#United States #California #Los Angeles #Consumer Watchdog #Chevron

Urgent Call for California Refinery Regulations

In light of the recent explosion and fire at Chevron's El Segundo refinery, Consumer Watchdog has made a strong appeal to the California Energy Commission (CEC), emphasizing that immediate action is necessary to set minimum inventory and resupply rules for oil refiners. This incident serves as a stark reminder of the vulnerabilities present in California's gasoline supply chain.

The failure to establish regulations has left consumers exposed to potential gas price spikes, especially following refinery outages. In comments directed to the CEC, Consumer Watchdog emphasized that Californians currently lack necessary protections which could cushion them from volatile pricing triggered by events such as the El Segundo explosion. The organization highlighted that despite Governor Newsom's earlier efforts, which included calling a special session in 2024 to address these issues, tangible regulatory measures have not yet been enacted.

Consumer Watchdog stated, "Californians are currently left defenseless against gasoline price spikes because there are no rules to force oil refiners to resupply the lost fuel after a refinery outage or to maintain minimum inventories." It is well noted in the comments sent to CEC that, historically, when supplies dwindle below a specific threshold, consumers inevitably face inflated gas prices. Data provided by the CEC also confirms that price increases were evident when inventory levels fell to around 12.5 days in 2022.

The comments criticize the slow progress of the Commission, which has been dilatory in drafting vital regulations despite the urgency highlighted during the special session called by the Governor. This situation has critical financial implications for consumers, with estimates suggesting that with proper regulations, billions of dollars in additional costs at the pump could be avoided.

Moreover, testimonies from the CEC officials have stressed the importance of maintaining an optimal supply level, with recommendations indicating that the maintenance of at least 15 days of fuel supply can significantly protect against price spikes. CEC Vice Chair Siva Gunda has made it clear that imposing rules to enforce minimum days of supply would be a crucial step towards stabilizing fuel prices. Such regulations could be established without greatly affecting refinery operations while requiring minimal investment.

A report highlighted that maintaining an adequate fuel supply—equating to a few extra days' worth—could cost refiners approximately $20 million to $25 million. However, this expenditure would be a fraction of the profits amassed by the four major refiners that dominate 90% of California's gasoline market, which collectively recorded $25 billion in profits last year. Thus, the proposed regulations amount to a simple cost of doing business contrasted with the larger benefit of safeguarding consumers.

Additionally, Consumer Watchdog pointed out that several countries, including Australia, France, the UK, and South Korea, already implement similar inventory obligations for their refineries. These international standards reflect a common understanding that such expectations are necessary to ensure stability in fuel supply and price control.

Concerns raised by refiners regarding the need for more storage space to accommodate increased inventories have been countered by data revealing significant unused storage potential within existing operations. The average utilization rate for refinery storage capacity stands around 57%, indicating a surplus capacity that can be utilized to meet the proposed inventory requirements.

In conclusion, the incident at Chevron’s El Segundo refinery is a pivotal moment, calling for urgent regulatory intervention. Advocates like Consumer Watchdog argue that it should not take further disasters to compel policymakers to take necessary actions to protect consumers. Implementing minimum inventory and resupply rules is not just a regulatory suggestion; it is a necessity to construct a more resilient and consumer-centered energy framework in California. The time for decisive action is now to avoid the financial burden of gas price spikes on everyday Californians.