CA Gov. Newsom Signs Law Forcing Oil Companies to Stockpile Fuel
The unintended consequences are already beginning, as Phillips 66 to cease operations at Los Angeles-area refinery.
Legal Insurrection readers may recall a post I did in September, reporting that California Governor Gavin Newsom was forcing the California Assembly into a special session to push through legislation requiring oil companies to amass stockpiles of gasoline and other fuels to prevent supply shortages and price spikes during refinery outages.
The proposed measure has now become law.
The new legislation was inspired by findings from the state’s Division of Petroleum Market Oversight that showed that gas price spikes are largely caused by increases in global crude oil prices and unplanned refinery outages.
The law gives energy regulators the authority to require that refineries keep a certain amount of fuel on hand. The goal is to try to keep prices from increasing suddenly when refineries go offline for maintenance. Proponents say it would save Californians billions of dollars at the pump.
Newsom joined lawmakers at the state Capitol to sign the law and criticized the oil industry for its efforts to keep the legislation from passing.
The legislation gives another state bureaucracy enormous power over our energy producers.
When the bill takes effect in 90 days, a state regulatory agency, the California Energy Commission, will have the authority to set constraints on storage levels for each refiner, each fuel and each blending component, per the bill. The agency will also be able to adjust inventory minimums, as well as establish conditions under which refiners can draw down or rebuild reserves.
The legislation will also allow the regulator to ensure that refiners have resupply plans in place ahead of maintenance outages and to set criteria that must be met before such events occur.
I am sure Newsom plans to tout this law as some big victory over Big Oil. What is missing in the reports is the fact that one of our major petroleum companies moved its headquarters to Texas…due, in large part, to bureaucratic strangulation and excessive regulations.
As a reminder, it was no small move. Chevron has been in California for over a century, opening in 1879 near Pico Canyon. The official announcement came in August 2024, declaring a move from the balmy San Ramon to the heart of oil country, Houston, Texas. The move was attributed directly to California’s high operating costs and regulatory environment.
The constant attacks on the petroleum industry as “price gougers” and “environmental destroyers” from the political class in this state probably also inspired Chevron’s decision.
Thanks to the new rules, oil companies are now tasked with maintaining reserves, which involve space, security, and maintenance costs. The logistical challenge is not just about having the space but ensuring these stockpiles don’t degrade over time (the shelf-life of stored gasoline is about 6 months), and setting aside the monies to support these facilities.
Furthermore, as Chevron shows, there are 49 other states in this union. Refiners can consider operations elsewhere, where they’re not subject to stockpile mandates.
In fact, the unintended consequences are at the beginning. Phillips 66 says it plans to stop operations at its Los Angeles-area refinery in the fourth quarter of 2025.
The stoppage will affect the 600 employees and 300 contractors who operate the refinery.
The exit follows California Governor Gavin Newsom’s signing of a bill on Monday requiring oil refiners to maintain a minimum fuel inventory and authorized the state’s Energy Commission to ensure refiners plan for resupply during maintenance outages to prevent supply shortages.
“With the long-term sustainability of our Los Angeles Refinery uncertain and affected by market dynamics,” the company is working with land development firms to evaluate the future use of its properties near the Port of Los Angeles, said CEO Mark Lashier.
I suspect the new rules are going to make a trip to the pump even more painful for Californians.
If Newsom plans to tout this misadventure as a “win” in 2028 and a model for the country, I don’t think it is going to work out well for him.
DONATE
Donations tax deductible
to the full extent allowed by law.
Comments
I wouldn’t have thought the name “Gavin Newsom” was penned by Ayn Rand in Atlas Shrugged but I’m going to change my mind.
I’m not sure if Newsom is stupid or evil; but I’m not sure it matters.
Oh, well… Who is John Galt?*
*I think “Elon Musk” is definitely a name that could have sprung from Rand’s imagination.
It is more accurately “Gavin Noisome.”
noisome
/ˈnɔɪ.səm/
adjective
1)Morally hurtful or noxious.
2)Hurtful or noxious to health; unwholesome, insalubrious.
3)Offensive to the senses; disgusting, unpleasant, nauseous; foul, fetid, especially having an undesirable smell; sickening, nauseating
He’s both stupid AND evil
Of course, the legislature has given them a “green light” to build more storage facilities.
.. if you believe that, I have some beach front property to sell you in Montana
This is the sort of regulatory overreach that causes business to question remaining. This is an unfunded mandate from the State to force business to absorb the costs of creating and maintaining additional stockpiles above their current voluntary levels. If the CA legislature evolved the establishment and maintenance of such additional stockpiles are a necessary public good then they should create a State owned facility, buy in fuel and maintain a rotation of sales/purchases to keep inventory
fresh.
“But, but, no one would leave California — we have good weather!”
Too bad about the political climate. It is hurricanes, tornadoes and earthquakes without the cleanup of a tsunami.
I left iin the 1990s as I saw what was happening and how my state was getting crazier as all the wackos from the rest of the country migrated into it.
Oil companies should just raise the retail price of fuel, capturing all costs + a nice profit over the next year.
Later they can sell that oil at market price.
I wonder if Newsom understands that gasoline rapidly degrades?
Trust that greasy and stupid Newsolini’s diktat will achieve the opposite of his loudly-touted consumer price relief. Just like the wretched, idiotic and unconstitutional diktat of Obamacare. Whenever the vile and stupid Dhimmi-crats claim that their idiotic, neo-communist schemes will save consumers money, it’s as sure as the day is long that precisely the opposite will happen.
Oil companies and refiners will eventually shut down all of their California refineries, after fairly and rationally deciding that the cost and expense of maintaining massive fuel reserves are untenable and an albatross on their bottom line. Refined gasoline will then have to be shipped into California by tanker truck, resulting in massive price increases.
Add a 32 oz botle of Stabil to each storage tank to extend gasoline life for up to 2 years.
That and buy straight gasoline, no alcohol. Especially for your generator. Those who do not have storage should have one or more 55 barrels or even a larger tank. Whatever season has disaster risk, start with a week or more storage, when past the season use it in your car, and refill with fresh gas.
Diesel is good for 10 years, though the generators are expensive.
This is something beyond typical libtard stupidity. I STRONGLY believe that at some point, we’ll learn many of these DNC politicians are simply paid agents of China. Unfortunately, we probably won’t learn the truth before it’s too late.
The Babylon Bee deepfake Newsom ad SAID Xi was his boss. Among many other genuine claims.
commerce clause violation?
Or, maybe a Dormant Commerce Clause violation. States can enact legislation that compels manufacturers/producers to produce products in a specific way that are sold in their state. But, they’re generally prohibited from enacting legislation that impacts trade with other states or countries. What they’re enacting is a wholly artificial control on inventories, which of course could potentially be a significant impact on the national, and even international, commodity markets.
I like the argument but I do note that Chevron (and apparently Phillips) have found it more practical to move out than fight about it…
Well, would you want to fight through the courts in commiefornia, then through the 9th circus to get to a court that might give you a fair shake?
Ha ha! Great point! Wickard v. Filburn rears back to bite Democrats!
This will just add another dollar to each gallon of
So in other words he wants to force oil companies to create a strategic reserve? Something democrats piss away in election years in order to help their socialist candidates?
His first idea was to require every homeowner to store 200 gallons of e85 in his garage to be recycled twice a year.
First he was going to require them to store 200MW of electricity at home.
Dammit! Don’t give them any ideas!
Emptying your emergency generator gasoline into the car twice a year puts lots of hydrocarbons into the air, defeating the California-mandated gas can spout fiasco. So there’s that plus.
Insurance companies would object to garage storage, with good reason. E85 is crap.
And Gavin will discover…
1) You can’t truly force ANYONE to make things (without a Simon Legree overseeing their every move), and
2) Those that do comply will simply raise the cost of their product to cover the costs and maintain it at a higher level, negating the edict.
Cost of gas will not come down. When the reserves get filled it places a demand on the oil market (the global supplier has to redirect product to California’s refineries and therefore leaves less supply for the rest of the market, thus driving up the price, at that point in time in the spot market).
Second, Democrats have no concept of ‘replacement costs’. Should there be a disruption and the reserves are tapped, the state of California will not allow the price to reflect the market and instead will force the oil company to sell at the price “when the reserves were filled”. This will entice the oil companies to sell to what other markets will bear — or release the oil as slow as possible as replacing the stocks will be at the higher market prices at that time.
What will happen is that California will use the law to force suppliers to set a price based on what regulators want. Stocks are not being drained fast enough? That’s a conspiracy! Stocks are not being refilled fast enough? Another conspiracy! And so on. It puts everyone is a losing position, Except for friends and families of CA politicians who invest in oil stocks.
Illegal? Immoral? Does it matter any longer? I wonder what these legislature apparatchiks were like as kids? Where did we go wrong?
We went wrong when we failed to wall California off.
perhaps if california allowed fuel from other states to come in this would not be an issue. nah that makes too much sense.
CA does import Gasoline from other States, it comes in by ship from the refineries in States along the Gulf of Mexico. They also import lots of electricity and way more than half their NG consumption.
isn’t that only raw fuel that has to be refined in CA due to CARB?
maybe I read the stuff wrong many months ago.
Not sure what you mean by ‘raw fuel’. It’s gasoline and diesel. I suspect some is already refined to CA standard and some isn’t. In either case it ain’t oil though CA.does import oil in addition. This closure is on top of two refineries repurposed to make biofuel in the last few years.
Once again, a government run by people who have never had real jobs decides it should tell people who have been doing the job forever how to do that job. Ripped from the pages of Atlas Shrugged!!
Newsom is a Dunning-Kruger poster child.
pull out of ca NOW
lets see how ca handles that
and then the feds step in and try and force them to
and they wont and then the military is summoned by the leftists
take back the country right now
cause even djt cant save this mess
pretty sure increasing the cost of gas production won’t lower the price.
Getting a permit to build, fighting the numerous court cases and actual construction it may be 2050 before the first tank would become functional.
If reserve depot construction moves at the same pace as federal EV recharging station construction, we are in for a magnificent demolition-derby clown show.
CA high gas costs aren’t just a once or twice a year seasonal occurrence, triggered by seasonal change in fuel blend. CA gas costs are highest in nation year round. Only hawaii is sometimes more expensive.
This is isn’t going to bring relief to CA residents.
OMG. Who’s the fascist now? One of the key tenets of fascism, and one that differentiates it from communism, is that under fascism, there is nominally a private business sector. But under fascism, the “private” sector is so tightly regulated by the government, that it is de facto, a government run company.
This is what Newsom is doing. He is regulating private industry so much that it becomes a de facto government run enterprise.
Astonishing only if you are a leftoid who still believes fascism is “right wing.” Before Mussolini was a fascist, he was a communist He didn’t experience a Road to Damascus moment that spun him 180, he just made an adjustment to socialist strategy.
I can easily see a California where the energy sector of the economy has pulled out as much as it can and what remains is being regulated for failure, where the transportation sector of the economy is absolutely dependent on a non-existent reliable fuel supply from the energy sector, and where the rest of the non-governmental economy cannot operate because of the problems with the first two. Said non-governmental economy will be beating feet to move out of California if it can afford to and is not blocked by Sacramento equivalent of a Berlin Wall.
That means that tax revenues will disappear as will political power on the national stage. Now toss in the ongoing waves of hostile foreign invaders being welcomed who have first claim on government resources over Americans.
If you have a morbid sense of humor, it will be amusing to watch from a distance.
Subotai Bahadur
He doesn’t stockpile water with reservoirs…
And that is CRIMINAL.
That is a great observation!
Since they are going electric why are they worrying about the price of gas? Any time now they won’t need any gas at all.