Oil rigs in the sunset. (Photo: Thaiview/Shutterstock)
California Energy Commission Proposes State Takeover Of Oil Refineries
‘Californians Deserve a Strategic Transition Away from Petroleum Transportation Fuels’
By Katy Grimes, August 6, 2024 2:55 am
Just as Chevron Oil company announced that it is moving its headquarters to Houston Texas from San Ramon California, California Energy Commission regulators announced proposed government controls of the petroleum industry, ostensibly in order to combat future energy price surges, according to a report released August 1, 2024 by the CEC.
Despite California’s radical and very accelerated green agenda which does not include oil and gas as fuels, the CEC fully expects some of California’s nine oil refineries to be shuttered due to falling demand, which would give the remaining refineries increased pricing power and raise the possibility of a surge in gas prices, the study said.
But the study had other interesting conclusions:
Like most product prices, gasoline prices should ideally obey the laws of supply and demand.
However, supply dynamics in California’s transportation fuels market differ from many other markets in the United States. Despite being directly geographically connected to other states, California’s relatively isolated transportation fuels market makes it essentially a fuel island. In addition, the critical need to address the state’s unique air quality challenges means that the state must require a unique fuel specification that differs from the rest of the nation. Related to the isolated market, the state’s opaque spot market appears to have an outsized influence on prices in a way that does not align with supply or demand fundamentals.
These factors have led to several challenges for the stability of transportation fuel prices. For example, in the last two years (2022 and 2023), California had two gasoline price spikes in September and October.
“Spikes were not seen in regions outside of the western part of the United States.”
Do my eyes deceive me?
As Ed Ring reported in the Globe in January, “Despite being a sunny, solar friendly state, with ample areas blessed with high wind, California still derives 50 percent of its total energy from crude oil. Another 34 percent comes from natural gas. This fossil fuel total for California energy, 84 percent, actually exceeds the world average for 2022, which – including coal – came in at 82 percent.”
Gov. Newsom claims that the state’s highest-in-the-nation gas taxes and prices are not what led to dramatically spiking gas/oil prices but because of price gouging by the oil industry. In May, Newsom even signed a gas price gouging law into place.
The California Energy Commission disagrees with the governor, showing that gas price spikes occurred in the last few years because of refineries temporally going out of commission because not enough oil was getting to them. The CEC also said that lower prices this year were caused by many factors, including a cut in industry costs and profits, lower crude oil costs, and in how much environmental programs are getting from the industry, the Globe reported. Prices could even be lower, but as the CEC noted, the only thing that went up was the gas tax itself.
The newest CEC study reports “gasoline remains California’s dominant transportation fuel, and demand is not especially responsive to short-term price spikes.”
They further explain:
Gasoline demand is expected to continue a downward trend as demand for ZEVs increases and other climate-friendly strategies unfold. However, the CEC projects that gasoline demand will remain above two hundred thousand barrels per day (TBD) at least through 2035 if not longer. Even under the most aggressive scenario transition to ZEVs, millions of petroleum-fueled vehicles are anticipated to remain on California’s roads and highways beyond 2035.
These vehicles will need fuel to operate, and many of the vehicles may be owned by lower income individuals and families, making it even more compelling to identify ways to ensure an affordable, reliable, equitable, and safe supply.
California accounts for most of the U.S. zero-emission vehicle sales – over 40% in 2022. I”m still looking for 2023 records. But this switch to electric vehicles did not originate because of supply and demand – the California Air Resources Board has been driving the push to electric with regulations.
Ed Ring reported at the Globe:
According to the Department of Motor Vehicles, there are 30.8 million cars and light trucks currently registered in California. According to the U.S. Department of Energy, of these, 1.2 million are “BEVs,” that is, pure battery-electric vehicles and not including hybrids that combine gasoline and electric propulsion. Almost all of these BEVs were sold in the past five years, with 374,000 sold in 2023. An overwhelming 60 percent of BEVs sold were Teslas; 226,000 in 2023. The closest rival to Tesla was Chevrolet, selling 19,000 BEVs in the state, followed by Ford, Mercedes, and Hyundai, each of these three companies selling 16,000 BEVs.
And then the CEC pivots to how to manage the evil, rotten and bad oil and gas industry because “Californians Deserve a Strategic Transition Away from Petroleum Transportation Fuels:”
…in workshops and hearings held by the CEC and in stakeholder comments, there is concern about market power abuse in the petroleum sector, and the state appears to be increasingly susceptible to price spikes as seen over the last decade. Stakeholders at CEC workshops and hearings have expressed concern about unfair market dynamics resulting from increased market power in California’s petroleum industry and potential market gaming by industry participants. Moreover, stakeholders have expressed concern that harmful industry conduct will be amplified by bad actors acting anticompetitively. During this critical transition period, additional oversight is necessary to protect Californians from further market dysfunction and potential market manipulation.
The CEC proposes:
“The State of California would purchase and own refineries in the State to manage the supply and price of gasoline,” wrote the study’s authors, with the scope of the initiative ranging from “one refinery to all refineries in the state.”
(CARBOB: The California Air Resources Board’s model for California Reformulated Gasoline Blendstock for Oxygenate Blending – CARBOB)
The CEC considers closing refineries:
The specific refineries that would shut down under this pathway are uncertain, but the in-state capacity for refining would not be a smooth decline like the demand scenarios. Rather, the supply response will be “lumpy” in the sense that a typical refinery is capable of supplying about 10 to 20 percent of overall state demand. Should one refinery close or convert (to renewable diesel), a large portion of in-state CARBOB supply essentially vanishes. The position of other refineries will be temporarily bolstered, resulting in an increase in market concentration. However, suppliers could choose to secure additional CARBOB supply from other domestic or foreign refiners if it is economically viable.
And they discuss Impacts of Continued Refinery Operations:
Refineries are often near marginalized and disadvantaged communities, leading to disproportionate impacts on air quality and, consequently, the health of these populations.
Other proposals:
- During times of lower gas prices, fees would be levied in a variable manner to then allow for stabilization initiatives during California-specific price spikes.
- California would actively regulate the operating rules, prices, and rate of return of petroleum fuel market operators similar to the current structure used to manage private electric and fossil natural gas utilities as natural monopolies where California sellers would be required to have prices approved by the designated State authority and spending would have to be approved for cost recovery in prices.
- The State of California would purchase and own refineries in the State to manage the supply and price of gasoline.
- Measure, publicize, and potentially manage retail margins. Assure that all gasoline that is sold at retail stations in California is not sold at excessive retail margins.
From the horse’s mouth – the California Energy Commission said the quiet part out loud: Government control of the petroleum industry… and they did it in the last three pages of the 76-page study.
But the CEC did sort of question the whole state-owned refineries move and asked, “as demand for fossil fuel declines, will the presence of State-owned refineries inhibit an orderly phase out of refinery capacity?”
The state obviously does not understand that if you can’t make any money you’ll have to curtail production, and you won’t be able to produce a product – or you’ll have to sell the product elsewhere. You can’t make this stuff up.
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Yikes!!!! This agency can’t perform its original mandate, process power plant siting applications, within statutory timelines. The idea that they would manage the State’s petroleum refineries is terrifying.
That’s just wonderful. I’m looking forward to $30 per gallon gasoline. I’m sure everyone at the California Air Resources Board (CARB) is erotically stimulated.
How can the federal government allow a state to undertake a nation changing policy all by itself without any regard to dissenting voices both local and national. Once the state gets their hands on the fuel industry, like everything else from education to the safety of walking the streets will be destroyed.
All California does anymore is manage the decline of the very systems we need to survive.
all the people who want evs need to start flying and driving the battery run cars and plains now see how they go from cal. to the other side of the US to visit your kids
are us, we the people, this ignorant to the manipulation and control by these so called human beings? oh wait… on another thought, some how one way or another this type of a person shall not and never receive a salary, based on exchanges of goods or everything that could or could not have a value, moreso if there is a value placed upon the position that represents the people alive and living, opinions, and views, not founded on a democracy but a understood and allowed to speak peoples choice, then at what ever time a citizen volunteer shall be placed for the betterment of the people’s republic! stay in your lane we will use our blinkers! RLS 2024 numerous analogy but true, this is what these people that have influenced and uncontrolled world, God is right your all fucked!
well look at anti abortion mandates from states, or no healthcare
These CEC people need to be “outed”. Whatever it takes. https://www.energy.ca.gov/about/commissioners
1) David Hochschild was appointed chair of the California Energy Commission by Governor Gavin Newsom in February 2019. He fills the environmental position on the five-member Commission where four of the five members are required by law to have professional training in specific areas – engineering or physical science, environmental protection, economics, and law.
Chair Hochschild’s career has spanned public service, environmental advocacy, and the private sector. He first got involved in the solar energy field in 2001 in San Francisco as a special assistant to Mayor Willie Brown where Chair Hochschild launched a citywide $100 million initiative to put solar panels on public buildings.
2)Commissioner Siva Gunda is serving his first term on the California Energy Commission.
Governor Gavin Newsom appointed Gunda in February 2021 to serve as the Energy Commission’s public member. Gunda was later appointed to Vice Chair in September 2021. He is the lead commissioner on energy assessments.
Gunda served as manager of the Demand Analysis Office and deputy director for the Energy Commission’s Energy Assessments Division. The division forecasts and assesses energy demands and supplies.
3)Noemí Gallardo is serving her first term on the California Energy Commission. She was appointed by Governor Gavin Newsom in February 2023 to serve as the CEC’s attorney member. She is the first Latina appointed as a CEC commissioner.
Gallardo joined the CEC in 2019 as its Public Advisor. She later became chief of staff for CEC Chair David Hochschild.
Before joining the Energy Commission, she was senior manager of public policy at Sunrun Inc.
(NO conflict of interest here…)
4) Commissioner Andrew McAllister is serving his third term on the California Energy Commission.
At the Energy Commission, he leads the policy area of energy efficiency, including the Building Energy Efficiency Standards, appliance efficiency, and load management and flexibility. More broadly, he is focused on enabling modern, data-rich analytical tools to support strong clean energy policy development and program implementation.
Commissioner McAllister holds a master of science and a Ph.D. from the Energy and Resources Group at the University of California, Berkeley and a bachelor of arts from Dartmouth College. He served as a Peace Corps volunteer.
5) In April 2019, Governor Gavin Newsom appointed Patty Monahan to be one of the five commissioners on the California Energy Commission. She serves in the Energy Commission’s Science/Engineering position and is the lead commissioner on transportation, industrial decarbonization, hydrogen, and ports, and is second for the Disadvantaged Communities Advisory Group. She has dedicated her career toward advancing clean energy technologies and cutting harmful pollution, with a strong focus on equity and transportation.
(Because the two are INEXTRICABLY related, right? She’s our woke commissioner…of course, another IC Berkeley grad…)
Before joining the Energy Commission, she served as the transportation program director at the Energy Foundation, where she guided campaigns across the United States that advanced electric transportation, more efficient vehicles, and cleaner transportation fuels. She worked for the Union of Concerned Scientists in several roles, including Director of the California office and Deputy Director of Clean Vehicles. She also worked at the U.S. Environmental Protection Agency, Lawrence Berkeley National Laboratory, and several energy-related consulting firms.
Commissioner Monahan received a Bachelor of Science degree from UC Berkeley and holds a Master’s degree in the Environment and Resources Program with a certificate in Energy Analysis and Policy from the University of Wisconsin, Madison.
THESE are the UNELECTED A-HOLES that will determine YOUR economic future, and there’s not a damn thing that anyone can do to stop them…
they need to be stopped. Where do these people find the support to make these disastrous decisions ? People of California get what they deserve for being so stupid.
sound like an educated bunch,
obviously you miss the point, of closing refineries by private companies opens door to further price gouging, government for people just making sure there’s fuel
and you think that government intervention will help? Have another glass of Kool-Aid and let history repeat it’s self once again.
Unelected clowns who no nothing about refining. Newsome, the SEIU,and CTA are hell bent on destroying the State and the people.
So pretty much the Oil Industry is done with California and they are telling them if you think you can do a better job than do it. We are so screwed did our Government forget what happened to Venezuela when they nationalized the Oil Industry this has to be a joke but I have a feeling they are serious. I don’t blame Chevron or any other Oil Company for leaving our State Government is anti business.
This article shows that California is moving to become a dictatorship run by liberals and not a single person. All you need to do is look at Venezuela and how the dictator took over the oil industry and ran the country into hell. When are the voters of this great state going to wake up and take back control.
The voters have been trying, for about three decades. Voting only works when the votes are being counted honestly.
uh-oh COSNPIRACY THEORIES!! 😆🤣
Now majority of CA-nians are from south America – where they failed their countries …
California is a Communist Democratic state. Every action they take is meant to give them more control over the people. They locked us down over a Pandemic that Fauci helped create. They declare our State a Sanctuary State and then provide millions of illegals with free healthcare, food, education lawyers, housing all at the expense of taxpayers. They brainwash our children with CRT/DEI and LGBQT Marxist propaganda meant to divide us. They use Race, Climate Change and any other crises to gain more control over us. They don’t care about serving the voters they are all Traitors and should be treated as such. They are as corrupt as can be. They attack our Freedoms of Speech,Religion and especially our 2nd Amendment rights. These are things every Dictator does to take over their country. America is in deep trouble.
Yes, it sounds like communism
So pretty much the Oil Industry is done with California and they are telling them if you think you can do a better job than do it. We are so screwed did our Government forget what happened to Venezuela when they nationalized the Oil Industry this has to be a joke but I have a feeling they are serious. I don’t blame Chevron or any other Oil Company for leaving our State Government is anti business.
We should have expected this, given the ideology of those in power. As to why they’re trying to do it now, well, BEV sales in California have begun tanking, and it looks like a Dem route across the country is coming in November. Ol’ Gavin and his merry band of thieves aren’t getting the ROI they were expecting from all those backroom deals on environmentally destructive lithium mining. $40 a gallon gasoline and diesel (and the resulting sky high food prices) ought to punch those sales figures right back up there, along with bolstering support for the Universal Basic Income programs and CBDC’s they so desperately want to put in place.
Looking more like Venezuela every day!
For years, I half joked we are Calizuela!
Not looking good folks. Progressives want to rule over you! Every aspect of our lives!
These same phony politicians that demonize fossil fuels, want control over the fuel. If this happens this will not fare well, especially for people who are struggling to pay bills.
😉 No worries, the nanny state will take care of you until they don’t!!
They don’t!
No they don’t!
This really is a “code red” moment in my opinion.
These commissions are unelected bureaucrats with too much power over peoples lives.
The administrative state at the federal,state and local level will the ruination of the middle class.
The EV industry was built on lies and absurd and unsustainable government hand outs. The honey moon is over and it should be obvious that gas and oil are here to stay for several generations to come. The EV industry is collapsing under the weight of the lies that started it. Let it die.
The problem today is the amount of anarchy anti-Americans making up the Democratic party. These people care not for our Constitutional Republic, hence they hire illegals, cowardly refugees, and aggressive wannabe victims to replace American voters. I mean the current head of CEC is from India, not the USA. This is deserving of civil unrest and abolishment of the anarchy anti-American democratic party on American soil immediately!!!
our governor is an idiot and has ruined California!
This taxpayer REJECTS the idea of CA taxpayer funds being used by the state to buy oil refineries. That is NOT a state government function. PERIOD.
Wake up California! DEI , Governor assigns woke “we don’t care what you say” friends (not elected) To tell you how, where, when and why what to do! Remember what Gavi-newsom in Covide his kids went to school while mind were told No! Remember when Gavi-newsom told stay home restaurant’s close while he had dinner with his woke buddies at French Laundry. Wake up if the government controls something you lose more of the freedom to be free to make your own decisions.
and his kids never got the vaccine
that’s called nationalizing… communist theft….!!
communism.
Let me propose a theory. Poke holes at it if you wish
1. The state is broke and could not afford to purchase these assets that they are supposedly trying to run out of business. (Why would they knock a cash cow to their pocket in the head?)
2. If the state wanted more control over the refiners, they could attempt to socialize the industry and let’s say take the assets in place of paying hefty fines for gouging the public as set by a public commission.
3. Once the state owns the production facilities, they believe that they can increase revenues to the state coffers while continuing to squeeze California drivers.
4.The only problem is that the state has is that they don’t know the first thing about operating a refinery and state employees are not notoriously known to be efficient and while some care the majority don’t.
5.To me this is a Venezuela type move and if the democrats get the ability to reorganize the US Supreme Court plans like this would be possible.
These politicians are living in the wrong country, communism is a little further west. These politicians that think this way should pack up their belongings and head that way. California democrats government is in a league by themselves, they have fixed the election to where they can have full control of everything, that’s the reason they are $75 billion in debt.
California has the highest price fuel in the country. Fuel tax is right behind. Politicians in this state have lost their minds and are completely out of touch with reality..
Our illustrious inept Federal government has all but destroyed our ability to obtain oil from the Alaskan pipeline and the state now decides to shutter our refineries. Do they really think EVs are the answer? Better yet, follow the money!
You can’t trust the refiners, the five major comapines take one or two refineries offline if the price is too low and you can’t trust the do gooders that run the state to worry too much about prices.
This is a fantastic idea!
The state should sell bonds to finance this, build a couple of new refineries and close down a couple of the old ones. Anything we refine here can be done cleaner than any other facility. The sheep here crying about the idea don’t know what they’re talking about and don’t care about anything but their perverted politics.
but you know!!
the irony of it all!
They’re all old and new capital investments have been almost stopped due to the inability to get permits and the state’s move to EV’s. It takes capital to run a refinery. A refinery needs between 50 and 100 million dollars every 3 years to keep the FCCU operational. Upgrading other units like hydro-crackers and reformers may cost even more.
The plan is probalby to take over all the refineries and then sell all the oil to China at a hefty discount leaving Californians high and dry. Never count out the China factor when analyzing the Democrats plans and schemes.
Isn’t this the definition of fascism?
From another perspective – CA still refines close to 2 MMBOPD but its crude went from 5% imports in 1992 to over 65% today. Each oil tanker travelling 12,000 miles/average emits the equivalent of 20,000 cars. Solar and windmills manufacture nothing – just produce electricity intermittently. A barrel of crude oil generates over 6,000 products from pharmaceuticals to all forms of plastic; from fertilizers to roads and tires; from most of the components of windmills to most of the components for solar panels; and the list includes surfboards and computers. Honestly, oil is the lifeblood of the world’s civilizations and that includes Cali. My question is where are the true environmentalists, like the Audobon Society as these Medieval Cuisinart’s are chopping up our birds, including our Condors and Eagles while the desert solar installations torch every bird flying over them and all of the land animals like the desert turtles? These political appointment’s idea of nationalizing CA refining is pure communism and will not work for the people…ever.
As the State of California proceeds to destroy itself, I am surprised that self-destruction and self-loathing have become so popular. Since Bad Robots are running the state and they are so easy to mock I will pile on.
The CEC has five commissioners with precious little business experience. Under their leadership the Energy Infrastructure in California has crumbled and killed. However, I think they have a come up with a way to accelerate the death of the entire state, not just it’s energy sector. I am so happy that they have played close attention to how a small group of Marxists was able to destroy Venezuela. They do not have to get creative since they are borrowing Venezuela’s most destructive idea and pushing it forward. However, I think they should do more.
They can accelerate our Green Marxist Future by nationalizing Apple, Google, Meta, OpenAI and more. These big tech companies use 70% of all wasted energy in the state. If the State takes over running these businesses their energy use can be severely curtailed. More than that, Californians will no longer have to pay taxes as their earnings can be given to the people. It also makes reparations so much easier.
OK; let’s review. If we are going to become a totalitarian, Marxist State. Say it out loud and get on with it. This erosive, acidic, incoherent, inconsistent, slow-moving elitist, cocktail party revolution is just so tiresome.
With the state running oil companies, they are certain to creat a major blaze along the pathway of running out of oil.
Oil refiners are one step away from detonation anyway. The state will blow it up just for grins.
No one can believe that if California government takes over oil refineries it would be to insure stability of prices. They want control so they can set the price as high as they want. Two reasons for this. One, if the price is high, it is a way to convince people to purchase vehicles that don’t require fossil fuel. Two, if the price is high, only those with great personal wealth will be able to afford to purchase it. Another reason would be that they can turn off the supply whenever they choose. Something I’d like to know is with all the fires in California requiring mutual aid from other states, how are those fire fighting vehicles going to be fueled? As far as I know, not one manufacturer of fire apparatus is currently producing any electric equipment. Not to mention the fire fighting aircraft that are essential for wild fire suppression efforts. The government of California is living in a fantasy world and trying to drag the entire state and much of the country in with it.
Now I know there’s a specific political system where as the means of production are exclusive to the Government but I just can’t put my finger on it…………This will be wonderful just like the High Speed Rail, what a Boon to California economy………..Once the taxpayers have all moved away, who’s gonna pay for all this.
Great article. I love the quote, “You can’t make this stuff up.” So true. Wonder if they have thought about who is going to pay for all that infrstructure. Newsome’s adventures are like college kids saying they are going to open a bar. Not going to happen.