Newsom’s Big Oil special session is a big bust. Nobody manages California gasoline | Opinion
Twenty-four years after state experts noted that low inventories of gasoline in California could lead to higher prices, Gov. Gavin Newsom has discovered the problem and launched a special legislative session to deal with it.
Instead of a deliberative process that started years ago, the administration is cobbling together a bill at the last minute that raises more questions than answers.
Newsom and his legislative allies want to require the state’s oil refineries to maintain more gasoline in storage so that slowdowns in production don’t cause prices to go through the roof. But it’s far from clear how quickly new petroleum infrastructure can be built in a state where environmental interests are loath to allow anything that would make gas cheaper.
“This is a political exercise,” said Kevin Slagle, a spokesman for the Western States Petroleum Association, the voice of California’s oil industry. “We all see it.”
This is a small taste of California’s future. The state wants to use less and less gasoline, yet always wants this industry to be reliable and immune to shortages and price spikes. But how?
“We are going to have to take seriously the oversight of the gasoline industry as we phase it out,” said economist Severin Borenstein of UC Berkeley’s Haas School of Business, who has been active on the subject for a generation, including a state committee in 2017 that reviewed the same problem. “We need to seriously manage this phaseout.”
That’s not what Newsom and the Democratically-controlled legislature are now doing. The special session called by Newsom has nothing to do with careful regulation. It has everything to do with the calendar.
September is when California’s refineries conduct scheduled maintenance of their facilities after the busy summer. These slowdowns in gasoline production have resulted in spectacular price spikes such as the one last year. Newsom can point to the special session as proof that he is doing something to solve the problem when the legislation, devoid of implementation details, does not.
The governor’s proposal, Assembly Bill 1, would require the California Energy Commission, “to develop and impose requirements for refiners operating in the state to maintain minimum levels of inventories of refined transportation fuels” and report back every three years.
This supply problem is partly caused by California’s decreasing petroleum infrastructure for years. California had 43 refineries in the 1980s. Now we’re down to 14, and only a fraction of those produce the bulk of the supply.
“It’s likely impossible in California to permit any new fossil fuel infrastructure,” Slagle said. Chevron’s president estimates it would take 10 years to build a single gas tank.
If Newsom and the Democrats were truly serious about rapidly building new gasoline inventory capacity, they would suspend every environmental law in the state to do so. That would be quite the headline. AB 1 proposes no such thing.
Borenstein thinks only a modest increase in storage is necessary. But then comes the truly hard question: Who decides to tap into this reserve, and when?
The administration’s oversight wing in the energy commission, all 10 people according to Borenstein, simply isn’t capable of managing Big Oil. Every legislator has way more staff. California is regulating this industry, said Borenstein, with “a few lawyers, a few economists and a few industry specialists. That is not taking seriously a $50 billion-a-year industry in California.”
AB 1 is too late to do anything about price spikes due to shortages any time soon. An increase in the cost of gasoline by just 10 cents would cost Californians $4 million more every day at the pumps, according to an Energy Commission estimate. Undoubtedly more anger and financial frustration is on the horizon. The question is who to blame.
Is it Big Oil, which has amassed $55 billion in unexplained profits since 2015, according to Borenstein? Is it California’s environmental policies that have reduced our refining capacity by a third? Is it every California governor from Gray Davis forward who has never dealt with the inventory problem despite repeated warnings?
Slagle of the petroleum association suggests that if Newsom wants more gasoline storage tanks, the state can “find the land and build tanks. Maybe that’s a better solution.”
Maybe. But then Newsom would own the problem. That’s not going to happen.
Borenstein sees the day in the not-too-distant future when the state is “down to two or three refineries” as the transition from fossil fuels, and to renewable energy sources, unfolds. Nobody is truly managing the most complicated energy transition ever attempted. Certainly not this governor. Certainly not this legislature.
A special session, with a shell of a bill that hasn’t even yet been analyzed by staff, is certainly not the forum to think this through. It is, on the other hand, how to save face.
This story was originally published September 7, 2024 at 5:00 AM.