A Self-Imposed Energy Crisis

It is key to note here that the Golden State’s looming energy crisis has arisen almost entirely as the result of years of policy decisions made by the state’s government. Drivers in California have long paid the highest gasoline prices in the nation thanks largely to the state’s onerous gasoline tax, which also ranks as the highest of any state. As time has gone on, the state has layered additional taxes, fees, and other costs to pump prices stemming from an array of policies designed to make driving more costly and force drivers to purchase electric vehicles under Governor Gavin Newsom’s aggressive EV adoption targets.

At the same time, legislative actions and regulatory measures enacted by CARB and other state agencies have been designed to shut down the state’s once prolific oil and gas industry. Drilling permits take months, even years to acquire when they aren’t outright denied. The Newsom administration has refused to allow the building of much needed new pipelines and worked overtime to force the closure of California’s handful of remaining oil refineries, creating the need to import refined products in addition to crude oil.

As a result, a state which once exported its own oil production and refined products to other states and overseas has become broadly reliant on imports to meet the needs of what is the world’s 5^th largest economy. It’s a dangerous formula similar to the fix in which Germany currently finds itself after 20 years of the same kinds of policy choices.

“We’ve been telling them for years that this policy of relying on foreign governments for oil and gasoline is probably not in the best interests of California,” Mische says. “Considering we have the fifth largest reserves in the United States, why don't we develop these resources internally and keep the money here? And that just fell on deaf ears. So, either the Governor's incapable or unwilling to fix the problem.”

An Energy Island Headed Towards Crisis

A significant piece of the problem is the fact that the state’s policy choices have turned it into a de facto “energy island” which prevents it from easily and quickly importing gasoline, diesel, jet fuel and other products from nearby states. California’s Low Carbon Fuel Standard (LCFS) mandates a special blend of gasoline not used in the rest of the country. The research team has urged Governor Newsom to temporarily suspend the LCFS for the duration of the current crisis but has been ignored.

But even if Newsom were to agree, the absence of pipelines coming into the state would present a roadblock, as the paper notes. “[S]ince California has no in-bound pipelines, this action will not result in additional gasoline at the pump until mid-May unless more drastic measures such as rail or truck transportation is used.” The researchers note that the lack of pipeline capacity would result in hundreds of additional tanker trucks along with hundreds of rail cars streaming into the state every day.

Mische is concerned that a very real crisis is looming with no one in charge apparently willing to take responsibility for doing anything real to address it. He testified last month before the state assembly in favor of a bill which would provide some relief to consumers, but the legislation didn’t even survive a committee vote.

Governor Newsom has used the rising gasoline prices as an opportunity to blame President Trump. While it is certainly true that gas prices in California and the rest of the country have risen since the Iran Conflict started, neither the President nor anyone else at the federal level can be blamed for the state’s $2/gallon price premium at the pump. Nor is anyone outside the Golden State to be blamed for the conscious decision by state policymakers to shut down their oil, gas, pipeline and refining sectors and rely on countries like Iraq, South Korea, India and even the Bahamas for their state’s energy needs.

The current global oil and natural gas supply crisis has served to highlight the enduring adage which holds that energy security equals national security. Everywhere outside California, the United States enjoys one of the highest degrees of energy security on earth. Inside California, a very real energy crisis is brewing.