Russia. China. Venezuela. Iran. More than a dozen countries produce gasoline in state-owned refineries.
Can California be next on the list?
California policymakers are considering state ownership of one or more refineries, one of the choice list proposed by the California Energy Commission to ensure a stable supply of natural gas as oil companies return from the state’s refinery operations.
“Nationals recognize that they are on the way to more refineries,” said Skip York, chief energy strategist at Turner Mason & Co., an energy consultant. Consumer demand, leading to fuel shortages, higher prices and severe logistical challenge.
California has lower gasoline demand, although for two reasons: more efficient gasoline engines and the increasing number of electric vehicles on the road. The coalition of scientists said that California’s gasoline consumption peaked in 2005 and fell 15% by 2023.
Electric vehicles, including plug-in hybrids, now account for about 25% of new car sales in the year. New sales of gasoline and light trucks will be banned starting with the 2035 model, according to the state mission.
The decline in demand is leading to a fundamental strategic shift in the state’s major refineries: Chevron, Marathon, Phillips 66, PBF Energy and Valero.
Two California refineries have already stopped producing gasoline to produce biodiesel fuel for heavy trucks, a cleaner fuel alternative that enjoys abundant state subsidies. Even more worrying is that the Phillips 66 refinery complex in Wilmington, outside Los Angeles, is scheduled to be permanently closed by the end of the year.
This leaves eight major refineries in California that are able to produce gasoline. Industry analysts say anyone’s closure will cause serious gasoline supply problems. But Chevron and Valero are considering permanent refinery closures.
meaning? “Demand will gradually decline, but supply will fall into large chunks,” York said. What is unknown is how many refineries will be closed, how long and how it will affect supply and demand.
According to York, this puts the state in a tough position. “Even if you have the perfect vision, it’s hard to schedule the timing right.”
The acquisition of the National Refinery seems to be a radical idea, but is considered the fact that the seriousness of the supply problem.
This is one of several options proposed by the California Energy Commission, which is implementing legislative orders to find ways to ensure a “reliable supply of reliable and safe transportation fuel supply in California.”
The list of options is different: shipping from more gasoline in Asia; regulating refineries according to the order of power companies; capping profit margins; and more.
The list will transform it into a formal transition plan by December 31, 2024, but no plans will be released six weeks later. Therefore, it is unclear what the national response will be if another refinery announces closure this year or the next.
California, known as the “Gas Island,” lacks multiple logistics networks on most continents of the United States, which can help mitigate the supply shock. There is no pipe to feed gas from other states. Marine shipments from refineries-rich Gulf countries are restricted by outdated federal laws under the Jones Act. Gasoline import California’s supply is only 8%. Almost all of the other 92% of the refineries produce.
More complex things: Special mixture of gasoline that California needs. Those essential formulas have gone a long way toward reducing air pollution. But they also raise gasoline prices and increase the risk of shortages, as there is almost no such gasoline outside of California.
Western Petroleum Association. Lobby groups warn that it is difficult for states to participate in refinery ownership or management.
“It’s a very complex and difficult business,” the organization said in a statement. “There are some business barriers and technical barriers that have a comprehensive and holistic understanding of the industry and how it works.”
When asked about the potential of state-owned refineries, Gov. Gavin Newsom’s office turned the question to the state energy commission, but issued a statement saying that California “is engaged in meaningful and thoughtful policy work to the point where it was Successfully managed our transition from fossil fuels for years, not overnight.”
In a statement, the Energy Commission acknowledged that “there are many challenges to overcome”, “including the high costs of purchasing and operating, skilled labor and expertise to manage refinery operations, and how refineries will adapt to the state from oil. The transition of fuel.”
Republican leader James Gallagher from Yuba City said California’s actions were not enough to address potential gasoline shortages.
“We started losing refineries because we made operations in California so expensive and impossible,” he said. “Now, after we got them down, we’re talking about taking over them to make sure there’s some supply. We’re being on the way. Going towards price control and government take over the industry. This has never been very good in world history.”
State Senate Minority Leader Brian Jones (R-Santee) agreed: “The state has no business in the refinery business,” he said.
Their Democratic counterparts, Parliament Speaker Robert Rivas (D-Hollister) and Senate President Prom McGill (D-Sonoma) declined to be interviewed.
In the next few years, further refinery closures are heating. Shortly after Phillips’ announcement No. 66, Valero CEO Lane Riggs responded to concerns about the company’s closure of one of its two California refineries.
“All options are on the table,” he said. “Clearly, California’s regulatory environment is putting pressure on operators there and how they think about their operations.”
Chevron has been a California company since 1879 Headquarters to Texas. The Wall Street Journal recently reported that the company has considered stopping production in its California refinery.
“Recent California policies such as banning the sale of new internal combustion engine vehicles by 2035, potential tax/finites on refinery profits, and potential new minimum storage requirements are headwinds for our business and weaken our confidence,” he said. Andy Walz, the president of Chevron’s downstream, midstream and chemicals, said in a statement.
Jones said while he is not sure the state-owned refinery option is a serious proposal, it is on the list of options and the looming supply issues are real. “I’m not sure all Californians have grasped the urgency of this situation,” he said.
“I think what we might need is to build another refinery in the state,” Jones said. Otherwise, when the refinery is closed, gasoline demand has to be met through gasoline imports from Asia, mainly by ships.
“People are shocked by the environmental impact of crude oil transport,” Jones said. “But no one is shocked by the environmental impact of gasoline imports.”
