It’s unlikely that was the plan. But it is interesting that at roughly the same time Chevron made its announcement, which was no surprise to Gov. Gavin Newsom’s office, the California Energy Commission issued a staff report that includes a dedicated section (Chapter 3, page 7) on “State-Owned Refineries.” It’s one of a number of “Policy Options to Mitigate Price Spikes” – the same price spikes Newsom has railed against (as if Sacramento had no role in California’s steep gasoline prices in California, where it costs more to pump regular – and midgrade and premium – than in any state outside of Hawaii, according to AAA).
In this section, the CEC suggests that the state “would purchase and own refineries in the state to manage the supply and price of gasoline.” The scope “could range from one refinery to all refineries in the state.”
To its credit, the CEC staff acknowledges:
- “It is very expensive to purchase or compensate for refinery infrastructure and will raise questions of liability and cost effectiveness when the projected demand of gasoline will decline in the state over time.”
- “There are complex industrial processes that the state has no experience in managing.”
- “Significant legal issues would need to be addressed.”
But even if the state could navigate those issues, the report indicates that there could be an even more material reason for the state to steer clear of refinery ownership.
“As demand for fossil fuel declines,” it asks, “will the presence of state-owned refineries inhibit an orderly phase out of refinery capacity?”
That’s an odd point. More likely, if the state owned even one of the 14 refineries that are still operating in California – there were 50 just a few decades back when the population was far smaller – it would be in a prime position to accelerate the phase-out just by administratively cutting production.
Also to their credit: The CEC regulators admit that the government would have no idea how to manage operations if it had control of one or more facilities.
“What would drive how the state managed the refinery?” they ask. “Profit? Maximize production? Minimize production?”
Isn’t that final alternative perfectly in line with what the largest chunk of the political class wants?
For all the posturing about the painful prices of gasoline, the agenda being followed by California’s political leaders won’t lead to relief at the pump. It was Steven Chu, the Stanford physicist, who led things off when said in 2008 that “somehow we have to figure out how to boost the price of gasoline to the levels in Europe.” When given a chance four years later to retract the statement during a Senate hearing while he was the Obama administration’s energy secretary, he declined.
Chu was never a state-level policymaker or functionary. But we’ve seen his wish expressed among those who have occupied both of those roles. They’ve created layers of rigid state regulation that have discouraged new and ongoing oil production, which inevitably led to price hikes at the pump.
Locally, voters in Richmond, home to one of two Chevron refineries in the state, will vote in November to decide if the company will be taxed $1 for each barrel of oil processed within the city limits. The ballot initiative was approved by the Richmond City Council and is as much an effort to curb production as it is to boost municipal revenues and improve local health.
It’s also a camel’s nose.
“The ballot measure, in many ways, represents the start of a new chapter by bringing more resources into community control,” said Kerry Guerin, an attorney for an environmental justice group.
In other words, a soft and partial government seizure of private property.
The CEC is in a tough position because, as reported by E&E News, “Newsom and the state Legislature are trying to wean the state off fossil fuels to eliminate greenhouse gas emissions while also preventing price spikes that could become more common as supplies decline.”
A Venn diagram wouldn’t apply here because there is no overlap between the circle of cutting the production of fossil fuels and the circle of “preventing price spikes.” If successful at the former, which is the objective, there’s no way to accomplish the latter.
Kerry Jackson is the William Clement Fellow in California Reform at the Pacific Research Institute, and the co-author of the forthcoming PRI book, The California Left Coast Survivor’s Guide.
