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Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

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The Irony of California’s Oil Dependence

California has become notorious for its war on fossil fuels, which has made the state the largest electric vehicle market in the United States if not the largest producer of renewable electricity. And yet, for all its green efforts, California continues to be uncomfortably dependent on foreign crude oil that, according to at least one analyst, makes the state a risk to national security.

California’s oil production has been falling steadily as a result of the environmental push of the local government and legislators. Yet its consumption has been rising, which may sound counterintuitive, but it is a fact stated by the California government, writes energy expert Robert Rapier in a recent article for Forbes. Gasoline sales in the state rose from 942,000 bpd in 2012 to over a million bpd in 2018, and sales of diesel--the dirtier fuel--rose even more. A lot of the oil that goes into making these gasoline and diesel comes from overseas.

Foreign crude accounted for 57.5 percent of the feedstock for Californian refineries last year, according to data from the California Energy Commission. This translated into an average of almost 370,000 bpd. Locally produced oil account for 31.1 percent, or 199,658 bpd, with the remainder coming from Alaska.

Of the imported oil, the largest chunk came from Saudi Arabia, at 28.51 percent of the total, as of 2017. Ecuador followed, covering 20.14 percent of California’s oil imports, and Colombia came third, covering 14.16 percent of imports. California also imports smaller amounts of crude from Iraq, Kuwait, Canada, Mexico, and Brazil, among others. Related: This Is How The U.S. Plans To Cripple Iran’s Economy

The significance of this particular import mix lies in the fact that Saudi Arabian, Kuwaiti, and Iraqi oil exports pass through the Strait of Hormuz, the world’s largest oil chokepoint and currently the focal point of the latest U.S.-Iran tensions. Iran has threatened repeatedly to close the strait if the U.S. continues pressuring it, but it has yet to act on this threat. Most geopolitical analysts doubt Tehran would indeed try to close the chokepoint risking an open military confrontation with the U.S. but the possibility is there. And California is more vulnerable to such an event than other states.

This is where the irony lies. California is the state with the highest fuel taxes, even though some blame the higher prices at the pump on refiners rather than the state government. State legislators have done their best to curb drilling for oil wherever and however much they can as the state bets big on renewable energy. Municipal governments have sued Big Oil for climate change that they claim is the singular result of the operation of the oil industry. And yet the state is guzzling increasing amounts of oil. That’s despite the fuel tax introduced a few years ago that has been rising steadily. Related: Libya’s Oil Production Could Double Within 5 Years

Recently, the California Energy Commission said it would launch an investigation into why Californian drivers pay more at the pump than drivers anywhere else. One might think the fuel tax would be mentioned as a possible reason, and it was, by a Republican legislator. The commission, however, is blaming high-end brand refiners that can charge more for their fuel than smaller fuel station operators and a refinery outage that occurred back in 2015.

The President of Consumer Watchdog Jaime Court also blames refineries: "We are an isolated market, and we have five oil refineries that control 90% of the gasoline in this state in terms of making it, and also in Southern California, control 80% of the retail gasoline stations," he said recently, commenting on where prices are heading.

It could be just a matter of time before the California regulators turn their attention to the primary source of this oil. It might never happen given the lack of readily available alternatives, mostly due to lack of transport infrastructure. Yet even the California regulators would be hard pressed to argue that the state’s dependence on imported oil is not good for anyone, either the government’s plans for a green future or the average driver paying through the nose to fill up their tank.

By Irina Slav for Oilprice.com

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