Russia. China. Venezuela. Iran. Over 12 countries produce gasoline in state-owned refineries.
Is California next on the list?
California policymakers are considering state ownership of one or more oil refineries. This is one item in the list of options presented by the California Energy Commission to ensure steady gas supply is available to oil companies to pull back from the state’s refinery operations.
“The state recognizes that they are on the path to closure of more refineries. Consumer demand is a lack of fuel,” said Skipyoke, chief energy strategist at Turner Mason & Company, Energy Consultant. , rising prices, bringing serious logistics challenges.
Demand for gasoline is falling in California, albeit slowly for two reasons. More efficient gasoline engines and more electric vehicles on the roads. According to a coalition of interested scientists, gasoline consumption in California peaked in 2005, falling 15% until 2023.
Electric vehicles, including plug-in hybrids, currently account for around 25% of new car sales per year. According to a state order, new gasoline and light truck sales will be banned from the 2035 model year.
The decline in demand has caused fundamental strategic changes among the state’s major oil refiners: Chevron, Marathon, Phillips 66, PBF Energy, Valero.
Already, two California refineries have stopped production of gasoline to produce biodiesel fuel for use in heavy trucks, a cleaner fuel alternative that enjoys rich state subsidies . What’s even more worrying is the Phillips 66 Refining Facility in Wilmington, a suburb of Los Angeles, which is scheduled to be closed forever by the end of the year.
California remains with eight major refineries that can produce gasoline. Industry analysts say closures for everyone create serious gasoline supply problems. But both Chevron and Valero are considering permanent refinery closure.
meaning? “Demand will gradually decrease,” York said. “But supply falls in bulk.” What’s unknown is how many refineries will be closed, how quickly they will affect supply and demand.
According to York, it puts the state in a tough position. “Even if you have perfect foresight, it’s going to be difficult to get the timing right.”
The state’s refinery acquisition seems like a radical idea, but the fact that it is considered indicates the seriousness of the supply problem.
This is one of several options laid out by the California Energy Commission, and meets legislative orders to find ways to ensure “a reliable supply of affordable and safe transport fuels in California.”
The options list is different. more gasoline ships from Asia. Regulate refineries in the order of the electric power company. Upper profit margin. And more.
This list was scheduled to be converted to a formal transition plan by December 31, 2024, but no plans have been issued in six weeks. So it is not yet clear what the state’s response will be if another refinery announces a shutdown this year or next year.
California is known as “Gasoline Island.” This lacks a variety of logistics networks throughout most of the continental United States, which helps to mitigate supply shocks. There are no pipelines that supply gasoline from other states. Marine cargo from refineries-rich Gulf countries is limited by outdated federal law known as Jones Act. Gasoline imports account for just up to 8% of California’s supply. The other 92% is produced almost entirely at refineries in California.
More complicated issues: Special blends of gasoline needed in California. These required formulations have greatly helped reduce air pollution. But they are also raising gas prices and increasing the risk of shortages because no such gasoline is produced outside of California.
Western Province Petroleum Assn. Lobby Group warns that states are difficult to engage in ownership or management of refineries.
“This is a very complicated and challenging business,” the group said in a statement. “There are commercial and technical barriers to a comprehensive and holistic understanding of the industry, and there are how it works.”
Asked about the potential of a state-owned refinery, Gavin Newsom’s office introduced the question to the state energy committee, saying, “California has meaningful thoughts to successfully manage the next transition from fossil fuels.” He is engaged in deep policy work.” 20 years, not overnight. ”
In a statement, the Energy Commission acknowledged that there are “many challenges to overcome” at state-owned refineries. Fits state transition away from oil fuel. ”
James Gallagher, Yuba City Council Republican leader, says California isn’t moving fast enough to deal with potential gasoline shortages.
“We’re beginning to lose refineries because it’s become so expensive and impossible to operate in California,” he said. “Now we’re talking about taking over them to make sure there’s supply after we’ve driven them away. We’re heading towards price management and government acquisition of industry. It’s the world’s world It’s never been a success in history.”
“There is no business in the state that is involved in the oil refinery business,” he said, said Brian Jones (R-Santee), a minority leader in the state Senate.
Their Democratic counterparts, Congressional Speaker Robert Rivas (D-Hollister) and Senate Majority President Pro Tempole Mike McGuire (D-Sonoma), declined to interview.
Talks about further refinery closures over the next few years are escalating. In a conference call with investors last year, shortly after the announcement of Phillips 66, Valero CEO Lane Riggs responded to concerns about closing one of the two California refineries.
“All options are on the table,” he said. “Obviously, California’s regulatory environment puts pressure on operators and how they think about moving forward with their business.”
Chevron, a California company since 1879, announced last year that it would move its headquarters to Texas. The company is considering shutting down production at one or both of its California refineries, the Wall Street Journal recently reported. Chevron confirmed in a statement to the Times.
“The recent California policy is that potential tax/penalties on refinery profits and potential new minimum storage requirements are all me, including banning the sale of new internal combustion engines by 2035. It’s headwinds towards our business and erodes confidence in the future,” said Chevron’s downstream, middle and chemicals president in a statement.
Jones doesn’t know if the options for state-owned refineries are a serious proposal, but it’s on the options list, and the looming supply issues are real. “I don’t know if all Californians have an eye on the immediate urgency of the situation,” he said.
“I think what I think is probably what we need is to build another refinery in the state,” Jones said. Otherwise, if refineries are closed, demand for gasoline must be met by gasoline imports, mostly by ships from Asia.
“People get odd about the environmental impact of oil shipping,” Jones said. “But no one is grossing about the environmental impact of gasoline imports.”
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