Just when you think California didn’t have enough foot left to shoot, it pulls out a gun and does it again. This time it involves the initial step toward California nationalizing the gasoline refinery industry. The California Energy Commission (CEC) has proposed several government regulations of the petroleum industry in order to combat future gasoline price surges. CEC regulators announced proposed government controls of the petroleum industry, ostensibly to combat future gasoline price surges. CEC’s proposed fiasco is unbelievable since it has a clear vision of the ultimate outcome: Venezuela.
The CEC announcement comes as Chevron, one of the largest oil companies in the U.S., announced that it will relocate its operations to Houston, Texas, is moving out of San Ramon, California. Its decision to leave follows years of aggressive environmental policy making from Democrats that hurt the company’s business.
The CEC report is laughably called “Transportation Fuels Assessment: Policy Options for a Reliable Supply of Affordable and Safe Transportation Fuels in California”. It’s laughable because the report title includes the word ‘Affordable.’
The report begins with this ‘justification‘: “The deployment of ZEVs [zero-emission vehicles] and a robust mass transit system are critical for achieving the state’s climate goals, reducing local air pollution, and eventually eliminating dependence on the volatile global petroleum markets. As demand for gasoline shrinks, refineries may close or convert to processing clean transportation fuels.”
Here’s the clincher: “This will lead to fewer gasoline refineries, with increased market concentration and associated market problems that often accompany it… Like most product prices, gasoline prices should ideally obey the laws of supply and demand. However, supply dynamics in California’s transportation fuels market differ from many other markets in the United States.”
CEC expects some of California’s nine oil refineries to be shut down due to decreased demand, thus giving the remaining open refineries increased pricing power that would increase the possibility of a sharp escalation in gas prices. CEC therefore maintains prices must be managed by the government.
CEC proposals include:
The State of California would purchase and own refineries in the state to manage the supply and price of gasoline with the scope of the initiative ranging from ‘one refinery to all refineries in the state.’
During times of lower gas prices, fees would be levied in a variable manner to then allow for stabilization initiatives during California-specific price spikes.
California would actively regulate the operating rules, prices, and rate of return of petroleum fuel market operators similar to the current structure used to manage private electric and fossil natural gas utilities as natural monopolies where California sellers would be required to have prices approved by the designated State authority and spending would have to be approved for cost recovery in prices.
California would measure, publicize, and potentially manage retail margins, assure that all gasoline that is sold at retail stations in California is not sold at excessive retail margins.
To further exacerbate the situation, California governor Gavin Newsom claims that California’s highest-in-the-nation gasoline taxes and its air quality challenges that requires unique gasoline compositions that differ from the rest of the nation didn’t cause current gasoline price increases. They were caused because of price gouging by the oil industry. In response, Newsom signed a bill to address alleged price gouging.
94.5% of the population live below the poverty line.
Venezuelans, in 2020, paid $2 per liter ($7.57 per gallon) for gasoline. This was one of the world’s highest prices and a sharp reversal for an OPEC nation that long said it had the world’s cheapest gasoline because it had the greatest proven oil reserves in the world. Why the reversal? First, Venezuela nationalized its oil industry in the mid-1970s. Petróleos de Venezuela, S.A. (PDVSA) was created to manage operations. Second, the oil industry’s deterioration increased when Hugo Chávez fired PDVSA’s most experienced engineers in an act of petty political retribution.
Venezuela, with the world’s largest proven oil reserves, ran out of gasoline. The socialist governments of Chavez and Maduro lost the ability to pump oil from the ground and refine it into gasoline. What little gasoline that’s available comes from Iran. But the Venezuelan government, which doesn’t officially charge at most gasoline stations, uses a quota system, so a fill-up can mean waiting in line for days.
The quota system is Sistema Patria (Homeland System), a platform created four years ago by Maduro’s government to distribute pension payments. It expanded to include gasoline prices. The system provides Chavismo (a left-wing political ideology based on the ideas, programs, and government associated with President Hugo Chávez between 1999 and 2013) with leverage for social and political control and to distribute resources in a country that has shed 70% of its gross domestic product since 2013.
Here’s the frightening part: It has the ability to monitor elections. Is this what awaits California?
José Toro Hardy, an economist and former director at PDVSA, said, “PDVSA once had over 20 refineries around the world. We were able to move our oil from the nation’s subsoil into the tanks of American drivers. And the entire process was managed by Venezuelan entities with Venezuelan oil wells, pipelines, Venezuelan tankers… We had built something gigantic, but suddenly, we were faced with a costly historic accident: Hugo Chávez won the election.”
The collapse in the oil industry is a stark reminder that the most valuable commodity isn’t the natural resource, but the human expertise to put it to productive use.
Is the CEC going to turn California into Venezuela? Is Governor Newsom, known to be hostile to the oil industry and committed to ZEVs, climate goals, and a clean environment, going to implement CEC’s proposals as an act of petty political retribution?
This is a good reason to get as many people as possible to vote for Donald Trump. If Kamala Harris somehow gets elected, she and the Democrats will print as much money as it takes to put deep-blue California back on its gasoline feet.
Warren Beatty has created a web page that facilitates quick responses and/or comments to anything you consider outrageous: quick-rant.atwebpages.com
Image: AT via Magic Studio
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