Chevron, one of the world’s largest oil companies, has said in a securities filing that regulations in the state of California may hurt its business in the fourth quarter of 2023, and that California Governor Gavin Newsom’s policies may contribute to pushing gas prices higher.
Newsom promised to improve oversight of “big oil” in California in March 2023 but Chevron has suggested that the governor’s policies may make it difficult to do business in the state.
In a January 2 notice to the U.S. Securities and Exchange Commission, the company said that regulatory challenges in the state “will be impairing a portion of its U.S. upstream assets, primarily in California, due to continuing regulatory challenges in the state that have resulted in lower anticipated future investment levels in its business plans.”
The move will have a financial impact on Chevron’s business, the company said, and will contribute to “non-cash, after-tax charges of $3.5 billion to $4 billion in the company’s fourth quarter 2023 results.”
California Gov. Gavin Newsom in Beverly Hills, California, on May 2, 2023. Chevron said that new regulations are discouraging investment in the state.
PATRICK T. FALLON/AFP via GETTY IMAGES
In a letter to the California Energy Commission commenting on Newsom’s legislation and its impact, Andy Walz, Chevron’s Americas products president, suggested that penalties that may be introduced as a result of the legislation may make gas prices more expensive.
“The state has long pursued a set of policies to reduce demand, increasing gasoline prices to change consumer behavior. California has used all these policy levers simultaneously in a manner that has raised retail costs for gasoline,” Walz wrote.
Walz added that the disincentive to California manufacturing of gasoline will make price spikes “more frequent and more disruptive.”
Newsweek contacted Chevron for comment via email on Thursday morning.
Gas prices in California have been elevated compared to national averages. As of January 5, the average price of a gallon of gas was at $4.7, more than a dollar higher compared to the national average of a little over $3 a gallon, according to AAA data.
At the end of 2020, retail prices for all grades and formulations of gas in the state stood at $3.1, according to the U.S. Energy Information Administration, but began rising and hit a peak of about $6.3 per gallon in June of 2022.
They have been declining since then and in December dropped to $4.56. Nevertheless, that price is higher than the national cost of $3.26, U.S. Energy Information Administration data shows.
The legislation that Newsom approved last year had planned to establish an independent entity that aims to “root out price gouging by oil companies and authorizes the California Energy Commission (CEC) to create a penalty to hold the industry accountable,” according to the governor’s office.
“With this legislation, we’re ending the oil industry’s days of operating in the shadows. California took on Big Oil and won. We’re not only protecting families, we’re also loosening the vice grip Big Oil has had on our politics for the last 100 years,” Newsom said in a statement after he signed the legislation into law last year.
Walz went on to say that Chevron, whose global headquarters are in California, alone has cut back “hundreds of millions of dollars” on its spending in the state since 2022.
“California’s policies have made it a difficult place to invest so we have rejected capital projects in the state,” Walz said.
“Setting a margin penalty would absolutely discourage investments here. Further, these arbitrary attacks on a disfavored industry do more than this—they signal to every industry, entrepreneur, manufacturer, and employer that California is closed for business.”
A spokesperson from Newsom’s office told Newsweek that oil refiners in the state are now required to be transparent about their monthly profits to “combat price gouging at the pump.”
They added that Chevron has generated billions of profits recently and engaged in stock buybacks and pointed out that the company had also said that it planned to continue operating oil fields and related assets for years to come in its filings.
“Oil drilling in California has been on a consistent decline since 1985,” the spokesperson said. “As of September, over 50% of oil drilling permits that California issued to companies went unused—so they’re not even using the permits that they’ve been issued.”
Update 1/5/24, 3:40 p.m. ET: This article’s headline was updated and additional context was added.
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Source : Newsweek