Chevron Blames State’s Energy Policies for High Gasoline Prices
Oil company cites “adversarial” policies for cuts of “hundreds of millions of dollars” in investment since 2022.
Chevron blamed high gasoline prices on California’s “adversarial” policies toward fossil fuels and cited “burdensome” policies that deter energy investment in the state in comments filed with the California Energy Commission (CEC). Chevron is one of the state’s oldest producers with involvement in all areas of the oil business.
The comments were submitted for an information session on the proposed “Maximum Gross Gasoline Refining Margin and Penalty” under SBX1-2. Newsom signed SBX1-2 in March 2023 to give the CEC new powers to monitor the gasoline market and impose penalties on refiners who charge more than a maximum margin for refining gasoline. The regulator was created as part of efforts to penalize “excessive” oil company profits in response to record high gasoline prices in California.
Chevron argued that the “distortive effects of [a gross gasoline refining margin penalty] would likely run counter to the goal of ensuring that gasoline remains affordable and reliable, in addition to ever cleaner.” The company noted that, “[r]ather than solving supply challenges or enabling increased production of clean, affordable gasoline, a margin penalty would contribute to a decades-long trend of decreasing investment and tightening supply.”
Policies Deter Investment
The company noted a number of factors that influence California gasoline prices, including government policies, crude oil prices, geography, and taxes and fees. “[I]n the California gasoline market, increasingly burdensome government policies, passed with the stated aim of reducing gasoline supply, have driven a wedge between supply and demand,” the company wrote. It cited “onerous permitting restrictions for crude production or energy” and “unique environmental policies.”
“A margin penalty will not resolve upstream, midstream, or downstream policies that create supply restrictions. Nor would a margin penalty ease crude oil prices, geographical challenges, or high taxes and fees,” the company wrote. The company argued that a margin penalty will further deter energy investment.
“California’s policies have made Chevron’s investments in its home state riskier than investing in other states, with projects being lower in quality and higher in cost. Chevron alone has reduced spending in California by hundreds of millions of dollars since 2022 – California’s policies have made it a difficult place to invest so we have rejected capital projects in the state. Such capital flight reflects the state’s inadequate returns and adversarial business climate.
Chevron also stated that the CEC and the state legislature “have yet to articulate a theory for how a margin penalty can solve any of the challenges that all stakeholders agree face the California transportation-fuels market. Until and unless it can do so, the CEC should refrain from adopting a policy that can only exacerbate those challenges.”
Market Uncertainty Impacts Renewable Energy
Chevron also argued that a margin penalty will create uncertainty in the energy markets and will decrease overall energy investment in California, including in renewable energy. “Uncertainty with the potential imposition of a margin penalty on our refineries would impact our ability to fund similar renewable energy projects.”
Chevron argued that the state should “shift away from a policy platform that disincentivizes production of affordable, reliable, and ever-cleaner energy and toward one that is more pragmatic, incentivizes investment and innovation, and recognizes challenges of scale and the need for diverse solutions.” It noted that energy companies “can make voluntary lower-carbon investments but can only do so in a policy environment that supports and encourages those investments.”