California Eyes Takeover of Oil Refineries

In its latest move to echo Venezuela, California’s energy commission touts government control of the state’s once-booming petroleum industry.

SACRAMENTO, Calif. — Fresh on the heels of Gov. Gavin Newsom’s emergency legislative session that blamed corporate greed and price gouging for the state’s absurdly high gasoline prices, the state is seriously considering a government takeover of the state’s refineries. I kid you not.

If you think gas prices are high under the state’s absurdly regulated market-based system, just imagine what they’ll be under this scenario. California’s leaders don’t want us driving anyway, so then they could just raise prices at will — rather than indirectly through taxes and regulations — and force us into short-range electric vehicles. And California isn’t exactly known for efficiently operating anything. But at least oil refinery workers will get great pensions.

This possibility isn’t from the musings of paranoid conservatives.

“Russia. China. Venezuela. Iran. More than a dozen countries make gasoline at state-owned refineries. Could California be next on the list?” asked the Los Angeles Times in an article this week. “California policymakers are considering state ownership of one or more oil refineries, one item on a list of options presented by the California Energy Commission to ensure steady gas supplies as oil companies pull back from the refinery business in the state.”

Right after that special session resulted in the passage of a pointless and symbolic new law forcing refineries to maintain larger oil reserves, Phillips 66 announced its plan to shutter its Los Angeles operations and eliminate a total of 900 jobs (employees and contractors). “With the long-term sustainability of our Los Angeles Refinery uncertain and affected by market dynamics, we are working with leading land development firms to evaluate the future use of our unique and strategically located properties,” the company’s CEO said.

In August, Chevron — a company that has operated continually in California since 1879 — announced that it would move its corporate headquarters to Texas. California officials offered snarky responses. A spokesperson for Gavin Newsom said the governor wasn’t surprised and that “We’re proud of California’s place as the leading creator of clean energy jobs — a critical part of our diverse, innovative and vibrant economy.” Blah, blah, blah.

In fairness, the California Energy Commission report from August only touted the state takeover idea as one possible scenario, although most of its other scenarios also involved greater state control. Some of its findings seem to rebut the governor’s “price gouging” nonsense. Everyone knows that oil companies seem to be “greedier” in California than anywhere else because of state policies including high gas taxes, environmental rules, and special gas-formulation mandates.

The state’s lawsuit blaming oil companies for climate change doesn’t help, either. Consider this language from Attorney General Rob Bonta: “Big Oil continues to mislead us with their lies and mistruths and we won’t stand for that. Their ongoing egregious misconduct is damning. We will continue to vigorously prosecute this matter and ensure that Big Oil pays to abate the harm they have caused, and we will recover ill-gotten gains that will benefit Californians.” Would you do business in a state with this attitude toward your industry?

As the report noted: “The deployment of ZEVs [zero-emission vehicles] and a robust mass transit system are critical for achieving the state’s climate goals, reducing local air pollution, and eventually eliminating dependence on the volatile global petroleum markets. As demand for gasoline shrinks, refineries may close or convert to processing clean transportation fuels. This will lead to fewer gasoline refineries, with increased market concentration and associated market problems that often accompany it.”

That suggests that higher prices are indeed the result of California’s green agenda rather than corporate behavior. Obviously, as the state chases away refineries, it gets fewer refineries. Given that fuels-formulation mandate, the state can’t just get more fuel from neighboring states. It can rely to some degree on imports. But, as the report added, those come with higher cost structures. The state can’t credibly complain about oil company pricing at the same time that it forces those companies to charge more because of state policies.

The report specifically mentions that our higher gas prices are tied to environmental mandates. It’s also well established that the state’s policies that reduce homegrown production make California consumers more susceptible to price spikes as the few remaining refineries occasionally have to shut down for maintenance or repairs. Like most California crises, this one is totally self-inflicted. The solution to exorbitant gas prices is to free the market, not put government in control of it.

“The idea that state bureaucrats — many of whom have spent years waging war against the oil industry — could suddenly turn around and competently manage a refinery is laughable,” wrote Charles Rotter in the Word Merchant Substack. “Running a refinery requires expertise, efficiency, and adaptability — qualities not typically associated with government-run enterprises.”

Or as Senate Minority Leader Brian Jones, R-Santee, told the Times: “Now, after we’ve chased them off, we’re talking about taking them over to ensure there’s some supply. We’re moving toward price controls and government takeover of industries. That’s never worked very well in the history of the world.” It certainly never has, but that doesn’t mean California won’t be willing to try it. But who will officials blame for soaring prices and gas lines?