Gov. Newsom's Phase-out of Oil Production Prompts Backlash in Kern County

"The arrogance and hypocrisy of this administration to deny Californians access to our own natural resources is appalling," said the measure's author, Second District Supervisor Zack Scrivner. 

Last month, Cox reported on the reactions by economists on Newsom's dual approach to climate change – tackling both supply and demand.

"If California consumers continue to demand the same amount of gasoline, it will just come from elsewhere," said Stanford University environmental economist Charles D. Kolstad..."It would be far more effective to take steps to reduce California oil consumption, which is one of the consequences of the state's pushing electric vehicles," he wrote.

Cox points to the decreasing amounts of in-state oil, and increasing imported oil, transported to California's 12 refineries that supply the state's light and heavy-duty vehicles the gasoline and/or diesel fuel. In 1998, almost 50% came was transported from the state's oil fields via pipelines, with the remainder coming via ship from abroad (only 16%) and Alaska (34%). Last year, the supplies from the state's oil fields dropped to 31% while foreign sources supplied 58%. Unlike natural gas pipelines, California has no oil interstate pipelines.

One of the main studies supporting a supply-side approach can be found in a briefing paper released in February 2018 by the Stockholm Environment Institute mainly based on global oil prices and supply and demand forces.

"Even though other regions would likely increase production somewhat, the authors estimate that global oil use would still drop by 0.2-0.6 barrels for every barrel that California does not produce," reported Nicholas Kusnetz for InsideClimate News.

In addition, the briefing paper argues that emissions from oil and gas extraction, which accounted for 4.1 percent of greenhouse gas emissions in 2017 (see California Air Resources Board chart [pdf] on pg. 6) would be reduced, though technically they would be "outsourced." Tackling oil demand, on the other hand, would address the 41 percent of emissions that result from transportation.

The SEI researchers also noted that "due to the widespread use of enhanced recovery techniques, such as energy-intensive steam flooding, California’s most productive oil fields are more GHG emissions-intensive than the average blend of crude oil" [see page 4 (pdf)].

Can California be a climate leader and remain a major oil producer? One of the study's authors, Peter Erickson, was interviewed in a New York Times article in 2017 about just that topic. Norway, which enjoys the world's largest per capita adoption of electric vehicles, is also a significant exporter of oil.

Severin Borenstein with the Energy Institute at the Haas School of Business UC Berkeley noted the uncertainty of the paper's finding in an op-ed in the Los Angeles Times, and pointed to a second downside of the strategy.

It will cause a huge transfer of wealth from consumers to producers. Remember, the way that the policy reduces emissions is by raising the price of oil, which means all consumers pay more and all producers (except for those curtailed in California) make more money.

Severance tax

Some supply-side side approaches to climate policy really do make economic sense. A state-wide severance tax, strongly opposed by the oil industry, would shift revenue from consumers to programs that benefit California, rather than foreign producers. California is the only oil-producing state lacking a statewide severance tax. The most recent attempt, SB 246, introduced last February by Sen. Bob Wieckowski (D-Fremont), has yet to be heard in committee.