“Dangerous Game”: Chevron Warns California That Anti-Petrol Policies Could Result In Gas Price Spikes, Shortages

Chevron is warning the state of California that its climate policies have consequences: namely, that the price of gas is going to continue to rise. 

Calling the state’s policies a “dangerous game”, it was reported by Bloomberg this week that Chevron is warning the state of potential gasoline price spikes and shortages as a result of policies that discourage petrol production. 

In the last quarter of 2023, drivers in California faced an average gasoline price of $4.94 per gallon, surpassing the national average by approximately $1.72, marking the highest recorded quarterly difference, as per Bloomberg’s compiled data.

Head of Chevron’s U.S. refining, Andy Walz, said this week that the spike is partly attributed to California’s stringent low-carbon fuel regulations, which prompt refineries to shift from petroleum to renewable diesel production. This transition is curbing gasoline availability and causing prices to rise, he told Bloomberg. 

“They knew it was going to happen when they wrote the legislation. The problem is the consumer is starting to realize it. It’s becoming painful. The way politicians dealt with it was ‘let’s blame the oil companies,” Walz said. 

But – as expected – Governor Gavin Newsom’s office responded with a vague statement blaming oil producers that was barely one brain cell above throwing paint on the Mona Lisa: “Big Oil has been ripping off consumers for decades and lying to protect their profits.”

And so, the adversarial tone naturally drives producers from the state: “If they cap the upside when conditions are good it’s going to make it really challenging to want to put our money there. I cannot compete internally for big capital investments. It doesn’t stack up. I’d rather spend money at our refinery in Mississippi,” Walz said. 

As the report notes, Chevron’s relationship with California has become increasingly strained, with stringent regulations leading to a $4 billion asset write-down, mostly in the state.

While Governor Newsom accuses the oil industry of price gouging and climate change misinformation, leading to investigations and legal actions, Chevron simply says it is responding to demand and shouldn’t be penalized.

A new proposal to cap refining margins in California further complicates things for the refiner Chevron’s, with its two refineries representing 30% of the state’s capacity. 

The policies are forcing refiners to spots where they “are making decisions that are kind of putting us on a pathway where there could be a reliability problem,” Walz said. “You may not have the supply of gasoline if things don’t turn out the way the government wants them to. It’s a dangerous game.”