An energy “reality” reminder is that crude oil by itself is useless black tar, unless you build a multi-billion-dollar refinery to break it down to produce various transportation fuels and oil derivatives that are the basis of the products in our materialistic world.
Without the refineries that turn the black tar into important fuels and derivatives that are the basis of more than 6,000 products in our daily lives, life goes back to the 1800s.
Why would the California “users” of the products and transportation fuels made from crude oil and politicians want to drive the refiners out of business?
In the last five years, California crude oil refining capacity has dropped by 30%.
Crude oil production capacity in California is in terminal decline, resulting in the state importing from foreign countries more than 60% of the crude oil demands of in-state refineries.
Even now, given the amount of transportation fuels that California is importing from foreign countries, the state continues its vulnerability level of contributing to a national security risk.
Refineries are the supply chain source of those products and transportation fuels made from crude oil that have allowed the world to sustain 10 times more people today (8.3 billion) than at the start of the Industrial Revolution; 700-800 million people in 1750.
There is something wrong with this picture – the products from refined crude oil, in addition to supporting the lifestyles of 8.3 billion people, have helped the medical community and food/nutrition/fitness realm in extending average life expectancy from 30 in the mid-18th century to 74 today.
California’s in-state refining capacity for transportation fuels continues to drop:
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- Two refineries have converted to manufacturing renewable diesel. In these cases, 350,000 barrels of crude oil processing per day have dropped offline.
- Over the last year, two refineries – Phillips 66 in Wilmington and Valero in Benicia – have shut down local operations and are leaving the state.
These closures have increased the need for transportation fuels of gasoline, jet fuel, and diesel to be imported from Asian refineries. This has made California vulnerable to many scenarios that could quickly generate supply shocks or shortages for the entire U.S. Some of these scenarios include port problems, weather issues, unscheduled refinery downtimes, or a significant global event.
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- In the case of the Iranian war, that vulnerability has never been so clear.
- Due to the closure of the Strait of Hormuz, crude oil supplies to Asian refineries have dropped dramatically.
- Asian refineries have been forced to cut back their crude oil charge rates. This forced them, as of late March, to suspend shipments of gasoline, jet fuel, and diesel that they had been supplying for California.
California’s policies are forcing the hand of Chevron, PBF, and Marathon, the three remaining oil corporations in California. Together, they own six of the remaining seven operational refineries in the state. Between February 26 and March 9 this year, these companies did something unprecedented by dispatching three letters to the governor and the California Air Resources Board. While they have varied details, the letters were aligned in challenging amendments to the state’s cap-and-invest program.
These amendments will result in huge fee increases for all three corporations.
Now, we will see if warnings from in-state refiners come to fruition.
Chevron president of downstream, midstream and chemicals Andy Walz said in a letter to California governor Gavin Newsom and other state officials that the new rules would “cripple the survivability of the state’s remaining refineries” and “upend California’s fuels market.”
The amendments will also result in increased reliance “on costly and slow-to-arrive foreign imports that are ill-suited to respond to supply shocks and carry higher lifecycle emissions,” Walz said.
Our world is not dependent on natural fossil fuels, as no one uses “raw” crude oil that is only black tar, but we have become dependent on the products and transportation fuels made from oil.
Today, we are a materialistic society. Wind turbines and solar panels only generate electricity, and cannot make any of the products or transportation fuels that get made from fossil fuels … which support:
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- Hospitals
- Airports
- Militaries
- Medical equipment
- Telecommunications
- Communications systems
- Space programs
- Appliances
- Electronics
- Sanitation systems
- Heating and ventilating
- Transportation – vehicles, rail, ocean, and air
- Construction – roads and buildings
Discussing crude oil alone, too often consultants, educators, politicians, and industrial leaders cannot explain how the more than 350,000 wind turbines, and an estimated 3.5 to 5 billion individual solar panels in the world will make the following transportation fuels:
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- Bunker fuel to support more than 112,500 commercial and merchant ships globally
- Jet fuel to support 30,000+ commercial aircraft
- Gasoline fuel: worldwide consumption of approximately 1.45 trillion litres of gasoline annually
- Diesel fuel of about 1.5 trillion litres globally per year
Transportation fuel demands continue to grow to support jet fuel for planes, bunker fuel for ships, diesel for trucks, and gasoline for cars.
Energy-dense fuels such as coal, oil, and natural gas – demonized as sources of carbon dioxide – remain the backbone of food distribution, especially in the developed world. They fuel irrigation pumps, fertilizer plants, delivery fleets, farm machinery, and refrigeration. Remove these energy inputs, and granaries would shrink. Famine would no longer be a relic of history in the western world; it would be knocking at the door.
Only the U.S., China, and Germany have economies larger than California, so refinery shutdowns and drastic reduction of crude oil refining capacity are no laughing matter. If the six remaining refineries in the state go down, the ports of Los Angeles, Long Beach, and Oakland could follow. Logistics could collapse. The supply chain of the products and transportation fuels made from oil could grind to a halt. Within a few weeks, cities could see food shortages. This would have a cascading effect in Nevada, Arizona, and deep into the country.
All of these issues are intertwined, with crude oil production and refining acting as the backbone. If California breaks its economic back, paralysis is sure to follow.
(Ronald Stein – BIG Media Ltd., 2026)