California wants to combat pumping peaks by demanding gas reserves

By Timothy Gardner

(Reuters) – California Governor Gavin Newsom on Thursday proposed a plan that would require oil refineries to maintain minimum reserves of gasoline to prevent price spikes.

According to the California Energy Commission, California refineries had less than 15 days’ worth of gasoline on 63 days last year. This situation led to a price increase and cost energy suppliers $650 million.

“Price spikes at the pump mean profit spikes for the oil industry. Refineries should be required to plan ahead and replenish their inventories to keep prices stable, rather than playing games to make even more profit,” Newsom, a Democrat, said in a press release.

It was unclear when the plan might take effect, and Newsom’s office did not immediately respond to a request for comment.

The plan, which has been criticized by the industry as an attack on oil producers, would require California oil refineries to submit supply plans to offset production losses during maintenance work at their facilities.

In California, it was found that gasoline prices will rise sharply in 2023 mainly because refineries are going offline and there is insufficient planning to replenish supplies.

The plan comes three months after the U.S. Department of Energy sold its 1 million barrel gasoline reserves in the Northeast, which Washington created after Superstorm Sandy left motorists scrambling for fuel supplies in 2014. Congress ordered the sale after the reserves were criticized as expensive to maintain and not conducive to energy security.

California, the most populous U.S. state, has some of the highest average gasoline prices in the country and a rocky relationship with oil companies. The state has ambitious goals for electric car adoption and is the only one to receive a waiver from the U.S. Environmental Protection Agency to set its own vehicle emissions rules.

This month, US oil company Chevron announced that it would move its headquarters from San Ramon, California, to Houston.

Catherine Reheis-Boyd, president and CEO of the Western States Petroleum Association, said Newsom’s plan was “nothing more than a political attack on consumers and our industry.”

“Imposing new operating requirements on energy producers based on such falsehoods is a regulatory violation and ignores the logistical challenges and costs associated with such a plan,” she said.

(Reporting by Timothy Gardner; Editing by Josie Kao)