Please note that the transcript provided below is AI-generated and intended for reference. It may contain missing words, misspellings, or other small errors. To request a correction or clarification, please contact info@theclimatecenter.org.
Woody Hastings, The Climate Center (00:00:30):
Well, thanks again everybody for being here. My name is Woody Hastings. I’m the Phase out Polluting Fuels Program Director for The Climate Center, and I organized this panel. Hope it’s an informational, helpful session for you. And it is the session in the phase out polluting fuels track. The Gasoline Scene: Supply, Refining, Reliability, and Affordability. This is our moderator and our panelists. You’ll see this slide again when I bring up Aarón Cantú to introduce our panelists and thank you to our panelists for being here. I do want to mention that unfortunately, Jamie Cort from Consumer Watchdog, his flight was delayed and then ultimately canceled. He’s not going to be here to join us. Some of us will try to speak to his slides a little bit because we do have his slides in this presentation.
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Just a real quick thank you to our sponsors again. They were mentioned this morning. I’ll mention them again. These are our top sponsors. We couldn’t do this without them. More of our sponsors in multiple levels. If you’re ever interested in sponsoring a Climate Center event, let us know. And even more sponsors. So thank you to them. And also to individual donors who help make the event possible.
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We also have promotional partners. If you’re interested in being a promotional partner, those are some of the promotional partners that we invite organizations to help us get the word out about these summits that we do. This is our fifth annual summit. If you have not yet jumped onto the event leaf program, there’s the hashtag if you want to follow along and network and do all the things you can do with the event platform. And if you’re on the socials, we’d love to have you put out information out there on all those social media channels. And so it’s CA California Climate Summit there, and there’s all the various platforms that we’re on. And with that, I would like to invite Aarón Cantú of Capital & Main, reporter with Capital and Maine, to come up and introduce the rest of the panel. And so Aarón, without further ado, I hand it off to you.
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Aarón Cantú, Capital & Main (00:03:04):
Thanks, Woody. And thank you to The Climate Center. My name is Aarón Cantú. I’m a reporter with Capital & Main covering climate and energy policy since 2021. I’m going to set the stage a little bit for what we’re going to talk about, and then I’ll introduce the panelists. I’ll introduce our first panelist, Ilonka Zlatar, and then introduce people as they speak. So California’s in the middle or beginning middle of an energy transition that is succeeding by most measures. Two and a half million electric vehicles are on the road today, up from zero 26 years ago. Gasoline cars are also more efficient than ever, and demand for gasoline is falling by design. Well, you could say we’re dealing with some transition growing pains. Last October, Phillips 66 shut down its LA refineries, and this month Valero is closing its refinery in Benicia. Together, those two closures represent 20 percent of the state’s refining capacity gone.
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To manage, California is relying more on imports. Refined gasoline and blend stock shipped from overseas and sent to the pump. It’s worked to keep prices from spiraling, but the situation has changed and the effects of the Iran war are being felt at the pump. So this is the tension that the panel will grapple with today. The policies driving refinery closures are a success, but for most of us still driving gasoline cars, we’re facing a system under stress. And refinery workers who built their careers at these shuttering facilities deserve more than to be treated as an afterthought. What’s the best way forward? That’s what we’re going to get into today. And so I’d like to first introduce Ilanka Zlatar, who is the California organizer for the Oil and Gas Action Network. Her full profile, like everyone else’s, is on the EventLeaf app. Ilanka, can you please set the stage for how we got to this position and how we should get out of it?
Aarón Cantú, Capital & Main (00:05:09):
Oh, we could start with Gigi.
Aarón Cantú, Capital & Main (00:05:33):
So Gigi is the Chief Economist at the Division of Petroleum Market Oversight. Gigi, if you could tell us, I mean, what are you guys doing to help keep gasoline prices low? I know your mandate is to help consumers at the pump, especially as we navigate this ongoing moment of transition. So start us off, please.
Dr. Gigi Moreno, California Energy Commission (00:06:05):
All right. There we go. All right. Good afternoon everyone. I would like to thank The Climate Center for hosting this event and Aarón for moderating. My name is Gigi Moreno. I am the Chief Economist for the Division of Petroleum Market Oversight and Independent Division of the California Energy Commission. DPMO’s statutory mandate is to protect California consumers by safeguarding the competitive integrity of the transportation fuels market. I lead DPMO’s economics branch where much of our work involves compiling and analyzing data to help us understand the structure and competitive dynamics of California’s gasoline market.
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So let’s take a look at some data. This chart plots the price of petroleum crude in 2025 dollars per gallon, meaning we’ve adjusted for inflation. Petroleum is the primary input in gasoline production, and crude prices reflect supply and demand dynamics at the beginning of the gasoline supply chain. And just to note, we plot ANS, it’s Alaska North Slope crude, but because crude oil is a global commodity, changes in global crude prices affect local crude prices as well. So how are gasoline prices related to the price of crude? So this chart shows crude prices along with average weekly retail gasoline prices in California, that’s in blue. The average weekly gasoline prices in the rest of the United States, that’s in green. So while retail gasoline prices are at the end of the supply chain, we can see that all three of these price series move together.
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The magnitude of these co-movements vary, but we can see from this chart that California prices appear more reactive to changes in crude prices, meaning you see a bigger change when we see a change in crude prices, particularly since 2015.
Dr. Gigi Moreno, California Energy Commission (00:08:44):
So notice that, so the 2015 is the vertical line, and notice that after 2015, you see the prices separating.
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It’s almost cone-shaped after 2025. So the California retail prices begin to deviate around 2025 from rest of US retail prices and from crude prices, which suggests a decoupling of California prices with the input prices and retail prices in the rest of the United States. And for example, between 2013 and 2015, the average difference in California prices versus rest of US prices was about 50 cents per gallon. So California is 50 cents per gallon higher. And the average difference after 2015 between California, retail gasoline prices and rest of US retail gasoline prices is approximately $1.28 per gallon. So that’s a big shift. And this shift does coincide with the February 2015 fire at the Torrance refinery in Southern California, which decreased the state’s gasoline production capacity by approximately 10%, and that went on for about 16 months. Next.
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Yes. Oh, I’m sorry. Let’s go back one slide. Okay. So another observation from this chart is the significant price spikes in California, which we’ve shaded in gray. Some of the price bikes in California are in response to crude price shocks. For example, in early 2022, we saw prices spike in California as well as in the rest of the US and as well as crude prices with the invasion of Ukraine. And we’re observing that also currently with the conflict in Iran. However, you also see significant price spikes. Those are the ones in gray that are unique to California. For example, in the fall of 2022, California prices spiked even as crude prices were decreasing and retail prices in the rest of the US were also decreasing. So what might explain this? What might explain the difference in California versus the rest of the US?
Dr. Gigi Moreno, California Energy Commission (00:10:59):
So let’s explore this question by focusing on the difference between retail prices in California and the rest of the US. So this line represents the difference in average retail prices in California relative to the rest of the US after you’re accounting for inflation. Next. What’s the first thing people typically think about when we’re trying to explain this difference? Usually we hear people say, “Well, it’s because California has higher gasoline taxes.” So this orange area represents the average difference in gasoline taxes in California relative to the rest of the United States. Next. Another reason that people often offer about what is the reason that we have a gap in prices for gasoline in California versus the rest of the US is that California has a unique gasoline blend that allows us to reduce air pollution and meet clean air standards. The blue area on this chart, which kind of looks brown, probably from out there, the blue-ish, brownish area on this chart is the estimated cost of California’s boutique carbo blend.
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And another reason that people often give that we want to look at is that California has a cap and invest and low carbon fuel standards. So this green area shows our estimate of the cost of these programs to consumers. Now, even after accounting for California specific gasoline taxes and environmental fees, we still observe a difference in retail prices in California relative to the rest of the United States. Professor Sevin Bornstein at UC Berkeley identified this unexplained difference and called it the mystery gasoline surcharge or MGS. So what do we know about California’s gasoline markets that can help us demystify this unexplained difference in gasoline prices in California relative to the rest of the US?
Dr. Gigi Moreno, California Energy Commission (00:13:23):
So first we have to recognize that California’s gasoline market is highly concentrated. It’s a highly concentrated market where 70% of oil refining capacities controlled by two firms, 50% of wholesale supplies are controlled by the same two firms. And let’s see, where are we? So when we observe … My notes are kind of going wild here. When we observe this level of market concentration, we say that firms have market power and …
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This level of market concentration suggests that firms in this industry have market power. And what that means, what it means by market power, it means that firms are able to raise prices without facing competition that puts downward price pressure on gasoline prices. All right, so next slide. So one of the problems that we observe when we have market power and when we have constrained supplies is that we observe episodic price spikes. And so those are shown here in the shaded areas where we see these price spikes in California prices. And when firms behave strategically, for example, deterring imports, engaging in strategic branding, these price bikes are amplified.
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So one other way that firms exercise market power is by taking advantage of consumers’ inability to change their consumption of patterns of gasoline. They don’t have a lot of other choices. This can be observed by comparing the price spread between branded and unbranded gasoline. So physically, branded and unbranded gasoline are effectively the same product. Yet we observe a significant spread between branded and unbranded gasoline in California, as you see on this chart. The price spread between branded and unbranded gasoline in California in 2019 was 21 cents per gallon. As of March 2026, that spread has grown to 31 cents per gallon. In contrast, this spread between branded and unbranded gasoline prices in the rest of the US was about seven cents per gallon in 2019, and it really hasn’t changed much. It was about six cents per gallon in March 2026. Next. So this chart is from our colleagues at Stanford, Ryan Cummings and Yom Mahoney.
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It plots the change in gasoline prices in the US before and after military conflicts. So what is particularly striking to me here is how quickly the current conflict has elevated prices. So while we observed large increases after the invasion of Ukraine, the current conflict is particularly steep, which means that household and businesses are not able to respond or adjust, likely making the current conflict particularly painful for consumers, because we haven’t had time to respond. Next. Another observation about the impact of the Iran conflict is that states most exposed to both import and export markets have experienced the steepest price increases. So the darkest orange shaded states are the ones with the highest price increases. Also notice that California has not experienced the highest price increases.
Dr. Gigi Moreno, California Energy Commission (00:17:39):
This chart exemplifies California’s exposure to international markets. It shows the volumes of diesel and gasoline exported since February 2026. California exports of diesel have increased since the beginning of the war in response to historically high international prices. So as we transition away from fossil fuels, we strive for a smoother, equitable transition by providing policy guardrails that protect competition and provide market oversight to minimize the impacts of market power on consumers in the California economy. Thank you.
Aarón Cantú, Capital & Main (00:18:15):
Thank you so much. Thank you for that presentation. I mean, I think filling my tank the other day, it’s good to have a sense for why gasoline is so expensive. And I feel like I learned quite a bit from your presentation. Thank you. Nick, you’re going to present a perspective that is from refinery workers. We’ve had two major refineries closed down over the last year, and that accounts for hundreds of people who are now out of jobs. And there isn’t as much being done as you might expect for something that was part of the plan, right? If we’re transitioning from fossil fuels, refineries are going to close down, and yet we don’t have a super thought out plan for what people who work there are going to do after. So Nick, president and representative of United Steelworkers Local Five. Can you talk about some of these issues and what folks are facing right now?
Nick Plurkowski, United Steelworkers – Local 5 (00:19:15):
Yeah. Good afternoon, everybody. So Nick Plurkowski, President of Local 5, and I’ll just start from the beginning. I was a high school math teacher and I had somebody come in from a local community college talking about getting a job at a refinery. You just have to do this training program. Compared to what I was earning as a math teacher, it was very obvious. I did the math and made the switch, but it was an eye-opening transition to train on stuff like that in a lab or at the community college and experience that. And then to walk into a refinery where you’re just absolutely surrounded by this equipment and these chemicals and everything. And what I would say is that it’s a very hazardous place to work, and if you don’t know what you’re doing, it’s a very dangerous place to work. So I’ll hopefully get back to that.
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But yeah, so right around COVID, Local 5 has Chevron, Richmond, Shell used to be, that’s where I started and then turned into PBF Energy and then Marathon, which was Valero when I started. So during COVID, all of a sudden the plant shut down for a turnaround at Valero at the time or Marathon, sorry. And then all of a sudden it wasn’t starting back up and everybody’s wondering what’s going on. And then they decided to close the refinery. Everybody got laid off, like overnight laid off, like you’re gone. And so that was a huge wake up call for Local 5. As you know, that site started rebuilding into a renewable fuel facility and did bring some of the workers back, but we’re up to about 120 USW represented employees there where it used to be 350 or so. So a huge impact to the workforce. And just so everybody knows the footprint of the refinery is the same, just the amount of workers in there that have to go around and do stuff.
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It’s pretty isolated and spread out, which is a safety concern, but I’ll get to that later. And Phillips 66 in Rodeo had a similar situation. They transitioned, but they kept all the workers there and they used all those workers to transition the facility. So you had great safety oversight, great participation, and workers that were trained at the end of that transition to run the plant, where at Marathon, they kicked everybody out, they kind of did their own thing and brought everybody back in. And unfortunately, during the first startup, we had a member get burned over 90% of his body, which is a horrific, obviously life-changing experience. So it doesn’t take much more than that to kind of kick everything into gear, especially for myself personally. But yeah, the way that transitions, two different transitions happen and everything. But again, what happened to those workers? So just in time, we did a study on the Marathon workers that were let go and how many people were in the room for the last presentation?
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Not too many, but there’s a whole report on that. Workers that leave that refinery in that timeframe were making 25% less. There was 25% of them a year later that still were unemployed, just all kinds of negative impacts of just getting taken to the gate. And so how do we fix that? So Local 5 got involved in a just transition report, working with allies and everything. I’d highly recommend looking that up. And we have 31 recommendations that came out of that. And a big one is the Displaced Oil and Gas Worker Fund through the state of California, which is roughly … Well, the grant is huge. USW got a piece of it and we’re trying to use as much as we can. Unfortunately, it ran through EDD. Anybody been off on state disability and had to wait for a check for quite a while. That’s basically how our program went as well.
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So it took about 18 months for the rubber to really hit the road for a 36-month program. So we’ve been answering questions in Sacramento recently about how come we haven’t spent all the money and we’re not at the spots that we’re supposed to be at, but it is working. It’s very troubling. Our siblings at P66 down in LA, for those folks after the cancellation notice, which they had a year heads up for, obviously people just kind of scattered to go find other jobs as soon as they can, and then everybody who’s left is going to be working six days on, one day off, sometimes 13 on the 14th day off and for over a year, nine months, 12 months to help shut the place down. So while the program very helpful, again, struggling to get it to good use with those folks because when are they going to go to a class or a training session or whatever?
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So it’s been a struggle to find what can connect. I think Sacramento State has a great water treatment program. It’s a six-month asynchronous online program that we’re trying to get a lot of people to sign up for, but it’s really hard to kind of connect those dots. So while it’s totally useful, it’s been hard to use. So we’re really looking at like stipends for training or even wage replacement. So if you do leave and you get, let’s say a similar job where you start as a trainee and then you work your way back up to hopefully what’s a similar salary, if there was wage replacement that could happen for that amount of time so that people wouldn’t have to sell their homes and move. And a lot of people left the state when Marathon did their thing. So it’s been an absolute struggle. And again, when the refinery shut down, they don’t hire anybody who would go to a job that was doomed from the beginning.
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So there’s not a lot of hiring. People are going to be completely overworked and overwhelmed and meanwhile they’re supposed to be looking for another career, but we’ve got some legislation in for like minimum staffing during a shutdown just to help with that stuff.
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And then just the safety aspect, just so everybody knows if there was a bell in here I could ring. Process safety management in the state of California. Where do we begin with that? So the refineries are represented by the Western States Petroleum Association. They sued California and federal and state court over the best process safety management regulation in the country and California settled. And so WISPA, essentially the companies have written their own version of that regulation, submitted it for review, and it’s currently waiting at the standards board to hopefully be denied, amended, or God forbid, accepted as is. The biggest piece that I’m concerned with there is employee participation. It says that if you’re a union site, the union gets to pick who participates in these safety reviews and everything that goes along with that reg. And if you’re non-union, then the workers get to pick.
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And if there’s something these companies want more than money, it’s the control. And so they want to pick somebody who they know is about to get a promotion, let’s say, or whatever. And if you sign here saying that everything’s good to go, then we’ll see how that works. That’s probably our biggest concern with that. And right now, it’s a big thing in the state to try to figure this out, and it’s turning into what’s a minimum qualification for someone to participate in these safety reviews. And we are not after a minimum qualification. We’re trying to get the best person possible in those rooms to speak up to the company. I can tell you they’re in that reg. While it’s not being challenged, we have what’s called stopwork authority. If you believe death or serious injury is going to come for something you’re going to do in the plant, you get to say, “No, I’m not going to do that.
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” They had to write that down in the regulation so that we could actually enforce it because every refinery would tell you that it already exists. Meanwhile, there’s so much pressure. And that pressure, again, how did this reg change come about? There was some lawsuit that nobody heard about. There was a settlement that nobody heard about. And then Cal OSHA is pitching the change to Cal OSHA, different branches or whatever, but the company has never stepped in the room for this change yet and tried to defend what’s going on there. It’s all in the lawsuit. That’s the only place where they can describe why they’re doing what they’re doing. And so for me, personally, I mean, I got involved in this, the marathon study and stuff like that kind of after the fact. And I would just tell you that it’s really scary. I mean, we talked about dangerous and hazardous, but imagine a company that’s not fixing stuff anymore and they still want you to just go out there.
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I mean, if you imagine like an ammunitions place or something like this stuff catches fire and explodes, there’s not even a good, safe place to fall down. It’s all metal walkways off the ground and ladders and stuff like that. And so if we don’t have the safety and basically that budget to keep the place running, you’re going to see more stuff. Last presentation, we had slides of every year with huge flames coming out of it. I was on the fire crew. I fought a couple of these fires, several inside the gate, and it’s terrifying. So if there’s one thing you can walk away with today, please support some refinery safety as we go into the sunset, I guess. But what was I going to say? Yeah, I think that’s the scariest part is that it’s getting even more unsafe in these plants. And everybody in this room, if you live in California, should be very concerned on what’s happening there.
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We got the work done with the recommendations for the Just transition by really taking a step back as the oil workers and just kind Getting past the, is this going to keep the plants open? Is it going to speed up shutting the plants down? And it’s like if we skip that conversation and just go straight to what’s next after a shutdown? Man, we got a lot of work done with those 31 recommendations. So please take a look at that. And yeah, that’s all I got. Thank you.
Aarón Cantú, Capital & Main (00:30:27):
Thank you, Nick. Sobering for sure. And I have a lot of questions around your presentation, so excited to get to the Q&A. But first, Ilonka Zlatar. I’m excited to present California organizer for the Oil and Gas Action Network. Ilanka, can you kind of set the stage for how we got to the point of refineries closing, something that probably the state should have seen coming and perhaps could have planned for a bit better. Set the stage for us.
Ilonka Zlatar, Oil and Gas Action Network (00:31:01):
Yeah. Thanks so much, Aarón. And I just want to start by saying I’m an organizer. I’m not a policy expert. I feel like there’s so many people in this room that have a lot more expertise in a lot of the issues that we talk about. So I’m sort of giving my perspective from the outside a little bit of like, what does a person who’s concerned about what’s happening in California see and feel and hear and do, right? So that’s kind of my perspective as a non-policy expert person. Next slide. Next slide, please. So I want to talk about a few things that we’ve, especially if you are in the first session today, we’ve already heard a lot more about. So it’s both like recap and hot takes and memes. And we’re going to talk about why is demand reducing? Why are refineries closing? How is the industry really manipulating this moment and lawmakers to their favor in this moment?
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And like what is the role of the state during this time and how do we not leave people behind? Next. So California is in the middle of an energy transition. And as you might know, California used to produce a lot of oil, right? So we had all these refineries that are over a hundred years old that were made to process California’s heavy crude. That is basically gone. There’s really not that much oil left in California. And we’ve been dropping in production in California since like the ’80s. So it’s not a new trend that California is not producing as much oil as it used to. So in order to keep these refineries going that we’re made for this oil, we’re importing oil from other places around the world and making our stuff from it. I have this graph that I borrowed from the CEC in here about the other reasons why our demand for gasoline is reducing in California.
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Well, we’ve done a good job at energy transition. We are a global leader in all of these policies that support investment in transit and EVs and fuel standards and air quality standards and all of these policies that we put in place have actually had a good effect. And we are leading the charge, especially in the United States as to declining our consumption of gasoline year over year.
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We have invested a lot of time and energy and neurons as a state into the demand side of the equation. I’m not an economist, but I learned that if you have a demand and then there’s the supply and they have to balance out in order for things to be groovy, and things are not groovy at the moment because we have this steep decline, which is what we want. We’ve been working towards that goal of reducing our reliance on fossil fuels. And then when it happens, we’re like, oh, we weren’t ready for the refineries to start closing and now our supply is maybe not at the place where we hoped it would be, but why didn’t we see this coming? We’ve been building this policy portfolio for decades trying to reduce our reliance on fossil fuels and refineries closing are kind of a result of that in part.
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In part, I say because, well, if it isn’t the consequences of our own actions, in part, but as we mentioned, refineries are really old in California. They’re over a hundred years old. The infrastructure needs a lot of investment in order to continue to be safe, right? And if you are a corporation that is motivated by quarterly profit increases for your shareholders, and you’re seeing that there’s a market that is no longer going to be able to support a growing amount of gasoline, you may not be motivated to make those investments into safety or to continue running the place, right? So what we’re seeing … I guess I’ll go to the next slide now. Oh yeah, that’s what I was talking about. Refineries are closing and they’re closing for a lot of reasons.
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Fuel demand is dropping in California, but also we’re seeing refineries closing all over the world. We’re seeing refineries close in Texas. So it’s not really like a policy environment that is detrimental to refineries specifically, but refineries were built before there were even environmental regulations. We don’t have a pot of money that refineries are sitting on to close safely. They don’t have remediation money set aside to make sure that whatever comes next is sustainable. So it’s not a good look and they keep exploding as we were hearing. It’s like, I think I put something on there, 12 major explosions in the last decade. So that’s major explosions across California, more than one per year, right? So they keep exploding. They’re unsafe. They need a lot of investment and the free market is not seeing the incentive to make those investments under the current conditions, which are based on global trends, as we heard earlier.
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Next slide. And as I was mentioning, it feels to me as an outside of server, although I did work in state government for seven years, but that was a previous life. It feels like California’s only been planning for half of the equation. We’ve been doing a lot of investments and market mechanisms, and we’re not really supporting or really being really thoughtful about how to square up the other end of supply. We don’t have a good plan on how to transition supply. As we were preparing for this panel, Gigi and I and others were the panelists were chatting about what can we do that would be useful? And I think maybe we ran out of time, but you’d mentioned to me when we were having a conversation that the infrastructure that we have currently with these refineries could be adjusted to be more of an inventory supply holding, right?
(00:37:36):
And I’m really sad that Jamie Court isn’t here today. He got delayed and wasn’t able to make it today because he was really going to speak about the law that he helped to get past for a refinery inventory minimums, which still have not been implemented. So we have some solutions that we’ve been able to pass into law that the state of California is still not implementing for reasons unknown. I feel like every time we ask, “Hey, why are we not implementing a rule that could help us to offset these price shocks when these explosions and these wars happen?” I haven’t gotten a satisfactory answer. Why are we not implementing these inventory rules? I don’t know. And I’m hoping that we can have a candid conversation in this panel today about why we’re not implementing those rules because it is a great tool. It is probably the only thing that we have a good idea that it would work actually to absorb those price shocks that we see in the system when we have wars and when we have explosions, which are now everyday things.
(00:38:42):
So I am hopeful that we can talk about what happens if the state steps in a more forceful way to using this infrastructure, refurbishing it to be an inventory holding facility with a community elected board and a phase out mandate. If we’re talking about, which if you were in the first session, we had the professor who I think is in this session give a brilliant overview of like, we don’t think we can do a just transition well without having more state intervention, without having government have a more forceful hand when a market is not there. And in this case, with the transition away from fossil fuels, the market is declining. That is not what investors want. What we’re seeing right now, this explosion of profits, this in my mind is the industry’s last ditch effort. They’re trying to squeeze every cent out that they can before they could put … This is the death throws, I hope, right?
(00:39:52):
And that’s my time, but yeah, let’s talk about what is the role of the state, right? Can we use this declining refinery infrastructure as a way to support us during the transition with those guardrails, right? That’s
Aarón Cantú, Capital & Main (00:40:08):
It. Yeah. Yeah. No, thank you, Ilanka. And I have a similar question. So Jamie Court with Consumer Watchdog isn’t here.
Ilonka Zlatar, Oil and Gas Action Network (00:40:25):
I had this whole thing about industry myths, which I guess I talked too much and couldn’t squeeze it in 10 minutes, but the industry is really using this moment to manipulate our lawmakers. And it was really unfortunate last session we saw some big backsliding, but as people who care in this room, I think we all need to do a better job of dispelling these myths. Myth number one, California … If we drill in California, that means gas will be cheaper
Ilonka Zlatar, Oil and Gas Action Network (00:41:00):
No. We heard crude is a global market. The reason that prices are going off the chain right now is because we’re in a global market. We cannot … Yeah. More local oil does not magically create new refining capacity. If the issue is that we don’t have enough capacity to refine, more oil isn’t going to fix that bottleneck problem. Myth number two, California regulations are closing refineries and raising gas prices. We’ve heard about this mystery surcharge. We in California pay over a dollar more than the rest of the country. I call it profit. Myth number three. Only California refineries can supply California gasoline. We have super special gasoline. Nobody else can make it. Lots of other refineries can make California gas. Let’s open up the market to more competition because basically we have monopolies in California. Good thing we have antitrust people at this agency.
(00:42:04):
And the … Wait, what was my fourth one? I didn’t rain. Oh, California oil is cleaner and safer than other oil. Heavy crude. Bad. It’s all bad. There’s no safe oil. There’s no safe oil. He knows. The industry likes to use front groups. We got this cool image of all the different front groups that … They just went out and said the quiet part out loud in the small print. They’re just like, “We made up all these groups to say the things that we want to say and convince people that we are good, but actually we are evil cartoon villains.” And they said it all there.
Woody Hastings, The Climate Center (00:42:42):
WSPA is?
Ilonka Zlatar, Oil and Gas Action Network (00:42:44):
The Western States Petroleum Association, a. K.a. So anyway, they’re using their money. They buy our politicians. They lobby every day, all day, because we can’t do that because we don’t have any money like that. And here we are with the consequences of deceit. Yay, the end.
Aarón Cantú, Capital & Main (00:43:08):
Thank you, Ilanka. So I had a question and I asked Jamie actually if he could send me some questions that he would’ve asked. And so I’m going to ask one of those, but it also related to a question I have, and then I think we can open up to Q&A. Jamie had asked if … So the supply now of gasoline is really tight, right? We have two refineries that have gone down in the last year. Others in the Bay Area are switched over to renewable fuels. So that means if a refinery catches fire or is shut down for a month or so, that supply gets even tighter and the pressure on prices at the pump is really intense. So Jamie had a question. If refineries don’t come back online when they say they will, as some say PBF Martinez has not, what tools does the state have to deal with that?
(00:44:01):
I think, Gigi, this question for you.
Dr. Gigi Moreno, California Energy Commission (00:44:05):
I think there are a couple ways to answer this. So there are a couple tools. One is providing guardrails in the market to encourage imports. So for example, making sure that there isn’t a barrier to entry for imports, that terminals are accessible, that importers are able to reliably get the imported gasoline into the state. The other tool is ABX21, which I think Jamie was going to talk about, which requires refiners to maintain inventories at a certain level, so as insurance against price bikes like we’re having now, and against refinery accidents as well. So those are two tools. And related to that, of course, what I mentioned earlier is having guardrails that promote and encourage competition among the suppliers so that there is that downward pressure on prices
Aarón Cantú, Capital & Main (00:45:18):
As well. And just a quick question on that. Is there any sense of when ABX21 may … The rules on minimum inventories might be produced by the CEC? I know you guys are an independent division, but is there a sense of when those rules might be put into force?
Dr. Gigi Moreno, California Energy Commission (00:45:35):
Yeah. I don’t have any other information than what’s publicly available, and so we don’t … That’s up to the CEC.
Aarón Cantú, Capital & Main (00:45:43):
Okay. Well, I have more questions, but would like to open it up to Q&A if others want to jump in.
Speaker 10 (00:46:05):
Thanks. Thank you, Michael Quitos from AV Community Energy. Great presentations. Thank you. This is super insightful. I’m realizing I need to broaden my hyper focus on the electric side of things and understand more about these systems and processes. I work, like I said, primarily in electricity, sort of in the world of the CPUC, CEC regulatory structures. It’s very clear to me how the regulatory agencies can regulate the electric utilities as natural monopolies with regards to things like pricing, competition, market power is something that’s always examined in CISO and with the utilities. Can you help me understand what the CEC, CPUC, maybe there are other agencies, maybe there’s … I’m sure there’s a legislative component. What is the authority to regulate these oil and gas companies to try to curb some of the price gouging that you’re describing, uncompetitive practices? These have been mentioned as strategies.
(00:47:17):
I’m curious what that actually looks like in practice and to what extent that can already occur under existing laws and regulations.
Dr. Gigi Moreno, California Energy Commission (00:47:35):
As I’ve already mentioned, so creating an environment that attracts competition by preventing deterrence of imports, and to some extent, having oversight, as DPMO is doing, that signals to the market that we’re keeping an eye on strategic behaviors that are harmful to consumers. So I think that should be the foundation of how you respond. I think one of the ways that we’re seeing competition arise in this industry, not only with increased imports, so we have record, historically high imports this currently and last year. And in addition, there’s already interest among investors, private investors, to build a pipeline that will help. It’s a pipeline from Texas to Arizona that would help mitigate some of the supply constraints in California, because that would supply Arizona, so then California would not be sending our exports to Arizona. And so that would be, that’s a signal to me that the market is paying attention and as an economist that … And I believe in markets and I believe the price signal is if you allow … If there’s an infrastructure, if there are guardrails that encourage competition, you’re going to see the market respond and see these opportunities for bringing competition into California.
Woody Hastings, The Climate Center (00:49:15):
And I’ll just jump in here real quick. I got the pointer on the pipeline that Gigi was just referring to. It was one of Jamie’s slides, and so there it is. And it would … California has been called a fuel island for a long time, and this would be the first time that we’ve ever had a pipeline bringing finished fuels, gasoline and other refined from into the state where today we’ve only been an exporter of finished fuels.
Ilonka Zlatar, Oil and Gas Action Network (00:49:48):
In addition to thinking about that stuff, I don’t think we talked too much about it now, but there … And I’m not the expert, so maybe you can expound on, but I’ve heard that there’s a lot of contracts that oil companies make with certain distributors and stuff. So they lock in certain pricing and then people are locked into contracts and they can’t really shop around for the best deal anymore. So imagine you’re a franchised gas station, right? So you’re a Chevron gas station owner, you’ve signed a 10 year contract with Chevron to be supplied by Chevron. You can only purchase from them and you’re locked into whatever price they tell you. So what effect does that have on locking in prices at a certain rate and how competitive is that? How does the contract and franchise structure play into the inflexibility that we see with prices going up and up and up and maybe not coming down on the other side after these crises have passed?
Dr. Gigi Moreno, California Energy Commission (00:51:03):
So these contracts are what we call the dealer tank wagon contracts and also branded gasoline contracts. And it is a mechanism for firms to, what we say, vertically integrate. So they have control over different steps of the supply chain. And the contracts are … They vary. I mean, each company might have different provisions in the contract, but it does commit a retailer to a certain number of years to sell the branded gasoline, and each contract will have different provisions on it. And so that’s one of the topics that DPMO is looking at, is looking at how are these vertical relationships affecting the market and affecting prices? And one of the questions that I ask as an economist is when you have vertical integration, is it helping consumers or is it hurting consumers? And so we’re in the process of investigating that.
Ilonka Zlatar, Oil and Gas Action Network (00:52:08):
Spoiler alert, it’s probably not helpful.
Speaker 3 (00:52:15):
Just curious back on the worker side, and Nick, I’m curious if there are any state bills related to Dogwoof, sorry, displaced the oil and gas worker fund, or the really important battle that’s been happening on the regulatory space around process safety management and the loss of the power of workers to really call that a, “I heard there might be a bill that’s trying to do that legislatively.”
Nick Plurkowski, United Steelworkers – Local 5 (00:52:44):
Yeah, great question. So yeah, United Seaworkers involved in a couple things going on and I cannot remember the numbers, apologize everybody, but-
Speaker 3 (00:52:54):
966 is the PSM bill that Gonzalez is carrying.
Woody Hastings, The Climate Center (00:52:59):
2157, I think.
Speaker 3 (00:53:01):
2157 is the displaced oil and gas worker fund to make that really important program permanent so that steel workers and the other people that got money have the time to run it out and then to add some of the really critical components of it. So 2157, AB 2157, and then in this important fight that you all are also sponsoring on SB 966, just going to name that. We get to work together, but that’s fine.
Nick Plurkowski, United Steelworkers – Local 5 (00:53:26):
Thanks, Julia. Yeah, 966 is the part that could potentially change and putting it into a bill instead of the standards, basically. So try not to lose that in every way, shape, and form that we can. Any support would be appreciated. Thank you.
Speaker 11 (00:53:48):
Hi. Gigi, do you have the authority to cap the differential between the branded and the non-branded? DPMO does not …
Dr. Gigi Moreno, California Energy Commission (00:54:00):
DPMO does not have that authority.
Speaker 11 (00:54:02):
Does the CEC?
Dr. Gigi Moreno, California Energy Commission (00:54:04):
I don’t think so either, no. And I’m not sure capping the differential is necessarily an optimal strategy. I think the best strategy would be to make sure that firms that have market power are not treating retailers unfairly, and they’re not strategically deterring competition. I think that’s where we can really make a difference because it would not … Restricting the differential is a bit heavy-handed and from an economist perspective, and I would prefer to put in mechanisms that promote competition and let the market figure it out within those guardrails.
Speaker 12 (00:55:10):
Thank you. So this question is for Gigi. So in your early slides, the price spike from Russia’s invasion of Ukraine was higher than the current price spike, even though technically the volume of supply disruption is higher now. Is there anything you can share about why that is? Is it like a time thing or is it like we’re a bit more prepared now? Because one slide showed that it was a little higher, but I think right now there was another one that showed that this price spike is higher. So is there anything you can share about that kind of discrepancy?
Dr. Gigi Moreno, California Energy Commission (00:55:47):
Yes. So one thing is what I was showing was in real terms. So after accounting for inflation, and so people may have felt it higher during … I mean, they may feel it higher now. So can I explain why it’s higher now, why it was higher during the Ukraine invasion than now? Well, one is now hasn’t ended yet, right? We’re still in the process of realizing where prices are going to go. Number two, the other point I think that is important is not just the level of prices, the level of price change. And I shared the graph that Neil Mahoney and Ryan Cummings at Stanford put together, which was the change in prices before and after conflicts and historically. And I don’t know if we can skip to that slide. Yeah. And so one of the things we observed that even though ultimately what we saw in terms of a price spike after the invasion of Ukraine … Oh, let’s see, which one is it?
(00:57:02):
This one, this slide. You’ll see the dark blue line, that’s the current and ongoing conflict. You’ll see that line’s pretty steep compared to the Ukraine invasion. And so even though at this point in real terms, we did see a bigger increase for Ukraine, the current increase is much steeper. And that concerns me because that affects people. People can’t quickly change the kind of fuel you use in your car, right? People can’t change their commuting patterns this fast. And so I think even if the prices may have been higher at the peak of the Ukraine response, the current price increase is worrisome because it’s so fast.
Speaker 3 (00:57:55):
That makes sense.
Ilonka Zlatar, Oil and Gas Action Network (00:58:01):
I think was there still one in the back?
Speaker 13 (00:58:05):
Thanks. Dan Lashoff with World Resources Institute. The governor’s budget this year includes a proposed tax credit for producing sustainable aviation fuel, which they presented as an environmental measure, but I think everybody kind of recognizes it as an attempt to keep the Phillips 66 Rodeo refinery open. An analysis by Aaron Smith at Berkeley shows that it would not have environmental benefits because it would just shift feed stock from making renewable diesel to aviation, known that kind of environmental benefits. Also seems like a super expensive way to address concern about workers and the legislature’s pretty skeptical of it. The legislative analyst offices urged rejection hearing last week members were pretty skeptical in the budget committee. So I am curious if members of the panel have thoughts on a better alternative. The governor’s own estimate is that the tax credit would cost $165 million per year, but Aaron Smith’s analysis suggests if you take everything into account, including consumer costs from higher gasoline prices, it could cost over a billion dollars a year.
(00:59:23):
So with that kind of money, even on the low end, isn’t there a better way to address the concern about just transition for workers at Phillips 66?
Ilonka Zlatar, Oil and Gas Action Network (00:59:41):
I don’t know anything about the budget.
Aarón Cantú, Capital & Main (00:59:45):
Well, it’d be good to hear from Nick.
Nick Plurkowski, United Steelworkers – Local 5 (00:59:50):
Yeah, I’m sorry. I don’t have alternatives. It’s a weird spot to be in. I mean, everybody there I can tell you thinks they’re doing better by having it be We have renewable fuel, but yeah, we’re struggling right now. So yeah, sorry, I don’t have a silver bullet for that one.
Ilonka Zlatar, Oil and Gas Action Network (01:00:08):
Is it any better or safer to have renewable?
Nick Plurkowski, United Steelworkers – Local 5 (01:00:14):
I’d like to think it was cleaner and everything like that, but I’m not a specialist on there. Interesting thing about the person at Marathon burned over 90% of their body. The Cal OSHA investigation that came in and started up pointed out that since they switched to renewable fuels, they went back to the 5189 process safety management reg from 1992 instead of the 2017 regulation. So we put in for that in a couple different ways and it went through, thankfully. So those renewable refineries are going to count as basically a regular refinery for every sense of the safety piece. So I would say it’s another refinery. Even though you’re doing renewables, it’s the same temperatures, pressures, flows, and flammability by the end of it. Otherwise, it wouldn’t be fuel. So the safety piece, again, that’s what we do, the safety piece. But if you’re not putting money into the plant and having safety people who know what they’re talking about participate in the safety meetings, the workers, then it’s going to be bad.
(01:01:30):
So yeah, I’d like to hear more on the clean offsets or not helping stuff to educate myself on that. But thanks for the question. It was a good question.
Aarón Cantú, Capital & Main (01:01:44):
And I think that-
Ilonka Zlatar, Oil and Gas Action Network (01:01:44):
I wonder if there’s …
(01:01:49):
I have a question for you. If we were to transition refineries to be more of storage inventory facilities so that we can handle more imports during this transition … I don’t think it’s in the best interest of California to prolong the life of refineries. I’m just going to end that statement there. I don’t think it’s in the interest of California to prolong the life of refineries, but we do have this mid-transition period. We do need to have some amount of gasoline to get us through the transition. And I wonder if we were to use the existing infrastructure as to do whatever maintenance and updates that we need to do to make them storage facilities for inventory so we can take imports and maybe do some whatever magic sauce that needs to happen to make it different fuels, would that retain a lot of the same level of staffing or would that still be like …
Nick Plurkowski, United Steelworkers – Local 5 (01:02:55):
Great question. Yeah. Typically when a refinery shuts down, I mean, it gets kind of dissected. So having a wharf where ships can come in and make deliveries, having the tanks obviously that are sitting around not doing anything. So they typically do get turned into terminals even after they’re permanently idled instead of being shut down. And that’s a game of cleanup. If you shut it down, would you be more on the hook for cleanup than if you permanently idled it and just had a couple of people walking around to make sure everything was fine? A lot of air quotes in there for people in the back. But yeah, it’s a possibility. The biggest pushbacks, and I’m stuck between facts and narrative from the company and stuff, but having extra tanks on site that would be used to help the storage thing and stuff like that, all the refineries went, “What tanks?
(01:03:49):
And where are we going to put them?” And man, that’s so much money. So the refineries aren’t going to do anything unless you absolutely force them to. And then yeah, if they leave, would they just hand over the tanks? They’d probably still have somebody running them or sell them to somebody else who’s going to kind of run them as a terminal. But yeah, that’s definitely a possibility. There’s a lot of tankage on the sites. I don’t know how much specifically, but it’s there.
Ilonka Zlatar, Oil and Gas Action Network (01:04:17):
I forgot I had a quote on one of my slides that I just wanted to reiterate. As you were asking about our legislative priorities and our plan, right? I think what we’re seeing right now is there’s this shock to the system. We’re seeing all these refineries starting to close, threatening to close, using the threats of closure to manipulate the system and all that. And we’re seeing the governor and the legislature starting to give into some of those demands. And to me, what that looks like is instead of getting through this energy transition, instead of setting a bold vision, having a plan and investing in it and supporting our people through the displaced oil and gas worker fund and through incentives and all this, instead of doing that, now we’re just sort of splish splashing in the middle zone, right? We’re like back pedaling, we’re just going to be rolling around in the mid transition for longer because we’ve failed to set a bold vision, make a plan and invest.
(01:05:15):
We are now back pedaling in the splish splash middle zone. I want you to picture it.
Speaker 5 (01:05:27):
All right. Thanks everyone. My name’s Brian Chop. I’m with the California Climate and Agriculture Network. I think my question is primarily for you, Gigi. So I work with farmers and ranchers. I’m hearing a lot of pain around diesel prices and also fertilizer prices right now, which have also increased 25 to 50%. I’m wondering if you were to do the analysis you showed us earlier, mapping gasoline prices in comparison to the rest of the US. Is there any meaningful difference for diesel as opposed to gasoline? That’s question number one, and why or why not? The second question is, is the energy commission or any other agency doing similar analysis around fertilizer prices?
Dr. Gigi Moreno, California Energy Commission (01:06:13):
Thank you. Yeah. My PhD is in agricultural economics. I’m excited to talk about agriculture or the opportunity to talk about agriculture. So DPMO is not currently analyzing a fertilizer, although I personally think about it just because I have a background in agriculture. Nevertheless, are we seeing your first question, which is more in DPMO’s wheelhouse. Well, we’re definitely seeing historically high diesel prices. Is it the same as gasoline? So I think what you mean, or do we see some kind of MGS? So what we’re seeing is diesel prices are shooting up everywhere and not just in California, in part because it is driven by global prices and California is very much exposed to the international trade for diesel. And specifically, we export quite a bit of diesel, which I think … We’re not going to go back to the slides, but I showed one of the slides.
(01:07:25):
Our exports of diesel have increased. We are a net exporter. So the gasoline market, we’re short, we’re a net importer of gasoline, but we’re a net exporter of diesel. And the prices of diesel are being driven up in California because high prices globally for diesel are really … They’re attracting our diesel fuel. And so I think they’re very different markets. Is
Woody Hastings, The Climate Center (01:07:58):
This the one digital?
Dr. Gigi Moreno, California Energy Commission (01:07:59):
Oh yes, this is it. Yes. And you’ll see that. So we have February, March and April exports of diesel. This is the market pulling the diesel to the highest bidder, essentially. California produces about 70% of our diesel is renewable and biodiesel. And so we’ve got crude diesel available to sell abroad, and the market’s working in that sense. While sometimes we benefit because we’re selling our diesel abroad, we benefit from that, but right now, because prices are so high, it’s really driving up our prices.
Ilonka Zlatar, Oil and Gas Action Network (01:08:49):
Does seem like … Just an observation from other states. It seems like in other states, diesel is more expensive than gasoline and in California it’s cheaper than gasoline or about the same. So I wonder if that’s because we have that bigger renewable diesel market here. So maybe the difference or the price of diesel in other states is higher comparatively to gasoline than it is here in California.
Aarón Cantú, Capital & Main (01:09:18):
One more question. I think we got to wrap it up.
Speaker 14 (01:09:21):
Hi, Ken Branson. I work for one of the state senators. So we talked a little bit about a concern about investing in the safety as these refineries stay open in a declining market, but what about a concern about when they shut down and need to be cleaned up? Is there any requirement to set aside money for all of that work or are we going to end up with an enormous orphan wells-like project problem here that’s going to fall in taxpayers?
Ilonka Zlatar, Oil and Gas Action Network (01:09:48):
I’m looking at Ferraz.
Aarón Cantú, Capital & Main (01:09:54):
I can somewhat answer that question, but feel free to jump in. So I did a story on the Phillips 66 closure last year and found that the refineries aren’t required to, at least to be transparent with how much that ARO asset retirement obligation may be. I think Phillips 66 estimated it would take $200 million around there to unwind and remediate the Phillips 66 site in Wilmington and Carson. Generally, people told me that that was an underestimate. Interestingly enough, during the first Trump administration, the EPA considered a process to consider closing refineries as a super fund process. The Obama administration started that. Trump administration came in and basically said, no, we’re not going to do that. And here we are. So there’s really, I mean, I was surprised to find how few regulations and rules there are governing refinery remediations and closures. So I think that’s what the state … Some of the bills and policy proposals in the state are trying to take on, but if y’all have more insight into that.
Ilonka Zlatar, Oil and Gas Action Network (01:11:01):
Is there a bill right
Aarón Cantú, Capital & Main (01:11:02):
Now?
Speaker 12 (01:11:03):
Yeah. SB 1259, which is what we’re calling the Refinery Transparency Act. It’s the Senator Blakespear, and it would essentially create requirements for refiners to file decommissioning plans and disclose the costs of their decommissioning plans and also their remediation plans. Start it over. Yeah,
Aarón Cantú, Capital & Main (01:11:24):
Sure. Why not?
Speaker 12 (01:11:25):
SB 1259, it’s the Senator Blakespear, and it would require refiners to file decommissioning plans and disclose the costs of those decommissioning plans, and then also file remediation plans with the state water board and disclose the costs of those. And then it would also direct the … So they file those with the state water board. It would also have the energy commission look at the liabilities that the refiners have, and then the potential state liabilities, so that we have an understanding of what might be passed on to the taxpayers.
Aarón Cantú, Capital & Main (01:12:02):
Great. Well, thank you all so much. Join me giving them a round of applause, please. And we’re on a break now until 3:30. Thank you.