who brings a more Trump-friendly conservatism and less predictable style to the table.

McCarthy will also be speaking for a conference where fiscal hawks hold significant sway and spending caps are gaining momentum as a proposed solution. That outcome would be similar to the 2011 debt limit standoff, which ended with Congress enacting strict spending limits that technically lasted a decade, but were waived more times than not.

“I think the first thing [Biden] should do, especially as president of the United States, is say he’s willing to sit down and find a common ground and negotiate together,” McCarthy told reporters Tuesday morning when asked what he would need to see from Biden to consider the meeting a success.

House Freedom Caucus Chair Rep. Scott Perry (R-Pa.) put it more simply: “It would be awesome if the president would admit he is going to negotiate. That would be awesome.”

But GOP members are still fiercely split over major issues like whether to slash the Pentagon’s budget or touch entitlement programs, and broad domestic spending cuts could prove problematic for more moderate, electorally vulnerable members.

Rep. Andrew Clyde (R-Ga.), another conservative who supports limits on domestic spending, said of Biden: “He wants to do a free debt ceiling. And I don’t think that’s what the American people want.”

The first step this time, as House Republicans see it, is for Biden to acknowledge to their leader that the U.S. needs to start chipping away at the nation’s rising borrowing bills. While GOP leaders have agreed to look at capping spending at fiscal 2022 levels in future spending bills, there’s been little open discussion about whether those demands would carry into the debt conversations.

“We can’t even talk about it without the president and Democrats coming to the table,” said House Budget Committee Chair Jodey Arrington (R-Texas).

Democrats, meanwhile, are looking for their own concessions. Biden plans to seek a commitment from McCarthy that the U.S. will never default on its financial obligations, according to a White House memo released earlier Tuesday. Administration officials also said they plan to unveil their proposed budget for the coming fiscal year on March 9, demanding that House GOP leaders reveal their own blueprint detailing their vision for spending cuts.

Some Senate Democrats have said they’re willing to discuss government funding as part of the annual appropriations process, but not while using the nation’s borrowing limit as a bargaining chip.

“There shouldn’t be a negotiation about whether or not we pay our bills,” said Sen. Debbie Stabenow of Michigan, a member of the chamber’s Democratic leadership. “If they want to talk about next year’s budget, certainly that’s a legitimate thing. But we don’t negotiate to pay our bills.”

Centrist Sen. Joe Manchin (D-W.Va.), however, has said it would be a mistake for the White House not to negotiate with Republicans over the debt ceiling. Manchin met with McCarthy last week, after which he said the GOP leader agreed not to cut Medicare and Social Security.

“I think those two can get something done,” Manchin said Monday night of the president and House GOP leader. “I really feel confident about that.”

Unlike some House Republicans, though, Senate Minority Whip John Thune (R-S.D.) said he hopes Biden will entertain changes to ensure the long-term solvency of programs like Social Security and Medicare, which “are both headed for bankruptcy.”

“That doesn’t mean you have to cut programs, but it does mean that you’ve got to make reforms … that will translate into making those programs more sustainable for the long term,” Thune said Tuesday. “If you take that off the table in these negotiations, it does obviously limit the amount of the budget that you can address.”

More than a decade ago, then-Vice President Biden and Senate GOP leader McConnell successfully hashed out a spending caps deal to stave off a market-rattling default. But this time, McConnell has said McCarthy should take the lead, arguing that nothing would get through the Democratic-led Senate if it can’t pass the Republican-led House.

McConnell said Tuesday that the 2011 deal was successful when it came to restricting spending in the short-term, but it squeezed defense funding too much.

“We’re all behind Kevin and wishing him well in negotiations,” McConnell said.

Rep. Chuck Fleischmann (R-Tenn.), a senior party appropriator, said Biden will ultimately have to negotiate with the GOP to stave off a debt default that — in Treasury Secretary Janet Yellen’s recent words — could result in a “global financial crisis.”

“No one holds all the cards,” Fleischmann said.

Jennifer Scholtes and Katherine Tully-McManus contributed to this report.

Haley’s expected announcement represents a turnabout: Haley declared in 2021 that she wouldn’t run for president if Trump did. But Haley telegraphed her change of plans in an interview with Fox News earlier this month, saying, “It’s bigger than one person. And when you’re looking at the future of America, I think it’s time for new generational change. I don’t think you need to be 80 years old to go be a leader in D.C.”

Trump has already started making light of the shift, pointing out to reporters over the weekend that she had previously said she would defer to him.

Haley, whose parents were Indian immigrants, has long been seen as a prospective presidential candidate. After serving in the South Carolina legislature, Haley spent six years as governor. In 2017, Trump picked her to join his Cabinet. After serving two years on the job, she launched a political nonprofit that served to promote her policies and, later, a political action committee that allowed her to support endorsed candidates.

The PAC, Stand for America, also helped fund Haley’s travel to early-voting states like Iowa and New Hampshire, where she stumped for local candidates.

Haley’s decision to launch her campaign in her native South Carolina highlights how critical the early-voting state is to her prospects — and several other candidates. Haley could face competition from another home-state contender, Sen. Tim Scott, who is also considering a bid. Haley appointed Scott to the Senate in 2012. He has since won elections to two full terms.

Trump, who won South Carolina’s 2016 GOP primary, also appears to be focusing on the state, having made an appearance in Columbia, S.C. over the weekend. The former president has received the endorsements of Sen. Lindsey Graham and Gov. Henry McMaster, both of whom are longtime allies.

Haley stared down Trump during a congressional primary contest in South Carolina last year, when Haley put her political muscle behind GOP Rep. Nancy Mace, who faced a Trump-backed primary challenge from Katie Arrington. Mace went on to win the primary for the Charleston-area seat handily.

LONDON — As nations around the world scramble to secure crucial semiconductor supply chains over fears about relations with China, the U.K. is falling behind.

The COVID-19 pandemic exposed the world’s heavy reliance on Taiwan and China for the most advanced chips, which power everything from iPhones to advanced weapons. For the past two years, and amid mounting fears China could kick off a new global security crisis by invading Taiwan, Britain’s government has been readying a plan to diversify supply chains for key components and boost domestic production.

Yet according to people close to the strategy, the U.K.’s still-unseen plan — which missed its publication deadline last fall — has suffered from internal disconnect and government disarray, setting the country behind its global allies in a crucial race to become more self-reliant.

A lack of experience and joined-up policy-making in Whitehall, a period of intense political upheaval in Downing Street, and new U.S. controls on the export of advanced chips to China, have collectively stymied the U.K.’s efforts to develop its own coherent plan.

The way the strategy has been developed so far “is a mistake,” said a former senior Downing Street official.

Falling behind

During the pandemic, demand for semiconductors outstripped supply as consumers flocked to sort their home working setups. That led to major chip shortages — soon compounded by China’s tough “zero-COVID” policy. 

Since a semiconductor fabrication plant is so technologically complex — a single laser in a chip lithography system of German firm Trumpf has 457,000 component parts — concentrating manufacturing in a few companies helped the industry innovate in the past.

But everything changed when COVID-19 struck.

“Governments suddenly woke up to the fact that — ‘hang on a second, these semiconductor things are quite important, and they all seem to be concentrated in a small number of places,’” said a senior British semiconductor industry executive.

Beijing’s launch of a hypersonic missile in 2021 also sent shivers through the Pentagon over China’s increasing ability to develop advanced AI-powered weapons. And Russia’s invasion of Ukraine added to geopolitical uncertainty, upping the pressure on governments to onshore manufacturers and reduce reliance on potential conflict hotspots like Taiwan.

Against this backdrop, many of the U.K.’s allies are investing billions in domestic manufacturing.

The Biden administration’s CHIPS Act, passed last summer, offers $52 billion in subsidies for semiconductor manufacturing in the U.S. The EU has its own €43 billion plan to subsidize production — although its own stance is not without critics. Emerging producers like India, Vietnam, Singapore and Japan are also making headway in their own multi-billion-dollar efforts to foster domestic manufacturing.

Now the U.K. government is under mounting pressure to show its own hand. In a letter to Prime Minister Rishi Sunak first reported by the Times and also obtained by POLITICO, Britain’s semiconductor sector said its “confidence in the government’s ability to address the vital importance of the industry is steadily declining with each month of inaction.”

That followed the leak of an early copy of the U.K.’s semiconductor strategy, reported on by Bloomberg, warning that Britain’s over-dependence on Taiwan for its semiconductor foundries makes it vulnerable to any invasion of the island nation by China.  

Taiwan, which Beijing considers part of its territory, makes more than 90 percent of the world’s advanced chips, with its Taiwan Semiconductor Manufacturing Company (TSMC) vital to the manufacture of British-designed semiconductors.

U.S. and EU action has already tempted TSMC to begin building new plants and foundries in Arizona and Germany.

“We critically depend on companies like TSMC,” said the industry executive quoted above. “It would be catastrophic for Western economies if they couldn’t get access to the leading-edge semiconductors any more.”

Whitehall at war

Yet there are concerns both inside and outside the British government that key Whitehall departments whose input on the strategy could be crucial are being left out in the cold.

The Department for Digital, Culture, Media and Sport (DCMS) is preparing the U.K.’s plan and, according to observers, has fiercely maintained ownership of the project. DCMS is one of the smallest departments in Whitehall, and is nicknamed the ‘Ministry of Fun’ due to its oversight of sports and leisure, as well as issues related to tech.

“In other countries, semiconductor policies are the product of multiple players,” said Paul Triolo, a senior vice president at U.S.-based strategy firm ASG. This includes “legislative support for funding major subsidies packages, commercial and trade departments, R&D agencies, and high-level strategic policy bodies tasked with things like improving supply chain resilience,” he said.

“You need all elements of the U.K.’s capabilities. You need the diplomatic services, the security services. You need everyone working together on this,” said the former Downing Street official quoted above. “There are huge national security aspects to this.”

Referring to lower-level civil servants, the same person said that relying on “a few ‘Grade 6’ officials in DCMS — officials that don’t see the wider picture, or who don’t have either capability or knowledge,” is a mistake. 

For its part, DCMS rejected the suggestion it is too closely guarding the plan, with a spokesperson saying the ministry is “working closely with industry experts and other government departments … so we can protect and grow our domestic sector and ensure greater supply chain resilience.”

The spokesperson said the strategy “will be published as soon as possible.”

But businesses keen for sight of the plan remain unconvinced the U.K. has the right team in place for the job.

Key Whitehall personnel who had been involved in project have now changed, the executive cited earlier said, and few of those writing the strategy “have much of a background in the industry, or much first-hand experience.”

Progress was also sidetracked last year by lengthy deliberations over whether the U.K. should block the sale of Newport Wafer Fab, Britain’s biggest semiconductor plant, to Chinese-owned Nexperia on national security grounds, according to two people directly involved in the strategy. The government eventually announced it would block the sale in November.

And while a draft of the plan existed last year, it never progressed to the all-important ministerial “write-around” process — which gives departments across Whitehall the chance to scrutinize and comment upon proposals.

Waiting for budget day

Two people familiar with current discussions about the strategy said ministers are now aiming to make their plan public in the run-up to, or around, Chancellor Jeremy Hunt’s March 15 budget statement, although they stressed that timing could still change.

Leaked details of the strategy indicate the government will set aside £1 billion to support chip makers. Further leaks indicate this will be used as seed money for startups, and for boosting existing firms and delivering new incentives for investors.

There is wrangling with the Treasury and other departments over the size of these subsidies. Experts also say it is unlikely to be ‘new’ money but diverted from other departments’ budgets.

“We’ll just have to wait for something more substantial,” said a spokesperson from one semiconductor firm commenting on the pre-strategy leaks.

But as the U.K. procrastinates, key British-linked firms are already being hit by the United States’ own fast-evolving semiconductor strategy. U.S. rules brought in last October — and beefed up in recent days by an agreement with the Netherlands — are preventing some firms from selling the most advanced chip designs and manufacturing equipment to China.

British-headquartered, Japanese-owned firm ARM — the crown jewel of Britain’s semiconductor industry, which sells some designs to smartphone manufacturers in China — is already seeing limits on what it can export. Other British firms like Graphcore, which develops chips for AI and machine learning, are feeling the pinch too.

“The U.K. needs to — at pace — understand what it wants its role to be in the industries that will define the future economy,” said Andy Burwell, director for international trade at business lobbying group the CBI.

Where do we go from here?

There are serious doubts both inside and outside government about whether Britain’s long-awaited plan can really get to the heart of what is a complex global challenge — and opinion is divided on whether aping the U.S. and EU’s subsidy packages is either possible or even desirable for the U.K.

A former senior government figure who worked on semiconductor policy said that while the U.K. definitely needs a “more coherent worked-out plan,” publishing a formal strategy may actually just reveal how “complicated, messy and beyond our control” the issue really is.

“It’s not that it is problematic that we don’t have a strategy,” they said. “It’s problematic that whatever strategy we have is not going to be revolutionary.” They described the idea of a “boosterish” multi-billion-pound investment in Britain’s own fabricator industry as “pie in the sky.”

The former Downing Street official said Britain should instead be seeking to work “in collaboration” with EU and U.S. partners, and must be “careful to avoid” a subsidy war with allies.

The opposition Labour Party, hot favorites to form the next government after an expected 2024 election, takes a similar view. “It’s not the case that the U.K. can do this on its own,” Shadow Foreign Secretary David Lammy said recently, urging ministers to team up with the EU to secure its supply of semiconductors.

One area where some experts believe the U.K. may be able to carve out a competitive advantage, however, is in the design of advanced semiconductors.

“The U.K. would probably be best placed to pursue support for start-up semiconductor design firms such as Graphcore,” said ASG’s Triolo, “and provide support for expansion of capacity at the existing small number of companies manufacturing at more mature nodes” such as Nexperia’s Newport Wafer Fab.

Ministers launched a research project in December aimed at tapping into the U.K. semiconductor sector’s existing strength in design. The government has so far poured £800 million into compound semiconductor research through universities, according to a recent report by the House of Commons business committee.

But the same group of MPs wants more action to support advanced chip design. Burwell at the CBI business group said the U.K. government must start “working alongside industry, rather than the government basically developing a strategy and then coming to industry afterwards.”

Right now the government is “out there a bit struggling to see what levers they have to pull,” said the senior semiconductor executive quoted earlier.

Under World Trade Organization rules, governments are allowed to subsidize their semiconductor manufacturing capabilities, the executive pointed out. “The U.S. is doing it. Europe’s doing it. Taiwan does it. We should do it too.”

Cristina Gallardo contributed reporting.

PARIS — Vladimir Putin is a “radically rational” leader who is betting that Western countries will grow tired of backing Ukraine and agree a negotiated end to the conflict that will be favorable to Russia, former French President François Hollande told POLITICO.

Hollande, who served from 2012 to 2017, has plenty of first-hand experience with Putin. He led negotiations with the Russian leader, along with former German Chancellor Angela Merkel, under the so-called Normandy format in 2014 after Moscow annexed Crimea from Ukraine and supported pro-Russian separatists in the Donbass region.

But those efforts at dialogue proved fruitless, exposing Putin as a leader who only understands strength and casting doubt on all later attempts at talks — including a controversial solo effort led by current French President Emmanuel Macron, Hollande said in an interview at his Paris office.

“He [Putin] is a radically rational person, or a rationally radical person, as you like,” said the former French leader, when asked if Putin could seek to widen the conflict beyond Ukraine. “He’s got his own reasoning and within that framework, he’s ready to use force. He’s only able to understand the [power] dynamic that we’re able to set up against him.”

Ahead of the one-year anniversary of Russia’s full-scale invasion of Ukraine on February 24, Hollande added that Putin would seek to “consolidate his gains to stabilize the conflict, hoping that public opinion will get tired and that Europeans will fear escalation in order to bring up at that stage the prospect of a negotiation.”

But unlike when he was in power and Paris and Berlin led talks with Putin, this time the job of mediating is likely to fall to Turkey or China — “which won’t be reassuring for anyone,” Hollande said.

Macron, who served as Hollande’s economy minister before leaving his government and going on to win the presidency in 2017, has tried his own hand at diplomacy with Russia, holding numerous one-on-one calls with Putin both before and after his invasion of Ukraine.

But the outreach didn’t yield any clear results, prompting criticism from Ukraine and Eastern Europeans who also objected to Macron saying that Russia would require “security guarantees” after the war is over. 

Hollande stopped short of criticizing his successor over the Putin outreach. It made sense to speak with Putin before the invasion to “deprive him of any arguments or pretexts,” he said. But after a “brief period of uncertainty” following the invasion, “the question [about the utility of dialogue] was unfortunately settled.”

Frustration with France and Germany’s leadership, or lack thereof, during the Ukraine war has bolstered arguments that power in Europe is moving eastward into the hands of countries like Poland, which have been most forthright in supporting Ukraine. 

But Hollande wasn’t convinced, arguing that northern and eastern countries are casting in their lot with the United States at their own risk. “These countries, essentially the Baltics, the Scandinavians, are essentially tied to the United States. They see American protection as a shield.” 

“Until today,” he continued, U.S. President Joe Biden has shown “exemplary solidarity and lived up to his role in the transatlantic alliance perfectly. But tomorrow, with a different American president and a more isolationist Congress, or at least less keen on spending, will the United States have the same attitude?”

“We must convince our partners that the European Union is about principles and political values. We should not deviate from them, but the partnership can also offer precious, and solid, security guarantees,” Hollande added.

Throwing shade

Hollande was one of France’s most unpopular presidents while in office, with approval ratings in the low single digits. But he has enjoyed something of a revival since leaving the Elysée and is now the country’s second-most popular politician behind former Prime Minister Edouard Philippe, five spots ahead of Macron — in keeping with the adage that the French prefer their leaders when they are safely out of office.

His time in office was racked with crises. In addition to failed diplomacy over Ukraine, Hollande led France’s response to a series of terrorist attacks, presided over Europe’s sovereign debt crisis with Merkel, and faced massive street protests against labor reforms.

On that last point, Macron is now feeling some of the heat that Hollande felt during the last months of his presidency. More than a million French citizens have joined marches against a planned pension system reform, and further strikes are planned. Hollande criticized the reform plans, which would raise the age of retirement to 64, as poorly planned.

“Did the president choose the right time? Given the succession of crises and with elevated inflation, the French want to be reassured. Did the government propose the right reform? I don’t think so either — it’s seen as unfair and brutal,” said Hollande. “But now that a parliamentary process has been set into motion, the executive will have to strike a compromise or take the risk of going all the way and raising the level of anger.”

A notable difference between him and Macron is the quality of the Franco-German relationship. While Hollande and Merkel took pains to showcase a form of political friendship, the two sides have been plainly at odds under Macron — prompting a carefully-worded warning from the former commander-in-chief.

“In these moments when everything is being redefined, the Franco-German couple is the indispensable core that ensures the EU’s cohesion. But it needs to redefine the contributions of both parties and set new goals — including European defense,” said Hollande.

“It’s not about seeing one another more frequently, or speaking more plainly, but taking the new situation into account because if that work isn’t done, and if that political foundation isn’t secure, and if misunderstandings persist, it’s not just a bilateral disagreement between France and Germany that we’ll have, but a stalled European Union,” he said, adding that he “hoped” a recent Franco-German summit had “cleared up misunderstandings.”

The socialist leader also had some choice words for Macron over the way he’s trying to rally Europeans around a robust response to Biden’s Inflation Reduction Act (IRA), which offers major subsidies to American green industry. Several EU countries have come out against plans, touted by Paris, to create a “Buy European Act” and raise new money to support EU industries.

During a joint press conference on Monday, Macron and Dutch Prime Minister Mark Rutte agreed to disagree on the EU’s response.

“On the IRA, France is discovering that its partners are, for the most part, liberal governments. When you tell the Dutch or the Scandinavians hear about direct aid [for companies], they hear something that goes against not just the spirit, but also the letter of the treaties,” Hollande said.

Another issue rattling European politics lately is the Qatargate corruption scandal, in which current and former MEPs as well as lobbyists are accused of taking cash in exchange for influencing the European Parliament’s work in favor of Qatar and Morocco. 

Hollande recalled that his own administration had been hit by a scandal when his budget minister was found to be lying about Swiss bank accounts he’d failed to disclose from tax authorities. The scandal led to Hollande establishing the Haute autorité pour la transparence de la vie publique — an independent authority that audits public officials and has the power to refer any misdeeds to a prosecutor.

Now would be a good time for the EU to follow that example and establish an independent ethics body of its own, Hollande said.

“I think it’s a good institution that would have a role to play in Brussels,” he said. “Some countries will be totally in favor because integrity and transparency are part of their basic values. Others, like Poland and Hungary, will see a challenge to their sovereignty.”

Despite those high expenses, the fundraising committee — which had money in the bank going into December — still distributed significant funds to Trump’s campaign committee, enabling him to pay staff and fund a variety of campaign initiatives over the holidays.

But the high costs of fundraising are an ominous sign, as the early days of campaigns are often a time for candidates to reap easy cash from enthusiastic donors.

Trump has significant fundraising work to do ahead of what could be a grueling election cycle. His campaign reported only $3 million in cash on hand, compared to more than $19 million that his campaign had at the same time in the 2020 election cycle. Four years ago, the then-president also did not have a competitive primary approaching.

The former president’s fundraising numbers would still be enviable for many candidates. December is typically a slow fundraising month, and the fundraising committee raised more than $15 million in October and November, mostly before Trump’s presidential campaign launched. Declining rates of return on digital fundraising is a problem that has plagued many candidates. But Trump was once considered the exception to his party’s digital fundraising woes, as he raised record sums online during the 2020 election cycle and continued raising large amounts of money after he left office in 2021.

“President Trump has raised $21.3 million in the last quarter, proving that he is an unstoppable force that continues to dominate politics,” said Steven Cheung, a spokesperson for the Trump campaign. “The campaign built out a second-to-none operation both on the national level and in early states since announcing. The President will wage an aggressive and fully-funded campaign to take our country back from Joe Biden and Democrats who seek to destroy our country.”

Trump will still benefit from significant outside money. A super PAC backing him, MAGA Inc., reported having $54 million in cash on hand at the end of 2022 and will likely look to target potential GOP primary opponents in advertising — a costly part of any campaign.

Overall, Trump’s fundraising committee spent over $250,000 on top political consultants and staff, while his campaign spent another more than $330,000 on staff and consultants. And the filings give some clues as to who exactly is working with Trump in the early days of his campaign. Aides say Trump’s 2024 operation, headquartered in West Palm Beach, Fla., not far from Trump’s Mar-a-lago club, is expected to be scrappier than the large 2020 campaign based at a high rise in Virginia.

Over $50,000 went towards paying advisers like Boris Epshteyn and Christina Bobb, who have assisted the former president on his numerous legal cases. The fundraising arm also paid longtime Trump aides like Lynne Patton, who has worked closely with the Trump family for years and was with Trump since his first campaign, and Dan Scavino, Trump’s director of social media in the White House who will continue that work on the campaign.

Other aides included in the filing include Margo Martin, who worked for Trump in the White House and has continued to be a press and communications aide for his reelect, Liz (Harrington) Shrew, a spokeswoman for Trump who frequently appears on right-wing media, Justin Caporale, a Melania Trump aide-turned-operations adviser, and Danny Tiso, a press lead for the campaign.

Vincent Haley and Ross Worthington, Trump’s top policy advisers and speechwriters who worked with him in the White House, are on the campaign payroll. And so are two of the people frequently at Trump’s side: Natalie Harp, the young OAN anchor-turned-aide, and Walt Nauta, Trump’s former military aide in the White House who moved down to Florida to continue to work for Trump and found himself at the center of Trump’s Mar-a-lago document drama.

Other major campaign expenses in December included $67,000 spent at Mar-a-Lago and a $5,000 donation to the Republican Party of Iowa.

The timing is important. Oil companies are rolling out earnings announcements as lawmakers in California are poised to hold hearings on a Newsom proposal to cap profit margins — an idea he floated last year as pump prices in California rose to the highest in the nation even as the cost of a barrel of oil dropped around the world.

Meanwhile, the price of gas in California is inching up again — reaching an average $4.55 per gallon in the state this week, up 10 cents from a week ago, according to AAA figures.

Even though Democrats control both houses of the Legislature, the governor’s assault on oil profits faces an uncertain fate. The industry wields considerable influence and some lawmakers see it as a misguided approach in a state where gas consumption is already starting to fall with the transition to zero-emission vehicles.

Newsom’s proposal, which state Sen. Nancy Skinner (D-Berkeley) is steering through the Legislature, would target California refineries. It still lacks the most critical detail: the amount of profit that would generate a penalty.

But Newsom’s continued messaging, along with a recent surge in local advertising from both sides of the issue, suggest a battle is brewing — even if major players in the Legislature are keeping quiet so far.

“We are continuing to review the proposal, and on anything this big, there will be a thorough vetting,” state Senate President Pro Tempore Toni Atkins (D-San Diego) said in an emailed statement. “One thing that’s already clear is that Californians are tired of paying high prices at the fuel pump. Gouging Californians will not be tolerated.”

Chevron, Marathon Petroleum, Phillips 66 and Valero — four of the five big companies with refineries in California — each released annual earnings in recent days, setting new records with a combined $74 billion in profits for 2022. The companies are projecting another strong performance this year. The fifth major refiner reports next month.

Oil industry executives are pleased with their results after a tumultuous period caused in large part by Russia’s invasion of Ukraine.

“It’s good that markets have calmed,” Chevron CEO Mike Wirth said during a Friday earnings call. “I mean the high prices really were creating a lot of stresses out there that are not good.”

Executives also said they expect oil supplies to remain limited, a big factor in higher prices.

“We believe that the current supply constraints and growing demand will support strong margins in 2023,” Marathon Petroleum Corp. CEO Mike Hennigan said in a Tuesday earnings call.

Supply constraints also spotlight a concern oil industry lobbyists and executives have expressed regarding a profit margin cap: They say it could lead to supply shortages that caused long gas station lines, and deep political pain, for former presidents Richard Nixon and Jimmy Carter.

Oil industry representatives have accused Newsom of being more interested in scoring political points than targeting the factors that increase prices at gas stations. They say he should look at other factors in higher prices, including retail competition and state taxes.

“The governor’s tax is targeted at the industry as a punishment, not as a way to lower costs for consumers,” said Western States Petroleum Association spokesperson Kevin Slagle.

Newsom has consistently rejected the industry’s arguments as “lies” and promised to hold the companies accountable.

His proposal is welcome even among people in oil-producing Kern County, said Cesar Aguirre, director of the local branch of the Central California Environmental Justice Network.

Even though the industry provides jobs, people in Kern see the proposed penalty as a way to address not just gas prices but other concerns such as contamination from wells, Aguirre said.

“We can hold them responsible, we can hold them accountable,” he said.