California Assembly is having an oversight hearing on the state’s oil and gas situation coupled with impact of war in Iran.
California lost two oil refineries this year. Average gas price statewide is now more than $6.
Newsom administration energy officials are up first.. 🧵
Chair of Utilities & Energy Committee @AsmCottie starts the hearing by saying tankers in Port of Long Beach are offloading 2M barrels of crude oil now.
“When this tanker is empty, it’s unclear where the next ship will be coming from”
Watch hearing here:
assembly.ca.gov/events/media/1…
@AsmCottie California Energy Commission Vice Chair Siva Gunda set the stage noting California's bringing in about 20% more oil because of the loss in Phillips 66 and Valero refineries.
He says CA crude oil prices are higher and will be compared to rest of nation even after Iran situation.
@AsmCottie Taking a look at $6 gas, Gunda points to gas tax increase and says biggest difference is related to crude oil prices.
Tai Milder with CA Division of Petroleum Market Oversight says California has a "serious pricing problem" when it comes to branded vs. unbranded...
@AsmCottie The branded vs. unbranded has been an annual discussion at the CA State Capitol for years and years and years...
Milder says crude oil price increases are playing out all across the U.S. He says there are higher prices in mid-west with state relying on local/domestic fuel.
@AsmCottie Milder talking about retail price differences. He says the office is investigating gas stations with outlier prices and notes they are all branded gas stations.
He said gap between unbranded vs. branded has increased over the last 5 years.
Brands include Chevron, Shell, 76...
@AsmCottie Western States Petroleum Association President Jodie Muller is up:
"California's petroleum system has been weakened by design, and global events are now exposing just how fragile it has become."
"This wasn't unforeseen... The CEC warned about this for decades.."
@AsmCottie WSPA urges CALeg to:
1) ensure there is in-state capacity to help when disruption hits
2) "stop believing" outsourcing energy needs will solve problems
3) fix hostile business climate pushing oil industry away
4) ensure state & locals are on same page about need for refineries
@AsmCottie UC Berkeley Haas' Severin Borenstein is here.
He tells lawmakers major difference between CA and rest of the country are taxes and environmental costs.
He also provides his annual comments about "mystery gasoline surcharge."
@AsmCottie Borenstein says essentially with the state's current environmental goals and closure of refineries, "the solution is imports."
"It's about port capacity, pipeline capacity, and most importantly it's about storage capacity."
Borenstein says he's not hot on refinery margin cap, he says it's not practical.
He also braces for members to be mad at him for this:
"The suggestion has been made that if we go to an E-15 blend that will solve our problems... it really won't. It might be helpful in limited times."
@AsmCottie Ok time for lawmaker Q&A.
Asm. Isaac Bryant asks if panel unanimously agrees war in Iran has impacted prices across CA.
"Yes".. Muller adds increases across the world.
@AsmCottie Bryant says he finds unbranded vs. branded price difference presentation "interesting" He also asks Borenstein to confirm mystery surcharge is bad for consumers.
Borenstein agrees, but says cost of doing biz in CA could help explain it. He says there's still digging to be done.
@AsmCottie Following the line of questioning, Asm. Petrie-Norris acknowledges the annual PSA to shop around for your gas.
@AsmCottie Asm. Lori Wilson asks how the state could mitigate global shock effects.
Borenstein says California could have a floating gas tax that declines when price of crude oil goes up, and goes up when crude goes down.
"There's no question it would help consumers"
@AsmCottie Borenstein tells Wilson a gas tax holiday, if state leaders wanted to do one, would need a specific end date, but notes it could be really difficult because people don't like having their taxes raised.
@AsmCottie In Q&A with Asm. Jacqui Irwin, Borenstein notes California Air Resources Board has a mission, but it's not to lower gas prices.
He says it's time to assess what CA is actually getting out of its special blend of gasoline and whether costs outweigh benefits.
@AsmCottie Asm. David Alvarez says this issue is serious and urgent and should be met with same urgency as Gov. Newsom's special sessions on gas price spikes in 2023 and 2024.
@AsmCottie Alvarez asks what happens if Strait of Hormuz is closed for another 60 days what happens.
Gunda does not see a supply shortfall within the next six weeks, but if it continues after six weeks we could see more exposure to price increases.
When asked for emergency plan,
Gunda acknowledges he has signed NDAs with oil industry on trade secrets as a monitor of pricing oil and gas situation, authority given to him in a law passed through one of CA's special sessions on oil and gas.
He confirms he's in negotiations to establish stability on CA fuel market for 3-6 months of certainty.
@AsmCottie Gunda says CEC is figuring out:
1) can California work with the industry in a coordinated way on imports?
2) can refineries source fuel in the event of an outage
3) tracking assets and commercial interests
@AsmCottie Alvarez flat out asks Gunda if CA should bank on relying solely on imports moving forward.
"Put all of our eggs into the basket?" for lack of a better term Alvarez asks.
"No," Gunda says.
@AsmCottie Alvarez asks Gunda what California should target at this point.
Gunda says California should protect its oil and gas assets at this point while the state is still thinking through its renewable energy transition.
@AsmCottie On Marathon's warning with cap & invest vote about its ability to operate in the state.
Alvarez asks if protecting those assets includes Marathon.
"Yes," Gunda said.
@AsmCottie Asm. Petrie Norris asks what CA could expect with prices if Strait of Hormuz stays closed.
Gunda says he expects average prices to remain below $7 in the near term.
Borenstein says if we went 60 more days it could be another $1 or $2 per gallon.
"That would be a crisis."
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