California Gov. Gavin Newsom has a new plan for how the state can avoid a spike in gas prices — more regulation. [emphasis, links added]
Newsom's proposed rule would require the state's refineries to maintain minimum fuel reserves to prevent shortages from causing higher prices.
In an announcement about the proposal, Newsom blamed high gasoline prices on oil companies and promised that further regulation of the industry would solve the problem for the state's residents.
“Rising oil prices mean rising profits for major oil companies. Refiners should be asked to plan ahead and replenish supplies to keep prices stable, Instead of playing games to make more profits. By allowing refineries to act responsibly and maintain natural gas reserves, Californians can save money at the pump every year,” Newsom said in a statement.
The California Energy Commission (CEC) found that in 2023, the state's refineries had 63 days of supply that lasted less than 15 days.
According to the CEC, Californians would have saved up to $650 million in natural gas costs if these regulations had been enacted at the time.
Newsom claimed in the statement that by holding “Big Oil” accountable, Californians will spend an estimated $728 million less on gasoline this summer than in the summer of 2023.
The latest proposal would impose penalties on refineries that do not maintain prescribed supplies.
California has a history of anti-fossil fuel policies and attacks on the state's refineries for allegedly causing high oil prices.
According to the American Automobile Association (AAA), The state has the second-highest average gas price, behind Hawaii.
At the same time, Texas has a relatively friendly regulatory environment for oil and gas and has the third-highest gasoline prices in the United States
In his statement, Newsom boasted about convening a special legislative session and signing into law a series of “reforms” that would hold oil companies accountable for natural gas prices.
He noted that investigations by state agencies further It accused the refinery of “suspicious transactions” and failing to prepare for maintenance outages.
“The data is clear: Refineries have been increasing profits through planned maintenance, reducing supply during the busy driving season,” Petroleum Market Surveillance Director Tammy De said in Newsom's statement.
according to doomberga group of analysts publishing articles from the past 40 years on the organization’s Substack, The number of operating refineries in California dropped from 43 to 14, a decrease of 67%. Meanwhile, total California refining volumes fell 33% during the same period.
“Heavy regulatory burdens force smaller operators who produce fewer gallons to absorb such costs out of the market. Over time, considerable market shares fell into the hands of a few large firms, which effectively operated in isolated oligopolies. doomberg Analysts explained this in an article last month.
When in doubt, nationalize!
At the beginning of this month, CEC is concerned that the state's nine remaining refineries may close and has recommended that the California government take over and operate these facilities.
CEC is determined, Despite the state's efforts to force Californians to use electric vehicles, “gasoline demand will remain above 200,000 barrels per day (TBD) until at least 2035 and possibly beyond.”
CEC Report Forecast Falling demand will lead to refinery closures.
The report concluded that with fewer refineries in operation, “anti-competitive behavior by bad actors will amplify harmful industrial practices.”
so, The CEC proposed that buying and operating the refinery itself would be in the national interest.
While the Newsom administration continues to view oil companies as “bad actors” and regulate them accordingly, Oil companies are fleeing the state.
Chevron announced in early August that it would move its headquarters to Texas. It's just one of many companies leaving the state.
Chevron CEO Mike Voss told wall street journal This move is the result of national regulations“It raises costs, hurts consumers and discourages investment,” Voss said.
Energy analyst David Blackmon said Chevron's origins can be traced to the Pacific Coast Petroleum Company, founded in California in 1879.
Oil and gas experts say Newsom's latest proposal could drive away more companies. Catherine Reheis-Boyd, president and CEO of the Western States Petroleum Association sacramento bees That Newsom's latest proposal for refineries is “inadequate regulation” that will further harm the industry.
She said the proposal was based on “lies” and “ignored the logistical challenges and costs associated with the program.”
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