California seems to be experiencing an 'energy crisis'. Gas prices are expected to exceed $8 per gallon in 2026. That's similar to Europe, who have been experiencing extremely high fuel prices for decades. But there's an entirely different 'cause and effect' in play causing California's gas price spike. Seems California has regulated itself into unaffordable energy. In spite of abundant energy resources and refining capacity, California has created a regulatory climate that has convinced two major oil companies to close their refineries in the coming year.
Valero's Benicia refinery near San Francisco and Phillips 66's Wilmington refinery near Los Angeles are both scheduled to close in 2026. Valero CEO Lane Riggs said on a recent earnings call that California's tough "regulatory enforcement environment" was the main factor driving the closing of the state's sixth largest refinery. The announcement came six months after state regulators fined the company $82 million for exceeding toxic emissions standards for more than 15 years.
Phillips 66 announce the closure of its Los Angeles refinery, the seventh largest in the state, just 3 days after California passed ABX2-1, which requires refiners in the state to hold additional inventories of gasoline stock. The company attributed the closure to not any specific policy but to "long-term uncertainty' for the refining business in the state. This is the sixth and seventh largest refiners in the state. Would a reasonable person be inclined to think that conditions would be any better for the five larger refineries?...
Last year Chevron moved its headquarters out of San Ramon, California to Houston, Texas, because it was becoming increasingly difficult to do business in the Golden State. According to a professor at USC, California has legislated itself into a situation where costs are extraordinarily high and the political environment is extraordinarily harsh. The two refineries represent almost 20% of in-state gasoline production, about 6.2 million gallons of gas per day. At present, California gas prices are about 40% higher than the US average, a difference attributable to 'supply issues', the CA 'special blend' of gasoline (sold only in CA), and a layer of taxes and fees paid by consumers.
California Governor Newscum blames the oil companies for gouging consumers for decades. According to him, "There's no other way to put it." Well, Gav, if you told the truth, there would indeed be another way to put it... California with the help of Obama and Biden have been pushing to make California (and the country for that matter) an all-EV affair. Newsome's objective was to eliminate internal combustion engine vehicle sales by 2035. That mandate set the stage for energy companies and refiners to set up an exit strategy. His timing is a little off, the refiners seem to be leaving about a decade too early.
California at one time was fourth in the world in oil production. Today, it produces about 2.5% of all US crude production, and only about 24% of its own in-state needs. That has left CA highly dependent on foreign imports including Iraq, Brazil, Guayana, and Ecuador. In 2024, CA imported 61% of its oil from foreign sources.
With the looming closure of the two refineries, the situation stands to get worse. California has no inbound pipelines for incoming gasoline or oil, leaving them completely dependent on foreign sources to make up the difference. All arriving gas and oil imports will be via maritime vessels, known for being some of the most egregious producers of greenhouse gas emissions.
California doesn't only have a lack of competent leadership, they have a leadership vacuum. If the Richter scale could measure stupidity, this earthquake would be historic.
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