Earlier this month California regulators put in place lower-air-polluting rules affecting refiners. As we recently reported, fuel prices will jump due to this regulation. But in the land known for its super-high fuel prices, California’s government has another trick up its Golden State sleeve.
In an effort to reduce pump prices, the governor recently signed legislation to force refinery operators to keep a fuel buffer on hand. Not so fast, says Chevron—the new California refinery law will jack prices, and possibly create shortages.
Chevron reacts to new California refinery law
Chevron, the #2 U.S.-based fuel producer, says the law to keep a minimum of fuel stocks on hand is “flawed.” The big oil company fired off a letter to state lawmakers on Tuesday, indicating that the state’s premise that “price spikes are profit spikes,” was erroneous. Portions of the letter were published by news agency Reuters.
The letter was a kick against ABX2-1, a bill signed into law by Governor Gavin Newsom last month. The law is crafted to stop fuel supply shortages in California. It grants the California Energy Commission (CEC) the ability to force refineries to keep minimum fuel inventories.
It also gives the CEC authority to manage refinery turn-around times and oversee maintenance scheduling to keep fuel flowing, and to keep prices lower. The law has teeth: If refinery operators don’t comply, they could see daily minimum fines of $100,000 when not in step with CEC directions.
“Two negative outcomes”
Chevron’s president, Andy Walz, told lawmakers they have it wrong. “We contend that enforcing a mandatory minimum inventory requirement will likely result in two negative outcomes,” wrote Walz. “An increased frequency and duration of supply shortages, and a permanent rise in gasoline prices for consumers.”
Not a California resident or frequent visitor? Don’t laugh yet. Walz also wrote, “Both risks extend beyond California, which should create the need for the legislature to proceed with caution, as policies that raise prices for the state could also affect neighbors in Arizona and Nevada.”
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##RVT1185b
Oh gosh! I guess I’d better start believing the President of the oil company that is just now finishing it’s most profitable year ever (along with taxpayer financed subsidies). Threats like his really get me in the trusting mode. At least CEC is saying what it will do as opposed to Chevron’s ‘might’.
Yup, Inflation drives profits up, not down. Taxes drive profits up not down, regulations drive profits up, not down and DEI drives profits up, not down.
Want lower prices then drive down regulations, inflation, taxes and DEI which will all four drive down the bottom line profit while maintaining the identical profit margin as a percentage of revenue.
Yep! And no clue politicians drive profits up, not down…IMO🙃
Triggered.
😂🤣 By what? Econ 101? Still hurting huh?
What did you expect the President to say? California has the highest prices in the nation. Give me a break. Just another excuse to raise prices and profits!
Then I guess the legislature and Gov should stop giving them excuses by stopping to pretend that somehow they know better how to manage complex fuel supply chains!
You do know a refinery can’t just crank out more gas, and stockpile it, without also creating more diesel, jet fuel, and other chemicals…right? A barrel of oil can only create “groups” of petro products, not all one or the other. It’s a balancing act.
Cali keeps digging itself into holes then tries filling them with more laws, which just creates more holes.
It’s not creation, the law is about storage of reserves.
Can’t store what isn’t created. It kind of goes in order, 1st you create it then you store.
Which costs money.
$Bill, I’d suggest you take a closer look at “record profits” and your commensurate opprobrium towards oil companies. If you look at a “profits” pie chart, after refining, distribution, transportation, advertising, crude oil, and all the other components, you’ll find that the oil giants are profiting at around $0.04 ~ $0.06/gallon. Meanwhile, the Fed takes $0.184/gallon in taxes for gasoline, and $0.244/gallon on diesel. In other words, the Fed is taking 4~6 times as much as the “greedy oil companies”. And that doesn’t even consider state taxes. Seems you’ve got the wrong dog in the fight.
Btw, all this information is readily available, if you can be bothered.
Just wait till the president imposes a 25% Tariff cough cough tax on Canada. Then we will all be paying out the nose.
And all this coming from a State that wants to ban ICE vehicles. They’ve already started it by banning large diesel vehicles.
wagon trains to transport stuff into CA coming soon
Another reason to avoid California…
Thank You! We appreciate your absence.
You are quite welcome. Glad to do my part!
ditto, choke on your delusions but stop whining to the rest of us
Kalifornia Energy Commission, drunk on power and lacking common sense.
Thank you Cali for keeping the state the most beautiful place on the planet
There are beautiful places in China and Russia too.
Cali is indeed a beautiful state; in fact, I’d opine it’s THE most beautiful state insofar as eye candy, nature, and topography. As well as being an outdoor purists Nirvana. But it’s run by morons hellbent on it’s destruction as a population center. Hence, the well known “California Exodus”. It would be great if Cali were to cede it’s 11 miles of Lake Tahoe to NV….
What have you been smoking? If it’s so nifty then why do the hordes of kaliphony tourons bombard other states in the summer? Especially on 101.
It used to be that we said CA goofiness was seeping into NV. No more. Now it’s pouring into NV.
Texas Too!
Those who can’t, tell others how to.
News**m doesn’t care about prices. Never has – never will. He’s immune. He believes he’ll be living in Washington D.C. in 2028 anyway. Always remember – elections have consequences, and you good folks that are trapped in Kaliforniastan and surrounding states, are unfortunately reaping those consequences. Shameful. Our recent election proves that it can be stopped as long as you, who have had enough of that crap, stick together.
The hate for CA here is strong!
Regulations raise prices but so does the market. Letting the few refiners do whatever they want leads to record profits.
It’s been over 40 years since a new refinery has been built in the USA. Good thing demand has not changed in 4 decades huh? Supply and demand with limitations thru regulation on the supply side raises prices more than anything else.
Stop being rational! It upsets the balance of nature. 😉
Too many folks like you seem to believe the word “profit” is a bad word. How long would any business stay around without profits? When they’re selling every drop of what they produce, they WILL make a profit. And to address your next comment, who are YOU to tell them how much profit to make? Don’t like it, don’t buy it.
CA gets a lot of fuel from foreign sources, I think I heard 40%, so will CA regulate how many fuel barges or ships stay in port longer, time is money!
Maybe CA remembers the market manipulation that created artificial shortages of electricity in the 2000’s. (See https://en.wikipedia.org/wiki/2000–2001_California_electricity_crisis) Similar thing happened with natural gas supplies in the 2021 Texas blackout. The Texas PUC used to investigate “convenient” generating plant shutdowns but heavy campaign contributions have limited their reach to only the most egregious cases. Strategic plant shutdowns to increase prices (and thereby profits) continue. Maybe CA has decided to proactively stop this nonsense.
Of course if this runs counter to your world view and hate of California, just keep your head in the sand and butt in the air.
One piece of info is lacking in your Texas story, natural gas lines carry water vapor which froze when temps were down in the low 4-6 degree range for three days. This caused icing inside the gas lines going everywhere especially to power plants.
My only comment is as a former graduate-level instructor, I would fail any student that used Wikipedia as a primary source.
Beats Fox News any day.
Well, then, we all know the so-called “news” sources you watch must be paragons of truth, virtue and the American Way, aren’t they?
Hmmm? Why doesn’t the state of California just set up their own “Emergency Reserve system” and let the oil companies fill it up for them. At state expense, which consumers don’t have to pay – right?, can maintain the system, and pay the storage fees and trucking and management of the system and all the other associated costs. Similar to the National Oil Reserves for “Emergency War time use”. Oh wait Calif. wants it refined first – I tho’t there was a shelf on refined gasoline – of course they could buy the “Sta-bil” company, or similar, to support their reserves.
I read your comment twice and I must say Doug, you covered it exactly on why silly ideas are called “silly ideas”. It is exactly why private industries should stay private and why the Gov’t is run by people that couldn’t run a lemonade stand. Unexceptional people making rules for actual exceptional people.
Any chance we could sell California back to Mexico?
We could get fifteen million as a refund.
We should just GIVE it to them.
Term limited politicians don’t have time to learn real economic/social/business basics since they need to find the next opportunity.
Thank you, Russ and Tina! Sounds like it is time for the 14 California refineries to begin transferring production elsewhere (if possible) and moving elsewhere. Building a new refinery is not a viable strategy, but upgrading and expanding existing refineries may be. Any refiner based only in California will have to decide if going out of business makes more sense than compliance. Of course, California may attempt to force refiners to stay in business. It won’t be the first time if they do. Happy new year and safe travels!