Can California really be in the thick of a full-blown oil crisis?
After all, this is the same state humorists and environmentalists alike hail as the champion of clean energy. In fact, nearly half of the Tesla cars in the U.S. are registered and driven on California highways.
Then again, it’s also the same state that hands out I.O.U.s in place of tax refunds… but I digress.
Despite the Golden State’s reputation for being a leader in alternative energy, the cold, hard truth of the matter is that the state is just as indebted to oil as the rest of us.
Actually, they have it much worse…
California Dreaming
It’s far too easy to fall for the wondrous things California is accomplishing with clean energy.
One quick trip to the California Energy Commission will inundate you with a plethora of new clean initiatives — like the latest news that the state is spending over a hundred million dollars to improve its electricity system, or that 45% of the 200,000 gigawatt-hours of electricity California generates is from natural gas, or even the addition of the state’s Renewables Portfolio Standard that was passed a few years ago.
Don’t get me wrong — show me the same goals in Maryland, and I’ll be the first one on board.
Unfortunately, oil dependence is a horse of a different color. California still relies on oil to fuel 96% of its transportation sector, and the state is home to almost 11% of the total number of vehicles registered in the U.S.
And for a state where oil production has been in decline for the better part of three decades, an addiction to crude oil is the last thing you want see.
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To say California is oil-rich is a little misleading. Even though the state has 2.9 billion barrels of proved reserves, both you and I know the only thing that matters is what you can get out of the ground.
They’re not alone in these peak oil woes. I mentioned last week that Alaska was dealing with its own oil production crisis.
There is, however, one slight difference.
California now relies on foreign countries for imports for over 60% of its oil supply. (I did say they have it worse than the rest of us, didn’t I?)
Since 2005, U.S. imports of crude oil and petroleum products dropped by nearly 24%, mostly due to the boost in tight oil production in the lower-48 states.
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During the same period, the amount of crude oil imports reaching West Coast refineries increased by 3.5%!
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The Oil Noose Tightens
It’s bad enough that California became a net exporter as production plummeted over the last 25 years, but this crisis situation didn’t exactly sneak up on anyone. Back in 2009, the Society of Petroleum Engineers released a report on the future of California’s oil supply.
You see, the most troubling issue isn’t necessarily how much oil they’re importing, but who is selling it to California refineries.
Toss Alaska’s own peak oil troubles into the mix, and you can probably guess where our clean energy champion will go for more oil:
That’s not a comforting chart no matter how you look at it.
Last year, 54% of the crude oil imports hitting the West Coast came from just three countries — all of which also happen to be card-carrying members of OPEC.
I have a feeling that most of you already know OPEC has been struggling to maintain its dominance over the world’s oil supply. It was only a few days ago that the IEA released its latest monthly oil report showing that OPEC production fell to 29.6 million barrels per day — its lowest point since 2011.
As for California’s three largest oil suppliers in OPEC, two of them — Saudi Arabia and Iraq — led the group’s 890,000 bbls/day production decline.
Stay tuned, because we’re not only going to delve further into OPEC’s brewing oil crisis, but we’ll also take a look at how you can take advantage of this dynamic shift in global supply.
Until next time,
Keith Kohl
Check us out on YouTube!A true insider in the technology and energy markets, Keith’s research has helped everyday investors capitalize from the rapid adoption of new technology trends and energy transitions. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital, as well as the investment director of Angel Publishing’s Energy Investor and Technology and Opportunity.
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