Inside Aera
Oil in Everyday Life Mar 13, 2020

California policymakers must come to terms with the state’s fossil-fuel reality

Despite laws mandating carbon emissions, California’s fossil-fuel consumption continues to grow. Should our oil demand be met by local production or foreign imports?

Dr. Christopher Thornberg is the founder of Beacon Economics, one of the most respected research organizations in California, serving clients across the U.S.

By Dr. Christopher Thornberg, Beacon Economics

California has been a leader in reducing carbon emissions and promoting renewable energy for nearly 15 years.

Major achievements include the Global Warming Solutions Act of 2006 (Assembly Bill 32), and the Sustainable Communities and Climate Protection Act (Senate Bill 375), passed in 2008.

These laws set the target of reducing California’s carbon emissions to 1990 levels by 2020. In 2016, California met those targets four years ahead of schedule. In addition, California has set an even more ambitious goal of reducing state emissions by 80% by 2050.

Moreover, in 2012, the California Air Resources Board (CARB) adopted the Advanced Clean Car program. This aims to reduce smog and greenhouse gas emissions from both gasoline and alternative-fuel vehicles. The program includes the Zero Emissions Vehicle (ZEV) Mandate requiring auto-manufacturers to offer specific numbers of the very cleanest cars available. Qualifying vehicle technologies include full battery-electric, hydrogen fuel cell and plug-in hybrid-electric vehicles. 

Despite its impressive efforts and achievements, California’s demand for fossil fuels remains considerable – at more than 50 million barrels per day. This need will continue for the foreseeable future.

The largest consumer of petroleum-related products is the transportation sector, accounting for 40% of total state demand. This includes automobiles, trucks and airplanes.

While Californians’ use of electric vehicles and hybrid cars leads the nation, the vast majority of the state’s vehicles currently use gasoline. As the amount of driving in the state grows, the demand for oil here will remain strong.

This chart tracks California oil production and consumption since the 1980s. While the Great Recession created a significant drag on the state’s oil consumption, demand has rebounded and is significantly higher today than it was in the early 1980s.

Oil demand rising, production falling

Over the past four decades, oil production in the state has decreased, while demand for oil has simultaneously increased. This is largely due to the state’s growing population and to longer commutes, which have increased vehicle miles traveled (VMT) as Californians drive farther to get from their homes to their jobs. Absent radical change, increased VMT will translate into continued demand for oil in the state.

This has led to an increased reliance on imported oil to satisfy California’s demand for oil.

Over this time, California’s oil output has fallen by over 50%. This has meant that oil imports into the state have increased precipitously. In 1982, locally produced oil accounted for around 60% of the state’s supply, compared to around 40% today. At the same time, the supply of foreign oil has grown from less than 10% to close to 60% of the state’s supply. Among California’s foreign oil suppliers are Saudi Arabia and Iraq.

The state’s greater reliance on foreign energy imports creates risks, including jeopardizing the reliability of our energy supply, which can be subject to market volatility and international turmoil. Last year’s attacks on Saudi oil fields, for example, led to increases in prices at the pump for Californians. Specifically, as foreign oil imports increase, California is exposed to a wide variety of geo-political factors and worldwide economic volatility.

Further, foreign oil supplies are not subject to California’s strict environmental and labor laws. In addition, maintaining or increasing California oil production contributes greatly to state and local tax revenues and creates jobs in the state.

Given California’s continued reliance on fossil fuels, policy-makers must consider this key question: Should California’s fossil-fuel demand be met by local production or by foreign oil imports?

My view is that California should continue to aggressively move toward renewable fuels with its current programs as well as potentially new initiatives. But fossil fuels will still be an important fuel source—particularly for transportation—in the transition to renewables, and decision-makers need to come to terms with that reality.

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