Apparently, Governor Gavin Newsom and the California Energy Commission (CEC) are considering following the same playbook that the late Venezuela Hugo Chavez once laid out.
No, I am not talking about throwing out the Constitution, but they might be for that. What I am talking about is for the state to take over a major part of the California energy industry.
Now if you think this is going to be a good thing then you are probably California dreaming. It will not be safe or warm when you’re in LA.
California ran Chevron (NYSE:CVX) and its corporate headquarters out of the state after 140 years with government pressure and lawsuits.
Sort of like Chavez did before he fired all the oil workers before the government seized the oil industry and of course before Venezuela’s economy went into steep decline. Sort of like how California’s economy has been doing under Governor Newsom.
The move by Chevron will eventually cost California about 7000 jobs. California has some of the strictest regulations in the country as well as specifications on gasoline that are very expensive, and has not only made California’s gas prices among the highest in the nation but also extremely vulnerable of retail gasoline price spikes.
Also, California’s dream to get rid of the internal combustion engine with regulations is going to force some refineries out of business potentially leading to higher prices.
Of course, the politicians regulate the industry and discourage investment, causing shortages of oil for these refineries. They blamed the oil companies for the price spikes even when it’s quite clear that it’s their policies that keep California prices high and put undo strain on the people of California as well as their businesses.
Chevron’s CEO Mike Wirt said on his decision to pull its corporate headquarters out of California:
“We believe California has a number of policies that raise costs, that hurt consumers, that discourage investment and ultimately we think that’s not good for the economy in California and for consumers”.
Yet what Hugo Chavez and Governor Newsome have in common is not what is good for the economy or the consumers but what is good for them. California and its misguided desire to transition from fossil fuels continues to fail miserably and its quest.
Ed Ring of the Globe pointed out that, “Despite being a sunny, solar-friendly state, with ample areas blessed with high wind, California still derives 50 percent of its total energy from crude oil. Another 34 percent comes from natural gas.
This fossil fuel total for California energy, 84 percent, exceeds the world average for 2022, which – including coal – came in at 82 percent.”
So it’s like Chavez when he decided to take over the Venezuelan oil industry forcing out people who knew how to run the industry and replacing them with government cronies.
If Californian authorities attempt to do this, I predict that they will run it into the ground and try to profit off it as it drives all energy prices in California even higher than they already are.
Oil prices held up amazingly well considering the stock market is still in a state of flux. The unwinding of the carry trade which according to some reports is 3/4 finished along with concerns that the high-flying tech sector needs to come back down to earth, all created uncertainty about the outlook for the economy.
Yet despite the fact that some people fear recession the oil inventory numbers while demand was a bit disappointing is saying that a recession is not happening anytime soon.
In fact, one of the concerns that we should have, and I think the market is starting to realize that, is that we are heading into a supply deficit with {{0|crude oil inventories} } falling for the 7th week in a row.
The EIA said that crude oil inventories decreased by 3.7 million barrels from the previous week. At 429.3 million barrels, U.S. crude oil inventories are about 6% below the five-year average for this time of year. Total motor gasoline increased by 1.3 million barrels from last week and is about 2% below the five-year average for this time of year.
Distillate fuel inventories increased by 0.9 million barrels last week and are about 6% below the five-year average for this time of year. So, supplies in the US are below average and it appears that the band is exceeding supply.
In fact globally, according to the latest data by JODI, crude oil inventories are down by a sizable 24.4 million barrels since April. JODI also shows that oil demand is slightly higher, roughly by 81,000 barrels per day. Global crude production is falling by about 586.00 barrels per day.
Natural gas prices are coming back. The balance is hoping for expected production cuts by producers responding to low prices.
The key thing for natural gas prices is whether or not they have the ability to stay disciplined and keep the market from overproducing. At any rate, today we get the natural gas inventory report, and I am expecting an injection of 22 BCF.