Fearing refinery closures, a California board proposes state purchase and operate the facilities

The California Energy Commission has put forth a proposal for the state to purchase and operate refineries. 

The commission oversees California’s goal of eliminating fossil fuels as a source of electricity. Its “Transportation Fuels Assessment” recognizes that gasoline fuels power most vehicle miles in the state, and gasoline prices will have impacts across the state’s economy.

The report predicts that gasoline demand, which peaked in California in 2005, will continue to decline over the next two decades. 

“However, the CEC projects that gasoline demand will remain above two hundred thousand barrels per day (TBD) at least through 2035 if not longer. Even under the most aggressive scenario transition to ZEVs, millions of petroleum- fueled vehicles are anticipated to remain on California’s roads and highways beyond 2035,” the report states. 

The report predicts that the state’s nine refineries will close as a result of the CEC’s projected decline in demand, and the remaining refineries will have a lot of control over important energy products. 

“Harmful industry conduct will be amplified by bad actors acting anticompetitively,” the CEC warns. “During this critical transition period, additional oversight is necessary to protect Californians from further market dysfunction and potential market manipulation.”

The solution is for the state to take control of the refineries, which the CEC believes will produce better outcomes for consumers. 

“The State of California would purchase and own refineries in the State to manage the supply and price of gasoline,” the report proposes. “The state would operate a market independent source of production, which would eliminate potential market manipulation.” 

The report notes that it’s expensive to purchase refineries, that there are significant legal issues with the scheme, and “there are complex industrial processes that the state has no experience in managing.” 

The report offers other proposals, including fees during lower gas prices that could fund mitigation efforts during price spikes, or the state could implement price controls. 

The U.S. experimented with energy price controls in the 1970s under then-President Richard Nixon, which are today considered a contributing factor in the decade’s energy crisis. Venezuela nationalized its oil industry in 1971, which preceded a collapse of oil production in the socialist nation.