California is playing a 'dangerous game' with climate policies, Chevron (NYSE:CVX) executive says

The premiums California drivers pay for gasoline compared to the overall U.S. average will likely rise significantly if state lawmakers continue to enact policies to discourage oil production, Chevron's president said.New York Stock Exchange: CFX) the refining division told Bloomberg in an interview Saturday.

California drivers paid an average of $4.94 per gallon of gasoline in the fourth quarter of last year versus the $3.22 national average, in part because the state's strict low-carbon fuel standards encouraged refiners to switch from oil to renewable diesel. This reduces gasoline supplies and increases fuel prices. Prices, said Andy Walz of Chevron (CVX). interview.

The state government “knew this would happen when it wrote the legislation,” Walz said, but now “the consumer is starting to realize it.” “It has become painful.”

Chevron (CVX) recently cited California's stringent regulations regarding the write-down of up to $4 billion in assets, and the company's latest ire is a proposal to create a refining margin cap in California; It is already difficult for Chevron to justify growth projects at its California refineries — which account for about 30% of the state's capacity — because of plans to end sales of internal combustion engines in the state by 2035, and Walz said a law that would effectively limit refinery profits would make them Practically impossible.

“If they limit the upside when conditions are good, that will make it really hard for us to want to put our money out there,” Walz said. “I would rather spend the money at our refineries in Mississippi.”

Partly to take advantage of state incentives, Chevron (CVX), Marathon Petroleum (MPC), and Phillips 66 (PSX) switched refineries away from gasoline, diesel, and jet fuel to renewable fuels, contributing to an 11% decline in refining in California. capabilities over the past decade.

Refiners are making decisions that “put us on a path where there could be a reliability issue,” according to Walz. “You may not have gasoline in stock if things don't go the way the government wants. It's a dangerous game.”