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THE BACKSTORY ON CALIFORNIA GAS PRICES: California drivers are seeing some relief from the average $6.39 per gallon they were paying at the gas pump a week ago, but they’re still being charged nearly double what those in the Southeast are paying for fuel.
Such high fuel prices have “always been the case here,” President Joe Biden noted yesterday in Los Angeles, where the county-wide average per-gallon price for gasoline is about $6.21 as of today, according to AAA.
Here are some of contributing factors to the list-topping retail fuel market in California, where political leaders and refiners are duking it out over who’s to blame for the high prices:
Refining: Part of the reason fuel is so pricey is refining constraints. Planned maintenance and unplanned outages affected close to 1 million barrels of daily crude oil refining capacity for various periods in September, reducing product availability on the wholesale market.
Total operable refining capacity has also fallen in the state in recent years (read on for more on the causes for that). As of June of this year, California had nearly 1.75 million barrels per day of operable crude oil refining capacity, which represents a slight increase from last year but an 8% decrease from 2020.
Marathon Petroleum closed its refinery in Martinez in 2020, in part because of COVID-19’s effect on fuel demand. The company is now working to convert the facility to produce renewable fuels, including renewable diesel.
The Martinez closure took 161,000 barrels per day of crude oil refining capacity offline, and more capacity is set to close. Phillips 66 is set to close two of its refineries next near, which together have a capacity of more than 180,000 barrels per day. The larger of the two will be converted to produce renewable fuels.
Higher taxes: Other states have lost refining capacity, too, but they have lower fuel taxes. California has the highest fuel excise tax of any state at more than 53 cents per gallon, and by law, it increases every year. Other states, including Maryland, have similar regimes.
Gov. Gavin Newsom sought to stay the automatic tax increase this summer due to rising prices, but the state legislature did not intervene.
They aren’t the most up-to-date numbers, but one analysis published last year estimated that total taxes and fees, including state and federal excise taxes, per gallon of gasoline exceeded $1.18.
The political battle: Newsom has laid most of the blame for high prices on oil companies, saying they have “jacked up prices at the pump in California” and provided no explanation. Their associated high profit margins reflect “rank price-gouging,” he said last week.
The industry has clapped back, complaining about the state’s strict environmental regulations, including its cap-and-trade program and rules requiring refiners to make a distinct gasoline blend unique to California called CARBOB.
“California is the most expensive operating environment in the country and a very hostile regulatory environment for refining,” top refiner Valero said last week in a reply to price gouging allegations, noting the blending requirements and other regulations.
Newsom sought to ease up on some of the regs by directing the California Air Resources Board last month to make an early transition to winter-blend gasoline, which is cheaper to manufacture, in a bid to bring down prices.
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BIDEN TEASES NEW ACTIONS TO LOWER GAS PRICES: Biden suggested yesterday that his administration could announce new actions to help tackle rising gas prices in the U.S., which have reversed their downward trend in recent weeks and are expected to rise higher following news of the OPEC+ production cuts.
"The price of gas is still too high, and we need to keep working to bring it down," Biden said yesterday in Los Angeles. He declined to offer any additional details, but added: "I'll have more to say about that next week."
It’s unclear what Biden might do to help alleviate prices in the U.S., though the White House has not ruled out the possibility that he could order the release of additional oil from the nation’s emergency stockpile, in addition to the drawdown of 180 million barrels announced in March.
The administration has also explored the possibility of limiting exports of petroleum products in a bid to reduce prices at home, but no announcements have been made.
‘JUST STOP OIL’ PROTESTERS VANDALIZE MORE ART: A pair of climate activists with the protest group Just Stop Oil were arrested today after throwing two cans of Heinz tomato soup over Vincent Van Gogh’s oil painting, “Sunflowers,” on display at London's National Gallery.
The two women poured the soup atop the iconic oil painting (which is protected by a glass cover) and its frame, then proceeded to rub glue on their hands and attach themselves to the wall next to it, the Examiner’s Asher Notheis reports. They were arrested for criminal damage and aggravated trespass, police said later.
"Human creativity and brilliance is on show in this gallery, yet our heritage is being destroyed by our Government’s failure to act on the climate and cost of living crisis," the activists said in a statement.
The gallery said later that the frame sustained “minor damage” but that the painting remained unharmed, and the painting was returned to its (newly cleaned) place in the gallery by afternoon.
The climate group has made headlines in recent months for targeting other works of art—including in July, when they glued themselves to a framed copy of Leonardo da Vinci’s “The Last Supper” after spray painting the wall underneath it with the phrase, “No New Oil.”
SONY-HONDA JOINT VENTURE PLANS TO START U.S. EV DELIVERIES IN 2026: The newly announced Sony-Honda Mobility (SHM) joint venture focused on electric vehicle manufacturing announced it will begin deliveries of its cars the U.S. and Japan in 2026, and plans to begin taking pre-orders for the cars in 2025.
The two companies signed a joint venture agreement in June, but since then, details of the partnership have been scant — though SHM did say in the announcement it plans to build its vehicles at a Honda facility in North America — likely, its facility in Ohio, where the company has also invested heavily in battery and EV manufacturing efforts.
SHM has not yet released any information about the expected cost or range of its vehicles, though it said it plans to develop cloud-based software and entertainment services, including options for Level 3 driving automation and Level 2+ automated assistance.
News of the effort comes as automakers race to meet consumer demand for EVs, which the IEA expects will rise to another record-high this year and comprise roughly 13% of total light duty vehicle sales.
PLANT VOGTLE BEGINS LOADING FUEL AT UNIT 3 REACTOR: Georgia Power said it has started loading fuel into its Unit 3 nuclear reactor core at Plant Vogtle, marking a major milestone towards bringing online the nation’s first newly built commercial nuclear reactor in more than 30 years.
The announcement also puts the Unit 3 reactor on track to begin operations in the first quarter of 2023—which operators expect will be followed by Unit 4, the second of the two new reactors, which is slated to come online in the second half of 2023.
The plant’s operators, Southern Nuclear, got the green light from the National Regulatory Commission (NRC) in August, clearing it to move forward with the fuel loading process. Next, it will undergo startup testing to demonstrate it can safely bring the plant from shutdown mode to full capacity.
Georgia Power CEO Chris Womack hailed the development as a “milestone” for Plant Vogtle and said it demonstrates “steady and evident progress at the nuclear expansion site.”
Operators estimate that, once operational, the new Plant Vogtle Unit 3 and 4 reactors will power more than 500,000 homes and businesses.
CLIMATE EXPERTS WARN EU FACING ‘VERY COLD SNAP’ THIS WINTER: A new early winter forecast from the European Center for Medium-Range Weather Forecasts, or ECMWF, warned that Europe is facing a “higher than usual” chance of a significant cold snap before Christmas—conditions that risk exacerbating the EU's already perilous energy supply as leaders brace for their first winter without Russian fossil fuels.
The medium-term forecast cannot predict with certainty what weather will look like in January or February, researchers said. But the risks of a December cold snap could cause a significant uptick in household energy demand, depleting the precious little stored gas the EU has to last through March.
In September, a cold snap saw gas consumption in German households spike by 14.5% compared to the four-year average for the same week—illustrating the threat.
“We are coming out of a warm summer. We know that winters are getting milder. So we may be inclined to think it’s going to be a mild winter and we don’t have to worry,” Carlo Buontempo, a director at ECMWF, told Politico EU. “This may well be the case, but the forecast that we issue today and our understanding of how the climate system works lead us to suggest that actually there is still a chance of a very cold snap and, if anything, this year that chance — before Christmas — is higher than in a normal year.”
…MEANWHILE, AN OMINOUS WARNING FROM RUSSIA’S GAZPROM: The CEO of Russian state-owned gas giant Gazprom warned this week that European households could still “freeze” during a cold snap this winter, despite EU leaders being on track to fill their gas storage tanks ahead of the winter season.
“Winter can be relatively warm, but one week or even five days will be abnormally cold and it’s possible that whole towns and lands, god forbid, will freeze,” Gazprom CEO Alexey Miller said at an energy event in Moscow, according to Bloomberg.
Citing an unidentified analysis, Miller also said that during peak demand days this winter, Europe could see a gap of 800 million cubic meters of natural gas per day—or roughly one-third of its total consumption.
He also cited estimates predicted that EU storage tanks will be drained to just 5% storage by March. “Sure, Europe will survive, but what will happen by the time of gas injection” into storage before the winters of 2023 and 2024? Miller asked.“It will be clear then that [the] energy crisis has come not for a short period of time.”
DC ATTORNEY GENERAL SUES COMPANY FOR POLLUTING RIVERS WITH CANCER-CAUSING PESTICIDE: D.C. Attorney General Karl Racine announced a lawsuit yesterday against the chemical manufacturer Vesicol, accusing it of contaminating the Potomac and the Anacostia for “decades” with a pesticide that it knew could cause cancer.
Racine said the company had knowledge about the harmful and long-lasting effects of its chlordane pesticide for 28 years, but continued to market it to low-income communities.
According to the lawsuit, the company received private lab results showing that chlordane caused birth defects in animals and later, that it was linked to cancer.
“With today’s lawsuit, we are going after Velsicol which – for decades – made dollar after dollar of profit while poisoning DC residents with dangerous chemicals that they knew caused severe health problems, including cancer,” Racine said in a statement.
Bloomberg Exxon’s exodus: Employees have finally had enough of its toxic culture
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10:00 a.m. The Federal Energy Regulatory Commission holds its monthly meeting.