California should raise fuel imports, pause margin cap, regulator says
By Shariq Khan
NEW YORK (Reuters) -California's energy regulator on Friday recommended new rules to encourage more private investment in fuel imports and a pause on refiner profit limits, hoping to stop gasoline prices from skyrocketing in the state as it braces for the closure of two of its major refineries.
The recommendations by the California Energy Commission came in response to a letter by Governor Gavin Newsom to suggest changes to the state's energy transition efforts by July 1. California faces higher fuel costs from planned refinery closures by Phillips 66 and Valero Energy.
CEC Vice Chair Siva Gunda acknowledged that refinery closures could boost the fuel prices in California, already the highest in the U.S., but said the sticker shock would be temporary.
The CEC estimates gasoline prices would rise 15 to 30 cents per gallon in the immediate aftermath of the refinery closures.
Retail gasoline prices averaged $4.61 per gallon in California as of Friday, higher than the national average of $3.21, according to AAA data.
The CEC is exploring ways to keep existing refineries operational, while raising capacity at third-party import terminals to bring in and distribute more gasoline and jet fuel, Gunda said.
As part of those efforts, the CEC recommended a pause on a program that capped the maximum profit refiners can earn on gasoline sales in the state. It said additional analytical work is needed to ensure it works as intended to protect consumers.
It said the pause should be for a "reasonable length of time" but did not specify how long that would be.
The CEC also asked Newsom to take steps to stabilize crude oil production in the state. California's crude oil output has dropped steadily from a peak of over 1 million barrels per day in the mid-1980s, to less than 300,000 bpd last year, according to U.S. government data going back to 1981.
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