Oil Is Imploding, And I’m Looking To Buy

Although most of you may have heard of the famous Texas oil gushers in the early days of the U.S. oil industry, I’ll bet only a handful of you history buffs know about the significance of Pico Canyon. 

Pico Canyon isn’t some isolated oil field out in the middle of nowhere. 

In fact, It’s only 40 miles north of Los Angeles. 

Just hop on I-5 going north and hang a louie onto the Pico Canyon road the moment you see the Burger King. Then, assuming you’ve survived the traffic, all you gotta do is drive west for another five miles and you’ll hit what is arguably one of the most important historical landmarks in California’s 174-year history.

Much to the chagrin of the state’s governor, Pico Canyon is the birthplace of California’s oil industry. The Star Oil Works Company picked up a man named Charles Mentry to drill a few locations in the area. 

It took four tries, but that lucky fourth well struck oil on September 26, 1876 at a depth of 370 feet. 

Here’s a shot of that well a year later:

Oil flowed out of the Pico Canyon No. 4 well for roughly 114 years until around 1990. 

A few years later, the Pacific Coast Oil Company bought out Star Oil’s assets, which attracted the attention of John D. Rockefeller… and once they had that, it was only a matter of time before it was swallowed up by Standard Oil. 

You can probably guess what happened next. Once Standard Oil was broken up under the Sherman Antitrust Act, the remnants of the California-based companies became the Standard Oil Company of California in 1926, and later changed its name to Chevron. 

I know it’s a little hard to imagine for the younger members of our investment community, but California was a powerhouse oil player in the United States for a long time; the state was a top 3 producer for decades throughout the 20th Century, behind only Alaska and Texas. 

Oh, how the mighty have fallen.

Folks, this is what an oil bust looks like:

But to put a little perspective on this, just keep in mind that while U.S. oil production has grown more than 160% since 2008, California’s crude output has plummeted more than 44%!

Not that a transition to cleaner energy — particularly in the transportation sector — is a bad thing, mind you. However, The Golden State’s war against its own oil and gas industry is finally breaking Chevron’s back… Whether that’s a good thing or not, I’ll leave it to you.

How bad did things get? 

If Germany’s clean energy transition was a cautionary tale for what could go wrong, then California’s constricting regulations on oil would be a massive dumpster fire that we can’t help but watch burn in slow motion. 

During a period when U.S. oil production soared to all-time highs, and currently treading water around 13.1 million barrels per day, California’s harsh regulatory environment has ensured the state’s oil output would continue declining throughout the shale boom.

The low-carbon fuel standards, cap-and-trade fees, strong drilling restrictions, and excessive price gouging legislation have targeted refiners. Chevron happens to own two of the three largest refineries in the state, which together hold more than 30% of California’s refining capacity. 

That’s not to mention the fact that the state of California went so far as to sue Big Oil recently, citing decades of deception and is going after those oil and gas profits. 

It may not have been the straw that broke the camel’s back, but it certainly made Chevron’s next decision easier. 

Now, after nearly 150 years into their relationship, the company is calling it quits and relocating its headquarters to Texas. 

You can see the problem given the fact that California is the second largest petroleum consumer in the United States, and has to import nearly three-quarters of its crude oil. 

Then again, it also doesn’t help when you rely on natural gas for almost 40% of your electrical generation. 

So where does that leave us? 

Fortunately, that’s the easy part for us. 

While oil companies are abandoning ship in California, the spotlight is slowly starting to shine on the few regions that will now play an even more critical role in finding new supply — and you can bet those small investment gems in the U.S. oil patch are still flying under Wall Street’s radar. 

This is where your search should begin.

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.

For nearly two decades, Keith has been providing in-depth coverage of the hottest investment trends before they go mainstream — from the shale oil and gas boom in the United States to the red-hot EV revolution currently underway. Keith and his readers have banked hundreds of winning trades on the 5G rollout and on key advancements in robotics and AI technology.

Keith’s keen trading acumen and investment research also extend all the way into the complex biotech sector, where he and his readers take advantage of the newest and most groundbreaking medical therapies being developed by nearly 1,000 biotech companies. His network includes hundreds of experts, from M.D.s and Ph.D.s to lab scientists grinding out the latest medical technology and treatments. You can join his vast investment community and target the most profitable biotech stocks in Keith’s Topline Trader advisory newsletter.