Team Penske driver Power got a clean start from pole but both Alexander Rossi of Andretti Autosport and Pato O’Ward’s Arrow McLaren SP machine – up from sixth – squeezed front-row starter Callum Ilott’s Juncos Hollinger Racing car to the outside at Turn 2 to claim second and third respectively.
Further back, Palou had already climbed to eighth, while Josef Newgarden was up to 20th from 25th.
Penske’s Scott McLaughlin and Palou were battling hard, as the first two primary runners, trying to stay clear of Simon Pagenaud’s Meyer Shank Racing entry, and Palou passed the Penske driver to claim seventh on lap five.
Up at the front, Power was keen not to overstress the Firestone reds on the abrasive 2.238-mile Laguna Seca surface although he had eked out a lead of 2.6 seconds on lap eight.
This margin soon increased as Rossi was struggling with his tyres, losing positions to O’Ward and Ilott on consecutive laps. Having started on used reds, Rossi had to – per the rules – to take on fresh reds when he stopped.
O’Ward then pitted from second at the end of lap 14 having got his deficit to Power down to 3.2s, and Power took on primaries next time by, emerging from the pitlane in fourth, just ahead of Newgarden, who was running long on his primaries.
By the time Power had cycled back into the lead, O’Ward was five seconds in arrears, but Palou was in a rocketship on his reds. Power didn’t want to make a fight of it with a team-mate of one of his title rivals, and therefore ceded the lead on lap 27 without a struggle.
Palou quickly pulled a 10s advantage over Power by lap 32, but Power in turn had eased away from O’Ward, who soon was passed by team-mate Felix Rosenqvist.
Ilott then stopped on the pit exit on lap 38, apparently without power, which prompted a rush for the pits before IndyCar threw a yellow. Palou had to wait for Power to pit in the box ahead of him but then. when he got sent, he nudged into Rosenqvist.
The net result was that the field was bunched back up, with the top 10 all on primaries. Palou now led Power, Rosenqvist, O’Ward, Newgarden and McLaughlin.
The man on the move on the restart was Newgarden, who was going flat out, full-rich on fuel. He passed O’Ward and Rosenqvist on consecutive laps at the top of the Corkscrew to claim third and latch onto Power’s tail.
The championship leader was struggling having taken too much wing out at his pitstop and was 7s down on Palou by lap 45. Newgarden duplicated his Corkscrew move on his team-mate and Power steered well clear and let him go.
But it was clear Newgarden needed to make an extra stop compared to many of his rivals. Having pitted for a third time before them, he led Palou by 9.5s with 25 laps to go, with Power a further 15.5s behind.
When Newgarden pitted for a fourth and final time, he emerged in second place, 21s behind Palou and a couple of seconds ahead of Power.
However, Palou now looked unstoppable, reeling off 1m14.7s laps, while Newgarden and Power ran 1m15.8s. Sure enough, Palou eventually finished half a minute ahead of Newgarden, with the new champion Power third.
McLaughlin snatched seventh from the Andretti driver on lap 92, but wheel banging between Ericsson and Rossi ended with the Ganassi car dropping off the track and falling to ninth with Rossi 10th.
Grosjean’s loss of pace in the closing stages cost him fifth place to Lundgaard and McLaughlin then snatched sixth from him on the final tour.
Result - 95 laps: