Chevron Joins the California Exodus

SACRAMENTO, Calif. — After Chevron last month announced its plan to close its San Ramon headquarters and take 2,000 corporate jobs from the San Francisco Bay Area to Houston, CEO Mike Wirth downplayed any political aspects of the move in an interview with Bloomberg Talks: “We’ve had some policy differences with California. But this isn’t a move about politics. It’s a move about what’s good for our company to compete and perform.”

There’s no doubt that Houston makes more sense as its headquarters given its role as the “epicenter” of the American oil and refining industry. One can’t blame a corporation for not giving the nation’s most populous state the raspberries given it still operates refineries, oil wells, and retail outlets here and must still deal with the state government. But it’s not a big reach to conclude that California politicians literally chased the company out of state.

“Chevron already had slashed new investments in California refining, citing ‘adversarial’ government policies in a state that has some of the most stringent environmental rules in the US,” reported the Mercury News last week. “In January, refining executive Andy Walz warned that the state was playing a ‘dangerous game’ with climate rules that threatened to spike gasoline prices.” Those were mild critiques given the approach Sacramento officials have taken toward the industry.

As the Los Angeles Times reported:

[T]he move is part of a long, steady exodus of not only Chevron’s operations, but also the larger petroleum industry from California, which in its heyday early last century produced more than one-fifth of the world’s total oil. While California remains the seventh-largest producer of oil among the 50 states, its production of crude has been sliding since the mid-1980s and is now down to only about 2 percent of the U.S. total.

This is driven by government policy, not market conditions. According to data from the U.S. Department of Energy, U.S. petroleum production and consumption has increased steadily since 1949. Oil imports have dropped significantly since 2005, but our nation’s economy remains heavily reliant on oil use. So is California’s economy. The state “currently gets 50 percent of its total energy from oil and another 34 percent from gas,” per Edward Ring in City Journal.

So while the state still depends on fossil fuels, its government — in its zeal to turn California into the worldwide leader in switching to alternative fuels to battle climate change — has decided that it no longer wants the industry within its borders. The state has banned the sale of new internal combustion engine vehicles beginning in 2035. In another attempt to dry up demand for gasoline, California already banned gas-powered garden equipment.

Reflecting on this “relentless” attack on the industry, Ring notes that California Attorney General Rob Bonta filed a massive lawsuit in 2023 targeting Chevron, six other major oil companies, and the American Petroleum Institute, alleging that it misled the public about the impact of the industry on the climate. “A year before that, in September 2022, Governor Gavin Newsom signed legislation to ban new oil and gas wells within 3,200 feet of any occupied structure,” he added. That will obviously crush any attempts to expand oil production.

Gov. Gavin Newsom and the Legislature have employed overheated rhetoric in its crusade. California’s gasoline prices are much higher than in neighboring states, currently averaging around $1.20 more per gallon than the national average. The reasons are obvious. We impose some of the highest taxes on gasoline. California requires a special environmentally friendly formulation, which reduces supply from other states. And California’s war on refiners has reduced supply as companies limit their investments.

Yet California officials have repeatedly blasted the “greed” of the oil companies, as if those companies are somehow greedier here than in, say, Nevada. “[W]e’re ending the oil industry’s days of operating in the shadows,” Newsom boasted after signing a law increasing the transparency of oil company pricing. “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 created that new oversight agency after failing in his attempt to impose a windfall-profits tax. Courthouse News Service accurately referred to that legislation as a “new tactic in his war on Big Oil.” The governor and Legislature are waging war on oil companies — so they can hardly be surprised if those companies take their jobs and revenues to states that welcome them. It’s an odd tactic, especially in a capital-gains-dependent state facing revenue shortfalls, but so be it.

California’s oil and gas industry accounts for 2.1 percent of the state’s gross domestic product and pays more than $40 billion in state and local taxes, according to a 2019 study commissioned by the industry. It’s also a key source of high-paying jobs around Bakersfield and the Central Valley. But none of that matters in the context of this ideological campaign. And this “war” is primarily ideological. 

Regarding that nonsensical lawsuit, the state blames the oil companies for every conceivable weather event. “California taxpayers shouldn’t have to foot the bill for billions of dollars in damages — wildfires wiping out entire communities, toxic smoke clogging our air, deadly heat waves, record breaking droughts parching our wells,” Newsom said in a statement supporting the effort.

Although officials express concern at high gasoline prices, the California Air Resources Board is currently developing new low-carbon fuel standards that agency officials say will boost per-gallon prices by 52 cents in two years. After they kick in, expect the governor and lawmakers to hold press conferences announcing investigations into oil-company price “gouging.” 

Meanwhile, the state continues to underinvest in road and freeway infrastructure in the hopes that Californians will abandon their cars in favor of ebikes and rail lines. So the question isn’t why Chevron is leaving, but why it took so long.

Steven Greenhut is Western region director for the R Street Institute. Write to him at sgreenhut@rstreet.org.

The post Chevron Joins the California Exodus appeared first on The American Spectator | USA News and Politics.