GOOD AFTERNOON. GOOD AFTERNOON.
I'D LIKE TO CALL THIS HEARING OF
THE ASSEMBLY COMMITTEE ON
PETROLEUM AND GASOLINE SUPPLY TO
ORDER AS PART OF THE SECOND
EXTRAORDINARY SESSION. WE'RE
HERE TODAY FOR AN INFORMATIONAL
HEARING WHICH WILL LAY THE
FOUNDATION FOR POLICY
DISCUSSIONS THAT WILL BE
HAPPENING THROUGHOUT THIS
EXTRAORDINARY SESSION. TODAY'S
AGENDA WILL COVER THE BASICS OF
CALIFORNIA'S PETROLEUM ECONOMY
AND THE STATE'S PLAN FOR ITS
FUTURE TRANSITION. BEFORE WE
BEGIN, I HAVE A BRIEF
HOUSEKEEPING ANNOUNCEMENT. I
WILL MAINTAIN DECORUM DURING
TODAY'S HEARING. AS IS CUSTOMARY
CONDUCT THAT DISRUPTS OUR
PROCEEDINGS WILL NOT BE
PERMITTED. ANY INDIVIDUAL WHO IS
DISRUPTIVE WILL BE REMOVED.
CALIFORNIA'S FUELS TRANSITION
PLAN IS ONE OF THE MOST
COMPLICATED AND MOST IMPORTANT
CHALLENGES THAT WE, AS
POLICYMAKERS, WILL NEED TO
NAVIGATE IN THE DECADE AHEAD. WE
DO NOT TAKE THIS CHALLENGE
LIGHTLY, NOR FRIVOLOUSLY.
GASOLINE DEMAND IS SHRINKING THE
MARKETS SUPPLYING GASOLINE TO
THE STATE IS CONSTRICTING. AS A
CONSEQUENCE, PRICES HAVE GROWN
MORE VOLATILE, AND THAT'S
HURTING CALIFORNIA FAMILIES. WE
CANNOT AND DO NOT EXPECT
CALIFORNIANS TO JUST ACCEPT SKY
HIGH PRICES. WE DON'T EXPECT
PEOPLE TO JUST ACCEPT PRICE
SPIKES. THAT'S WHY WE'RE HERE TO
IDENTIFY SOLUTIONS TO STABILIZE
PRICES, TO DELIVER SAVINGS FOR
CALIFORNIANS AS OUR STATE
TRANSITIONS TO A CLEAN ENERGY
ECONOMY. AS WE DO THIS WORK, AS
WITH ALL POLICY MATTERS, IT IS
ABSOLUTELY IMPERATIVE THAT WE
THOROUGHLY VET ANY PROPOSAL THAT
WILL IMPACT THE LIVES AND THE
POCKETBOOKS OF 40 MILLION
CALIFORNIANS THAT WE ARE AWARE
OF. POTENTIAL UNINTENDED
CONSEQUENCES AS WE PLAN OUR
FUTURE STRATEGIES, AND THAT
WE'RE CLEAR EYED IN THE
DECISIONS THAT WE MAKE. AND
THAT'S WHY WE'RE BEGINNING. WE
ARE BEGINNING THIS EXTRAORDINARY
SESSION WITH A KIND OF WHAT I'M
THINKING OF AS PETROLEUM MARKETS
101. SO TODAY'S HEARING IS AN
OPPORTUNITY FOR US TO FOCUS ON
AND UNDERSTAND THE FUNDAMENTALS.
HOW DOES CALIFORNIA'S PETROLEUM
MARKET OPERATE TODAY? WHAT ARE
THE PRICE SIGNALS AND HOW ARE
PRICES DETERMINED AND WHAT MAKES
OUR MARKET UNIQUE COMPARED TO
THE REST OF THE COUNTRY? TODAY,
WE'LL ALSO PROVIDE AN OVERVIEW
OF CALIFORNIA'S DECARBONIZATION
STRATEGY AND A PREVIEW OF THE
TRANSPORTATION FUELS TRANSITION
PLAN. TOMORROW'S HEARING WILL
BUILD UPON THIS FOUNDATION,
PROVIDING INSIGHTS INTO WHAT
CURRENTLY IMPACTS THE SUPPLY OF
TRANSPORTATION FUELS. EXAMINING
THE ADMINISTRATION'S PROPOSAL TO
REQUIRE MINIMUM INVENTORIES ON
REFINERS, AS WELL AS EXAMINING
OTHER POTENTIAL SUPPLY
INTERVENTIONS. I WILL NOTE THAT
GIVEN THAT TODAY IS REALLY
SUPPOSED TO BE FOUNDATION LEVEL
SETTING INFORMATION SETTING, AS
WE HAVE QUESTIONS THAT ARE
RELATED TO THE GOVERNOR'S
PROPOSAL OR OTHER MATTERS, I MAY
PAUSE THAT LINE OF DISCUSSION,
KIND OF PUT A PIN IN IT SO THAT
WE CAN FOCUS ON ON THOSE
QUESTIONS TOMORROW. SO WITH
THAT, BEFORE WE JUMP IN, I'LL GO
AHEAD AND TURN IT OVER TO MY
COLLEAGUES FOR ANY OPENING
REMARKS. ASSEMBLY MEMBER HARDT,
I WANT TO THANK CHAIR
PETRIE-NORRIS AND SPEAKER RIVAS
FOR ESTABLISHING THIS COMMITTEE
ON GASOLINE SUPPLY SO WE CAN
CONVENE A TRANSPARENT
STAKEHOLDER PROCESS ON THE STATE
OF GASOLINE PRODUCTION INVENTORY
AND ITS IMPACTS ON OUR
CONSTITUENTS. WE'RE HERE TODAY
TO BEGIN THE CAREFUL AND SERIOUS
WORK OF FINDING SOLUTIONS TO
EASE THE BURDEN OF RISING
GASOLINE COSTS THAT HURT
CALIFORNIA CONSTITUENTS.
TRANSITIONING TO A CARBON
NEUTRAL ENERGY FUTURE IS A
COMPLEX ENDEAVOR, AND I
RECOGNIZE THE CHALLENGES. BUT
THE LONGER WE DELAY IN
TRANSITIONING TO A MORE
SUSTAINABLE ENERGY FRAMEWORK,
THE MORE WE RISK VOLATILITY IN
GASOLINE PRICES. WE'VE ALL BEEN
BACK IN OUR DISTRICTS SINCE THE
END OF THE LEGISLATIVE SESSION,
AND WE'VE HEARD LOUD AND CLEAR
FROM OUR CONSTITUENTS THAT
CALIFORNIANS ARE VERY WORRIED
ABOUT RISING PRICES, INCREASING
HOUSING PRICES, INCREASING
GROCERY PRICES, INCREASING
ENERGY PRICES, AND INCREASING
GASOLINE PRICES ARE ALL HITTING
CALIFORNIA FAMILIES VERY HARD.
WITHOUT SWIFT ACTION, CONSUMERS
WILL CONTINUE TO BEAR THE BRUNT
OF FUEL PRICE FLUCTUATIONS.
TRANSPARENCY IN PRICING AND
SUPPLY CHAIN OPERATIONS IS
CRITICAL. TODAY'S HEARING WILL
HELP BUILD THE FACTUAL
FOUNDATION WE NEED TO PASS
EFFECTIVE LEGISLATION. I'LL BE
LISTENING CLOSELY IN THE DAYS
AHEAD. I'M CONVINCED WE CAN
EQUITABLY MANAGE THIS TRANSITION
IF WE WORK TOGETHER. LET'S ROLL
UP OUR SLEEVES AND GET TO WORK.
THANK YOU. THANK YOU. ASSEMBLY
MEMBER JACKSON. THANK YOU VERY
MUCH, MADAM CHAIR. I ALSO LIKE
TO THANK THE SPEAKER FOR
CREATING A PROCESS WHERE WE CAN
THOROUGHLY VET, AND MAKING SURE
THAT NOT ONLY WE KNOW, BUT THE
PUBLIC KNOWS EXACTLY WHAT WE ARE
VOTING FOR, OR AGAINST. AND I
WOULD THINK THAT CERTAINLY I
HELD FROM THE INLAND EMPIRE, ONE
IN WHICH RELIES HEAVILY ON OUR
VEHICLES, AND SO MYSELF BEING
ONE BACK WHEN I IN MY YOUNGER
DAYS, HAVING TO COMMUTE TO L.A.
BACK AND FORTH EACH DAY, TWO,
2.5 HOURS EACH DAY, I HAVE THE
RECEIPTS. I HAVE THE ROAD RAGE
TO PROVE IT, BUT ALSO,
UNDERSTANDING THOSE DAYS WHERE
YOU JUST DIDN'T HAVE MONEY
ENOUGH MONEY TO FILL UP THE TANK
AND WHETHER YOU WOULD MAKE IT
HOME EACH DAY, AND EVEN WHEN
IT'S ON Â. WELL, IS IT REALLY
ON Â LIST? HOPEFULLY I CAN AT
LEAST MAKE IT TO THE OFF RAMP.
RIGHT? AND SO THE IDEA IS THIS
IS VERY SERIOUS, AND I AM
GRATEFUL FOR THE PROCESS, MADAM
CHAIR, OF THAT. YOU'RE GOING
THROUGH TO MAKING SURE THAT
WE'RE PROPERLY EDUCATED, ON
THESE ISSUES SO THAT WE CAN
REALLY MAKE SURE THAT WE ARE
MAKING THE MOST THOUGHTFUL AND
RESPONSIBLE DECISIONS. THIS IS
AN ISSUE THAT WE CANNOT AFFORD
TO MAKE THIS POLITICAL THEATER.
WE CAN'T AFFORD TO JUST SAY
WE'VE DONE SOMETHING. WE HAVE
GOT TO MAKE SURE THAT WHATEVER
WE DO ACTUALLY LOWERS GAS PRICES
AND ANYTHING LESS, FOR ME AT
LEAST. AND I'M SURE MY
CONSTITUENTS WOULD AGREE WITH
ME, IS NOT ACCEPTABLE. I LOOK
FORWARD TO THE PROCESS. AND
THANK YOU VERY MUCH. THANK YOU.
ASSEMBLY MEMBER, WE'LL GO AHEAD
AND TURN IT TO VICE CHAIR
PATTERSON. THANK YOU. THANK YOU,
MADAM CHAIR, WE HAVE TWO
HEARINGS. ONE BEFORE US TODAY,
ONE BEFORE US TOMORROW. AS THE
VICE CHAIR OF UTILITY AND ENERGY
FOR THE LAST 12 YEARS, THIS IS
AN AREA THAT CONCERNS ME. IT'S
AN AREA THAT I THINK WE, FIRST
OF ALL, NEED TO FULLY UNDERSTAND
CALIFORNIA'S PETROLEUM ECONOMY.
THIS HEARING IS THE FOUNDATION
FOR US TO BE ABLE TO MAKE WELL
INFORMED DECISIONS WITH RESPECT
TO THE BILL, WHEN, WHEN AND IF
WE SEE IT. AND SO MY INTENTION
IS TO REALLY BE A SPONGE TODAY.
LISTEN, I'M GOING TO TAKE A LOT
OF NOTES, BUT WHEN WE GET TO
TOMORROW, THAT BECOMES WHERE THE
RUBBER MEETS THE ROAD. AND I
WILL HAVE SOME COMMENTS AND, AND
ALSO SOME QUESTIONS WITH RESPECT
TO MAKING SURE THAT WE DO LOWER
COSTS, BUT WE DO IT IN A WAY
THAT DOESN'T CREATE UNINTENDED
CONSEQUENCES. WE HAVE A NUMBER
OF WARNING SIGNALS FROM THE CEC
AND OTHERS THAT, SQUIRRELING
AWAY A LARGE SUPPLY OF GASOLINE
COULD, COULD ACTUALLY WORK IN
THE OTHER DIRECTION. TO, TO
BASICALLY BE A, YOU KNOW, IF YOU
HOARD IT AWAY, AND THE DEMAND IS
THERE. PRICES ARE VERY LIKELY TO
GO UP. AND I THINK THAT THERE'S
ALSO SOME INFORMATION ON SOME OF
THE REPORTING THAT WE'LL HEAR,
MAYBE TESTIMONY TODAY THAT IF WE
LOSE ONE MORE REFINERY IN THE
STATE OF CALIFORNIA, IT'S GOING
TO BE CATASTROPHE. AND SO WE'VE
GOT TO BE VERY, VERY CAREFUL.
AND WE'VE GOT TO UNDERSTAND THE
COMPLEXITIES. THIS HEARING GIVES
US THE CHANCE TO UNDERSTAND THAT
TOMORROW. THEN WE'RE GOING TO
HAVE TO START SAYING, OKAY, NOW
WE UNDERSTAND WHAT WE HAVE IN
FRONT OF US. LET'S MAKE SURE
THAT WE GOVERN WISELY AND CHOOSE
WISELY. MAKING SURE THAT WE
UNDERSTAND THAT THERE COULD BE
UNINTENDED CONSEQUENCES AND AT
THE SAME TIME, I THINK WE OWE IT
TO OUR CONSTITUENTS TO WORK VERY
HARD TO UNDERSTAND THE
COMPLEXITY, BUT ALSO TO ACT IN A
RESPONSIBLE WAY. AND I THINK
THAT TODAY'S HEARING PROVIDES
THAT OPPORTUNITY FOR A DEPTH OF
FOUNDATIONAL UNDERSTANDING.
TOMORROW, WE'RE GOING TO HAVE TO
DECIDE ON HOW WE GO ABOUT MAKING
DECISIONS. NOW THAT WE KNOW WHAT
WE KNOW. WILL THE BILL IN FRONT
OF US ACCOMPLISH THAT END, OR
WILL IT EXACERBATE A BAD
CONDITION IN THE FIRST PLACE?
AND SO WE'LL I'LL WAIT UNTIL
TOMORROW TO DIG DOWN INTO THAT
AND ASK SOME MORE SPECIFIED.
WONDERFUL. THANK YOU. VICE
CHAIR. PATTERSON. ASSEMBLY
MEMBER. BENNETT THANK YOU VERY
MUCH. CHAIR. PETRIE-NORRIS.
MARKET ECONOMIES WORK VERY
EFFICIENTLY. AND IN EVERYBODY'S
BEST INTEREST. WHEN YOU HAVE A
GOOD MARKET AND A HEALTHY
MARKET, THAT MEANS HEALTHY
COMPETITION AND ADEQUATE
KNOWLEDGE FOR EVERYBODY TO MAKE
PROPER DECISIONS. I THINK WHAT
THE CEC HAS BEEN ABLE TO FIND
OUT SINCE OUR 2023 ACTION, WHICH
OPENED UP SOME OF THE
INFORMATION THAT THE CEC DID NOT
HAVE, IS THAT THE MARKET ECONOMY
THAT WE HAVE RIGHT NOW IN THE
GASOLINE MARKET, IN PARTICULAR,
DOES NOT REFLECT THOSE IDEAL
COMPONENTS OF A MARKET ECONOMY
WITH HEALTHY COMPETITION, WITH
ADEQUATE KNOWLEDGE BY ALL OF THE
PARTICIPANTS THAT ARE OUT THERE.
WE ARE IN CALIFORNIA AT GREAT
RISK AS WE'RE MAKING THIS
TRANSITION. VERY RARELY DO YOU
SEE A MAJOR INDUSTRY IN A
SITUATION LIKE THIS WITH A
DECLINING DEMAND CURVE AND A
STAIR STEPPED DECREASE IN SUPPLY
THAT COULD COME WITH AS HAS BEEN
POINTED OUT, THE CLOSURE OF ONE
REFINERY. AND SUDDENLY WE HAVE
THIS STAIR STEP DROP AND THE
POTENTIAL NEGATIVE IMPACTS FOR
CALIFORNIANS THAT COULD COME
FROM THIS SITUATION. SO ALL OF
US ARE AT RISK, BOTH CONSUMERS
AND PRODUCERS. IT IS FIENDISHLY
DIFFICULT TO TRY TO MAKE THIS
TRANSITION PROPER. SO IF WE
DON'T HAVE A PURE MARKET ECONOMY
THAT WE COULD RELY ON, WHICH I
WOULD MUCH PREFER WE STAY OUT OF
IT, LET THE MARKET HANDLE IT,
BUT WE DON'T HAVE THAT
SITUATION. THE QUESTION THAT I
ASK IS, IS THIS SHOULD THE
REPRESENTATIVES OF THE PEOPLE OF
CALIFORNIA JUST SIT BACK AND LET
THIS TRANSITION TAKE PLACE AND
LET AN EVER INCREASING
CONCENTRATED GROUP OF MARKET
PLAYERS MAKE THE DECISIONS THAT
WE HOPE PROTECT CONSUMERS? OR
SHOULD WE INTELLIGENTLY GET
INVOLVED AND THAT'S WHAT
TOMORROW WILL BE ABOUT. HOW DO
WE INTELLIGENTLY GET INVOLVED?
BUT, ONE OF THE FUNDAMENTAL
QUESTIONS THAT WE WILL HAVE TO
ADDRESS IN THIS COMBINED TODAY
AND TOMORROW IS, IS THE CEC THE
APPROPRIATE AGENCY TO DO THIS
INVESTIGATION? AND I WOULD JUST
LIKE TO SAY AT THE START OF
THIS, THE INFORMATION I'VE
RECEIVED FROM THE CEC AND OTHER
STAKEHOLDERS HAS BEEN VERY
BALANCED OVER AND OVER AGAIN.
THEY POINTED OUT BOTH THE PROS
AND THE CONS OF EACH OF THE
SOLUTIONS THAT THEY HAD. THAT'S
HOW YOU GET TO GOOD POLICY. AND
SO THE STAKEHOLDERS THAT ARE
GOING TO PARTICIPATE TODAY AND
TOMORROW, I VERY MUCH APPRECIATE
THAT THE CHAIR AND OTHER PEOPLE
MADE SURE THAT WE HAVE A
BALANCED GROUP OF STAKEHOLDERS
AND THOSE STAKEHOLDERS THAT
SHOULD HAVE THE MOST INFLUENCE
ARE THE ONES THAT HAVE THE MOST
CREDIBLE ARGUMENTS. AND THAT
MEANS PEOPLE THAT ARE NOT
PRESENTING US JUST A ONE SIDE OF
A POINT OF VIEW, BUT THAT
RECOGNIZE WE HAVE TO BE THERE TO
DO WHAT'S RIGHT FOR CALIFORNIANS
OVERALL. SO AGAIN, I REALLY LOOK
FORWARD TO THIS, AND I
APPRECIATE GETTING THIS
OPPORTUNITY TO PUT MY THOUGHTS
IN THE GENERAL CONTEXT HERE.
THANK YOU VERY MUCH. THANK YOU.
ASSEMBLY MEMBER. ASSEMBLY
MEMBER. RUBIO. THANK YOU, MADAM
CHAIR. I ALSO WANT TO THANK THE
CHAIR AND THE SPEAKER FOR
PROVIDING THIS OPPORTUNITY FOR
US TO REALLY REVIEW THE
INFORMATION. I'M THE FIRST ONE
TO TELL YOU THAT I AM NOT AN
EXPERT. MY EXPERTISE IS I GO AND
PUMP GAS. THAT IS AS FAR AS I
GO. WHERE IT COMES FROM, WHO
PRODUCED IT IS COMPLETELY OUT OF
MY REALM. AND THAT'S WHY I'M
LOOKING FORWARD TO TODAY'S
INFORMATIONAL HEARING. BUT I
ALSO WANT TO CAUTION THAT,
WHATEVER HAPPENS OUTSIDE, I KNOW
THERE'S A LOT OF MUDSLINGING
GOING ON. I WANT TO IGNORE THAT.
THAT IS NOT WHY WE'RE HERE. THIS
IS, FOR ME, STRICTLY
INFORMATIONAL, STRICTLY TO LEARN
EXACTLY WHAT THE PROCESS IS AND
HOW THIS ALL WORKS TOGETHER. THE
POLITICS OF IT DOESN'T HELP US
MAKE FAIR DECISIONS AND BALANCE
DECISIONS. AS ONE OF MY
COLLEAGUES JUST STATED, SO I
WANT TO I SEE THE PRESS HERE,
AND I APPRECIATE YOU BEING HERE.
I THINK THAT THIS IS THE
OPPORTUNITY FOR US TO LEARN HOW
THIS WHOLE SYSTEM IS PUT
TOGETHER AND MAKE THOSE
DECISIONS, BECAUSE I LIKE, MY
COLLEAGUE FROM RIVERSIDE, MY
COMMUNITY IN THE EAST SAN
GABRIEL VALLEY DRIVES VERY, VERY
FAR TO GET TO WORK TO DOWNTOWN
LA, TO THE INLAND EMPIRE. AND
THEY ARE THE ONES THAT BEAR THE
COST OF ANY DECISIONS THAT WE
MAKE OR WE DON'T MAKE. SO I WANT
TO THANK YOU AGAIN FOR THIS
OPPORTUNITY TODAY. I'M READY TO
LEARN, AND DEFINITELY WILL HAVE
SOME QUESTIONS TOMORROW. I WANT
TO GIVE THE STAKEHOLDERS AN
OPPORTUNITY TO PRESENT THEIR
CASE, TO PRESENT THEIR
INFORMATION. SO THAT I AM WELL
EDUCATED AFTER THIS SO THAT WE
CAN MAKE A DECISION OR NO
DECISION AT ALL. THANK YOU.
THANK YOU. ASSEMBLY MEMBER.
ASSEMBLY MEMBER WOULD, FIRST OF
ALL, THANK YOU, MADAM CHAIR. AND
I ALSO WANT TO THANK THE SPEAKER
FOR, PUTTING THIS COMMITTEE
TOGETHER, AND APPRECIATE THE
BALANCE OF THE COMMITTEE, AS
WELL. I THINK IT'S REALLY
STRONGLY REPRESENTATIVE
REPRESENTATIVE OF THE ENTIRE
STATE AND, AND THE FOLKS THAT
MAKE UP OUR CONSTITUENCIES. I
COME FROM A BLENDED FAMILY, I
HAVE AN ELECTRIC CAR, AND I HAVE
A GASOLINE POWERED CAR. AND SO I
UNDERSTAND THE STRUGGLES FOR
BOTH, AND, YOU KNOW, THE
INFRASTRUCTURE FOR THE ELECTRIC
CAR IS, IS STILL EVOLVING IN
MANY, MANY WAYS. AND WE HAVE
CHALLENGES RELATED TO ENERGY
TRANSMISSION AND
INTERCONNECTIONS AND, ENERGY IN
THAT RESPECT. AND YET, ON THE
OTHER HAND, WE HAVE A GASOLINE
INDUSTRY THAT'S, THAT'S HEADING
IN A DIFFERENT DIRECTION. AND SO,
SO WE'RE, WE'RE WE'RE AT A,
WE'RE AT A REALLY INTERESTING
CROSSROADS HERE. AND, AND SO I'M
REALLY LOOKING FORWARD TO THE
OPPORTUNITY TO LEARN MORE ABOUT
THIS, SOME OF THE GASOLINE
INDUSTRY, AND, AND I HOPE, YOU
KNOW, AT THE END OF THIS, I ALSO
WANT TO THANK THE GOVERNOR FOR
CALLING THE SPECIAL SESSION,
WHICH GIVES US THE OPPORTUNITY
TO ACT ON A BILL, YOU KNOW, AT
THE END OF THIS AND, AND MY HOPE
IS THAT WHAT WE COME UP WITH, IF
WE MAKE CHANGES OR WE MAKE OR WE
VOTE ON IT, WE DO ULTIMATELY
VOTE ON A BILL THAT THE PERFECT
DOES NOT BECOME THE ENEMY OF THE
GOOD. IT'S IMPORTANT THAT WE
MAKE PROGRESS. I THINK THE
CITIZENS OF CALIFORNIA ARE
DEMANDING THAT, AND I LOOK
FORWARD TO THE PROCESS. SO THANK
YOU. THANK YOU. ASSEMBLY MEMBER
LEE. THANK YOU, MADAM CHAIR. I
TOO WANT TO THANK THE SPEAKER
FOR CREATING OUR SPECIAL
COMMITTEE FOR TODAY. AND I ALSO
WANT TO THANK THE GOVERNOR AS
WELL FOR CONVENING A SPECIAL
SESSION. I THINK CALIFORNIA
CONSUMERS DESERVE THAT SPECIFIC
FOCUS FROM US ON GASOLINE
PRICES. BUT I THINK JUST JUST TO
BE BRIEF ABOUT IT IS I THINK IT
IS INCREDIBLY FITTING THAT WE
ARE ENDING OUR TWO YEAR
LEGISLATION ON SPECIAL SESSION.
WHEN WE BEGAN OUR LEGISLATIVE
TWO YEAR SESSION WITH A SPECIAL
SESSION ON THE VERY SAME TOPIC
IN 2022, GAS HAD INCREDIBLE
SPIKES WHERE PEOPLE HAD EYE
WATERING PRICES AT THE PUMP
TWICE IN ONE YEAR, TWICE IN ONE
YEAR. AND SINCE THE LEGISLATION
WAS SIGNED INTO LAW IN THE FIRST
SPECIAL SESSION IN MARCH 2023,
THERE HAVE BEEN ZERO PRICE
SPIKES AND PRICES HAVE BEEN VERY
STABLE. SO I LOOK FORWARD TODAY
TO RECEIVE OUR CRASH COURSE
EDUCATION TODAY, BUT ALSO TO
UNDERSTAND MORE SO THAT WE CAN
BE BETTER INFORMED. MAKING
POLICY SO THAT WE AVOID PRICE
SPIKES IN THE FUTURE AND EMPOWER
THE CEC TO CONTINUE DOING ITS
MISSION OF KEEPING US INFORMED
AS WELL AS THE PUBLIC. SO THEY
HAVE CONFIDENCE THAT BIG OIL IS
NOT GETTING AWAY WITH TOO MANY
PROFITS. THANK YOU. THANK YOU.
ASSEMBLY MEMBER PAPIN. CALLED
UPON. THANK YOU. CHAIR.
PETRIE-NORRIS I REALLY
APPRECIATE YOUR OPENING REMARKS
AND HOW WE'RE GOING TO PROCEED.
I ALSO WANT TO CONCUR WITH
ASSEMBLY MEMBER LEE THAT THIS IS
A TREMENDOUS OPPORTUNITY TO
FULLY VET AND EVERYDAY COMMODITY
THAT'S GOING TO AFFECT PROBABLY
EVERY CALIFORNIAN, AND WE WOULD
NOT BE DOING OUR JOB IF WE
DIDN'T HAVE A SPECIAL SESSION.
SO I THINK THE GOVERNOR, I THANK
THE SPEAKER FOR CONVENING THIS,
AND I THANK THE CHAIR FOR HER
LEADERSHIP, BECAUSE IT COULDN'T
BE MORE IMPORTANT THAT THIS
ISSUE BE AND THIS POTENTIAL
LEGISLATION BE FULLY VETTED FOR
THE PUBLIC. THEY DESERVE IT.
THAT'S WHY WE'RE HERE. AND I
LOOK FORWARD TO A VERY ROBUST
AND MEANINGFUL DISCUSSION. THANK
YOU. ASSEMBLY MEMBER ZIMMER. SO
I WANT TO THANK THANK THE CHAIR
FOR CONVENING US. I WANT TO
THANK THE GOVERNOR FOR CALLING
THE SPECIAL SESSION AND THE
SPEAKER FOR FORMING THIS
COMMITTEE, WHICH IS I THINK, A
VERY BALANCED ONE. AND I THINK
EVEN THOUGH WE THERE ARE
DIFFERENT PERSPECTIVES ON THIS
COMMITTEE, I THINK WE ALL SHARE
THE GOAL OF MAKING SURE THAT
WE'RE REDUCING, OIL GAS PRICES
FOR CALIFORNIA CONSUMERS. THAT'S
THE GOAL OF THIS COMMITTEE.
THAT'S THE GOVERNOR'S GOAL. AND
I THINK THAT'S THE PERSPECTIVE
THAT WE'RE ALL APPROACHING THIS
WITH AND UNDERSTANDING AT THE
SAME TIME THAT THIS IS A VERY
COMPLICATED SET OF ISSUES. THE
GOVERNOR HAS A THOUGHTFUL
PROPOSAL THAT HE'S PUT ON THE
TABLE, AND IT'S OUR JOB TO MAKE
SURE THAT WE ARE ASKING THE
RIGHT QUESTIONS, MAKING SURE
THAT WE'RE ACTUALLY ACHIEVING
THE OBJECTIVE THAT THE GOVERNOR
AND THAT WE ALL SHARE, WHICH IS
REALLY MAKING SURE THAT GAS
PRICES ARE ARE AFFORDABLE FOR
CALIFORNIA CONSUMERS AND THAT
WE'RE REDUCING GAS PRICES
OVERALL. SO THANK YOU VERY MUCH.
THANK YOU. ASSEMBLY MEMBER
GIBSON, THANK YOU VERY MUCH.
GOOD AFTERNOON. I WANT TO AGAIN
ALIGN MY COMMENTS WITH MY
COLLEAGUES. ONE THANKING THE
GOVERNOR BECAUSE IT'S THROUGH
HIS AUTHORITY THAT WE HAVE BEEN
BROUGHT TOGETHER, AND ALSO OUR
SPEAKER FOR HIS LEADERSHIP, AND
ALSO TO OUR CHAIR AND TO OUR
VICE CHAIRS, THIS IS A VERY
IMPORTANT CONVERSATION TODAY.
I'M EXCITED TO BE HERE, ONE WITH
ALL MY COLLEAGUES. AND AGAIN,
IT'S A VERY BALANCED, SELECTION
AND COMPOSITION OF INDIVIDUALS
FROM THOSE WHO REPRESENT
PETROLEUM AND THOSE WHO DON'T,
THOSE WHO SUPPORT THE
ENVIRONMENT. I THINK EVERYONE ON
THIS IN THIS BODY SUPPORT THE
ENVIRONMENT, BUT ONE IS THE
DISCUSSION THAT WE NEED TO HAVE
IN TERMS OF HOW AND WHY ARE WE
PAYING SO MUCH AT THE PUMP. THIS
IS NOT ONLY A DISCUSSION ABOUT
GASOLINE, BUT IT'S ALSO A
DISCUSSION IN MY MIND ABOUT
JOBS. ABOUT THE SUPPLY CHAINS
AND HOW WE CAN, WE CAN MAKE SURE
THAT THE STATE, IS
SELF-SUFFICIENT, SELF-SUSTAINING
FOR ENERGY NEEDS AND MEETING
THOSE ENERGY NEEDS AND OUR GOALS
AND OBJECTIVES AROUND THE
ENVIRONMENT, WHICH IS ABSOLUTELY
CRITICAL. AS THE CHAIR OF THE
SELECT COMMITTEE ON THE PORTS
AND GOODS MOVEMENT IN THE STATE
OF CALIFORNIA, THIS TOPIC IS NOT
NEW TO ME, FOR MY ROLE AS THE
CHAIR OF THE SELECT COMMITTEE,
NINE MONTHS GOING UP AND DOWN
THE STATE OF CALIFORNIA,
VISITING OUR PORTS AND HEARING
FROM STAKEHOLDERS, LAYMAN'S
BUSINESS OWNERS AND THINGS OF
THAT NATURE. IT IS VERY CRITICAL
THAT WE COME TOGETHER AND TRY TO
REACH SOME KIND OF REASONABLE
BALANCE AND A REASONABLE
CONCLUSION ON WHERE WE NEED TO
GO AND HOW WE NEED TO MOVE IN
THE DIRECTION THAT MEETS THESE
GOALS. AT THE SAME TIME, DRIVING
DOWN GASOLINE PRICES IN THE
STATE, THIS PANEL HAS BEEN
ASSEMBLED HERE. CERTAINLY. I'VE
READ THE BACKGROUND, AND I'M
LOOKING FORWARD TO THE
DISCUSSIONS AND ONE LEARNING,
AND EDUCATING ME IN THIS VERY,
VERY IMPORTANT MATTER, WE HAVE
TO DO THIS BECAUSE IT'S OUR JOBS
AND OUR RESPONSIBILITIES. AND SO
I LOOK FORWARD TO ENGAGING IN
FRUITFUL CONVERSATION. TO THAT
END, THANK YOU. THANK YOU, THANK
YOU, COLLEAGUES, AND THANK YOU
ALL FOR SERVING ON THIS
COMMITTEE. AS PART OF OUR
EXTRAORDINARY SPECIAL SESSION.
GRATEFUL FOR YOUR PARTNERSHIP
AND YOUR LEADERSHIP AND
COLLABORATION AS WE LOOK TO
IDENTIFY SOLUTIONS TO DELIVER
FOR CALIFORNIANS. SO WITH THAT,
LET'S GO AHEAD AND JUMP INTO OUR
FIRST PANEL, OUR FIRST PANEL
WILL PROVIDE AN OVERVIEW OF THE
ENTIRE PETROLEUM SUPPLY CHAIN TO
DETAIL HOW THIS ALL WORKS IN
PRACTICE AND HOW IT IS PRICED.
WE HAVE ONE PANELIST, I BELIEVE,
JOINING US HERE IN PERSON. WE'RE
JOINED BY TOM ROBINSON, WHO IS
THE CHAIRMAN OF ROBINSON OIL.
OKAY, MR. ROBINSON, YOU CAN GO
AHEAD AND APPROACH THE DAIS AND
THEN YOUR FELLOW PANELISTS ARE
GOING TO BE JOINING US REMOTELY.
SO WE'RE ALSO GOING TO BE JOINED
BY NEIL MAHONEY, WHO IS A
PROFESSOR OF ECONOMICS AT
STANFORD UNIVERSITY, AND BY SKIP
YORK, THE SENIOR ECONOMIST AND
ENERGY STRATEGIST FOR TURNER,
MASON AND COMPANY. AND, WE'VE
DIVIDED THIS PANEL INTO KIND OF
TWO SUBSECTIONS. SO THE FIRST
WE'RE GOING TO FOCUS ON THE
PRODUCTION CYCLE. AND SO I'D ASK
EACH OF OUR PANELISTS, TO
PROVIDE THEIR COMMENTS RELATED
TO THE PRODUCTION CYCLE, WILL
THEN PAUSE FOR COMMITTEE
QUESTIONS BEFORE WE MOVE ON TO
THE NEXT SUBTOPIC, WHICH WILL BE
THE MARKET AND PRICING. SO LET'S
SEE. WE'RE GOING TO GO AHEAD AND
BEGIN WITH PROFESSOR NEIL
MAHONEY. SO WE'LL JUST GET HIM
ON THE GET HIM ON THE SCREEN.
HELLO. GOOD AFTERNOON EVERYBODY,
CAN FOLKS HEAR ME? WE CAN HEAR
YOU. WE CAN'T SEE YOU YET, BUT
WE CAN HEAR YOU. AND I WILL JUST
FLAG FOR COMMITTEE MEMBERS THAT,
PROFESSOR MAHONEY SLIDES ARE IN
YOUR BACKGROUND, MATERIALS IN
YOUR BINDERS. IF YOU'D LIKE TO,
TO LOOK AT THEM THERE, PROFESSOR
MAHONEY, THE FLOOR IS YOURS.
THANK YOU FOR BEING HERE, THANK
YOU TO THE CHAIR AND THE MEMBERS
FOR THE INVITATION. IT'S A IT'S
AN HONOR TO BE HERE TODAY, TO
SHARE MY PERSPECTIVE AND HELP
YOU BUILD A FOUNDATION FOR
EVIDENCE BASED POLICY MAKING, SO
I HAVE, TWO SLIDES FOR, THIS
COMPONENT OF THE SESSION. IF WE
COULD ADVANCE TO, THE NEXT
SLIDE, THAT WOULD BE GREAT, SO
LET ME START WITH WITH SOMETHING
THAT I THINK MANY OF YOU ALREADY
KNOW, WHICH IS THE CALIFORNIA
GASOLINE MARKET IS BOTH ISOLATED
AND CONCENTRATED. CALIFORNIA
REFINERIES IMPORT THE MAJORITY
OF CRUDE OIL THEY USE FROM
ABROAD, FROM OUTSIDE THE UNITED
STATES. THEY THEN PROCESS IT
INTO REFINED PRODUCTS LIKE
GASOLINE, BLENDSTOCK AND DIESEL,
THEN THESE REFINED PRODUCTS, ARE
TRANSPORTED TO RACKS WHERE, THEY
ARE THEN PURCHASED BY GAS
STATIONS, BECAUSE OF LIMITED
PIPELINE INFRASTRUCTURE AND
SEABORNE TRANSPORTATION,
CALIFORNIA'S ABILITY TO OBTAIN
OUT-OF-STATE IMPORTS OF GASOLINE
IS RESTRICTED. INDEED, FIVE
REFINERS, FIVE REFINING
COMPANIES CONTROL VIRTUALLY ALL
OF THE CALIFORNIA GRADE REFINING
CAPACITY, AND 11 REFINERIES
PRODUCE 90% OF CALIFORNIA'S
GASOLINE AND DIESEL Ó. CAN WE
MOVE TO THE NEXT SLIDE? SO AS
I'D MENTIONED, CALIFORNIA
REFINERIES TURN CRUDE OIL INTO
GASOLINE BLENDSTOCK. AFTER DOING
SO, THE GASOLINE, CAN EITHER BE
SOLD IN BULK IN THE LOS ANGELES
OR SAN FRANCISCO SPOT MARKETS.
IT IS SOLD TO RETAIL GAS
STATIONS AT ONE OF 14 RACKS OR
IT IS STORED IN INVENTORIES FOR
FUTURE SALE. AND, THE TANKS THAT
STORE THESE INVENTORIES USE A
FIRST IN, FIRST OUT, INVENTORY
SYSTEM TO PREVENT GASOLINE FROM
GOING STALE, AFTER GASOLINE IS
PIPED TO THE RACK, THE
BLENDSTOCK IS MIXED WITH ETHANOL
AND BRAND SPECIFIC ADDITIVES TO
PRODUCE THE GASOLINE THAT WE
PUMP INTO OUR CARS, TRUCKS CARRY
THIS GASOLINE FROM THE RACK TO
UNDERGROUND STORAGE TANKS AT GAS
STATIONS. AND AS I SAID,
OBTAINING GASOLINE FROM OUT OF
STATE, TYPICALLY FROM EUROPE OR
SINGAPORE, IS DIFFICULT AND CAN
TAKE MORE THAN A MONTH. MY NEXT
TWO SLIDES, I BELIEVE, ARE FOR
THE NEXT COMPONENT OF THE
INFORMATION SESSION. SO I'M
HAPPY TO, YIELD THE FLOOR AND
PASS TO THE OTHER MEMBERS OF
THIS INFORMATION SESSION. OKAY.
WONDERFUL. THANK YOU. PROFESSOR.
WE'LL NOW, GO TO SKIP YORK,
WHO'S JOINING US FROM TURNER.
MASON AND COMPANY. ALSO
PROVIDING VIRTUAL TESTIMONY.
OKAY. SO HOPEFULLY, MY SLIDES
WILL APPEAR ON THE SCREEN HERE
IN A SECOND. I'M GOING TO SPEAK
TO YOU ABOUT TWO DIFFERENT LINKS
IN THE SUPPLY CHAIN, THE FIRST
LINK IS I'M GOING TO WALK YOU
THROUGH THE REFINERY. SO ONCE
WE'VE GOT THE CRUDE OIL, HOW DO
WE GET IT TO THE REFINERY? AND
IT GOES THROUGH THE REFINERY.
THEN THE SECOND LINK IS GOING TO
BE THAT THAT LOGISTICS LINK THAT
COMES OUT OF THE REFINERY. AND
THEN HOW DO WE GET IT TO THE
TERMINALS, SO IT'S READY TO GO
TO THE RETAIL SERVICE STATION.
SO THIS VERY FIRST SLIDE IS TO
JUST PUT THIS, JUST TO PUT THE
PETROLEUM SYSTEM IN PERSPECTIVE.
THIS IS A VIEW OF THE ENTIRE
ENERGY TRANSPORTATION SYSTEM FOR
ALL ENERGY. SO WHETHER IT WAS
YOU WERE GOING TO USE BIOFUELS
OR A REFINERY OR ELECTRIC
VEHICLES, THIS IS A VIEW OF HOW
THAT ENTIRE SYSTEM LOOKS, WHAT
THE ENTIRE SYSTEM LOOKS LIKE.
WE'RE GOING TO FOCUS TODAY ON
WHAT'S INSIDE THAT ORANGE BOX.
SO IF WE CAN GO TO THE NEXT
SLIDE. SO NOW WE'RE GOING TO
LOOK AT AND THIS IS WHERE MY
COMMENTS ARE GOING TO BREAK
DOWN. BASICALLY THE FIRST SET OF
COMMENTS ARE GOING TO BE ON THE
RIGHT HAND SIDE. THAT'S GOING TO
BE TAKING THAT CRUDE OIL INTO
THE REFINERY. AND WE'LL TALK A
BIT ABOUT HOW, THOSE THAT THOSE
MOLECULES HAVE TO BE STORED IN
DIFFERENT STORAGE TANKS AND THEN
MOVED AROUND WITHIN THE
REFINERY. ONCE WE'VE GOT THAT
PRODUCT FINISHED, WE'LL THEN
MOVE IT INTO A PIPELINE SYSTEM
AND WE'LL THEN WE'LL TALK ABOUT
IN THE SECOND SET OF COMMENTS
ABOUT HOW WE MOVE FROM THE
PIPELINE SYSTEM INTO THE FUEL
TERMINALS, AND THEN WE'LL TALK
ABOUT WHAT HAPPENS INSIDE A FUEL
TERMINAL TO GET THE PRODUCT
READY TO GO OUT INTO THE TANKER
TRUCKS AND HEAD OUT TO THE
STREETS. SO IF WE HEAD GO TO THE
NEXT CHART, THIS WILL BE A VERY
SIMPLE VIEW OF WHAT A REFINERY
LOOKS LIKE IN A REFINERY. REALLY
DOES, TAKES CRUDE OIL AND THERE
ARE REALLY SORT OF THREE
PROCESSES, THREE TYPES OF
PROCESSES THAT GO INSIDE, THAT
GO ON INSIDE A REFINERY. WHEN
YOU'RE TRYING TO MAKE A FUEL,
YOU CAN EITHER GO. THE ONE
PROCESS IS DISTILLATION, AND
THAT IS WHERE WE'RE GOING TO
SEPARATE MOLECULES BASED ON
TEMPERATURE. SO IN ESSENCE WE'RE
IN THAT UNIT CALLED THE CRUDE
DISTILLATION UNIT. WE'RE GOING
TO BOIL THE CRUDE. WE'RE GOING
TO HEAT IT UP AND AS THE CRUDE
HEATS UP IT STARTS TO VAPORIZE.
AND WE WILL PULL THOSE MOLECULES
OFF TO OTHER UNITS. SO WE'RE
GOING TO SO WE'RE DISTILLING IT
AND WE'RE, AND WE'RE SO WE'RE
SEPARATING BY TEMPERATURE
ANOTHER WAY THAT WE COULD,
PROCESS THOSE MOLECULES IS
THROUGH CRACKING. AND CRACKING
IS EXACTLY WHAT IT SOUNDS LIKE.
WE'RE GOING TO BREAK MOLECULES.
SO ONCE WE'VE DISTILLED IT, SOME
OF THOSE MOLECULES WILL BE VERY
LONG. WE'LL HAVE VERY LONG
CHAINS. AND WHAT WE'RE GOING TO
DO IS WE'RE GOING TO BREAK THOSE
CHAINS INTO SMALLER MOLECULES
THAT GET US CLOSER TO A FINISHED
PRODUCT. SO IF WE'RE LOOKING AT
GASOLINE, THE UNIT THAT WE USE
TO BREAK THOSE MOLECULES DOWN IS
CALLED A FLUID CATALYTIC
CRACKER. AND YOU'LL SEE IT IN
THE DARK BLUE ON THE LOWER
RIGHT. SO WE TAKE THOSE LONG
CHAINS THAT COME OUT OF THE
BOTTOM OUT OF EITHER WHAT'S
CALLED A COKER UNIT. IT'LL BE
CALLED SOMETHING LIKE COKER
GASOIL. AND THEN WE'LL MOVE IT
INTO THE CATALYTIC CRACKER. THAT
CATALYTIC CRACKER WILL BREAK
THOSE MOLECULES DOWN. AND ONE OF
THE BIG PRODUCTS THAT COMES OUT
OF THAT CATALYTIC CRACKER WILL
BE SOMETHING THAT WE CALL, CAT
GAS. AND THAT'S THE THAT'LL BE A
PRODUCT THAT WE THEN SEND
TOWARDS THE GASOLINE POOL, AND
WE'LL GO AND WE'LL STORE IT IN
ONE OF THE TANKS IN THE UPPER
RIGHT. THE THIRD WAY, WE COULD
PROCESS MOLECULES INSIDE A
REFINERY IS WE REFORM IT. BY
THAT WE MEAN WE REARRANGE IT.
AND WHAT WE'RE DOING IN TERMS OF
GASOLINE WITH REFORMING IS WE
ARE LOOKING TO WAY TO CHANGE
HYDROGEN BONDS IN ORDER TO
INCREASE OCTANE. AND THERE'S
REALLY TWO FOR GASOLINE. THERE'S
REALLY TWO UNITS THAT WE THAT
REFINERIES PREDOMINANTLY USE TO
DO IT. THAT'S CALLED A REFORMER
OR AN ISOMERIZATION UNIT THAT
YOU SEE SORT OF IN THE MIDDLE
LIGHT BLUE UNIT THERE. AND THAT
IS A UNIT WHERE WE WOULD TAKE A
MATERIAL THAT COMES OFF THE
DISTILLATION UNIT CALLED
NAPHTHA. WE WOULD RUN IT INTO
THE REFORMER, AND WE WOULD SORT
OF BREAK OFF THE HYDROGEN AND IT
WOULD INCREASE THAT WOULD
IMPROVE THE OCTANE OF THE
REMAINING MOLECULES THAT COME
OUT. AND THAT'S CALLED
REFORMATE. AND THAT REFORMATE
HEADS TOWARDS THE GASOLINE
BLENDING POOL. OR WE COULD DO
ANOTHER UNIT CALLED ALKYLATION,
WHERE WE TAKE SMALLER MOLECULES.
SO KIND OF THE OPPOSITE OF CAT
CRACKING. WE'RE GOING TO TAKE
SMALLER MOLECULES AND FORCE THEM
TOGETHER. AND THAT IS GOING TO
RESULT IN A MATERIAL CALLED
ALKYLATE. AND THAT ALKYLATE IS
GOING TO HAVE A HIGH OCTANE.
IT'S A VERY GOOD BLENDSTOCK FOR
GASOLINE. AND WE'RE GOING TO
SEND THAT TO THE GASOLINE POOL.
NOW IN BETWEEN, AS WE'RE GOING
THROUGH THIS, WE'RE ALSO GOING
TO BE DOING SOMETHING ELSE TO
THESE MOLECULES. SO AS WE'RE
MAKING MOLECULES TOWARDS
FINISHED PRODUCTS, WE'RE ALSO
GOING TO BE CLEANING THE
MOLECULES. AND THE BIGGEST
CLEANING THAT WE DO IS
DESULFURIZATION. SO WE COULD BE
DESULFURIZATION DESULFURIZING
THESE MOLECULES AT VARIOUS
STAGES AS WE MOVE THROUGH THIS
REFINERY. SO WE COULD BE DOING
IT A NUMBER OF TIMES. AND THAT
WAY WE GET ALL THE WAY DOWN
TOWARDS A FINISHED PRODUCT, LIKE
ULTRA LOW SULFUR DIESEL OR CARB
GASOLINE. THAT HAS TO BE THAT
HAS VERY LOW SULFUR STANDARDS,
VERY TIGHT SULFUR
SPECIFICATIONS, AND THE WAY WE
MEET THOSE STANDARDS IS BY
DESULFURIZING, IT AS SEVERAL
TIMES THOSE MOLECULES SEVERAL
TIMES AS WE GO THROUGH THE
REFINERY. NOW, THIS IS A VERY
SIMPLIFIED VIEW TO GET AN IDEA
OF WHAT IT REALLY LOOKS LIKE,
JUST FOR THE GASOLINE PORTION OF
THE REFINERY. LET'S FLIP TO THE
NEXT SLIDE. AND THIS GIVES YOU
AN IDEA OF IF YOU WERE ACTUALLY
LOOKING AT A REFINERY, THIS IS
WHAT THE GASOLINE PART OF A
REFINERY WOULD ACTUALLY LOOK
LIKE. ALL THESE UNITS THAT ARE
SENDING STREAMS TO EACH OTHER
AND SHARING STREAMS AND THEN
MOVING THEM ON TO OTHER STREAMS,
THESE BLENDING OF CRUDES AND
OPTIMIZING THESE OPERATIONS AND
THE ENVIRONMENTS, BECAUSE WE CAN
ACTUALLY CHANGE HOW EACH ONE OF
THESE UNITS OPERATE TO, TO IN
ORDER TO CHANGE THE YIELDS THAT
COME OUT OF THEM. SO AS WE'RE
CHANGING, BLENDING CRUDES AND
WE'RE OPERATING ON OPTIMIZING
THE OPERATING ENVIRONMENT IN
ORDER TO MAKE THE SUITE OF
FINISHED PRODUCTS, BECAUSE THE
REFINERY DOESN'T MAKE JUST ONE
PRODUCT, IT'S GOT TO MAKE A
SUITE OF PRODUCTS THAT COMES OUT
AND IT'S MAKING A SUITE OF
PRODUCTS THAT THE REFINERY
THINKS IT CAN SELL INTO THE,
INTO THE MARKET. AND THAT'S A
VERY COMPLEX PROCESS. SO THE WAY
THEY'RE GOING TO HANDLE THIS
COMPLEXITY ACROSS ALL THOSE
SUITES OF PRODUCTS IS BY RUNNING
A VERY COMPLEX LINEAR PROGRAM
THROUGH A COMPUTER, WHICH IS
GOING TO USE VOLUMES, COST UNIT
OPERATIONS AND EXPECTED PRICES
TO OPTIMIZE. WHAT'S THE BEST
USE, WHAT'S THE MOST OPTIMAL USE
OF THE CRUDE, THE CRUDES THAT IT
HAS AVAILABLE IN ORDER TO GET
THE PRODUCTS THAT THE REFINERY
THINKS IT NEEDS, TO SELL INTO
THE MARKET? AND WHAT'S IMPORTANT
TO REMEMBER THIS AS YOU GO
THROUGH THIS OPTIMIZATION SCHEME,
IS THAT THE REFINERY MUST
CONTINUOUSLY STAY IN BALANCE,
MEANING THAT EVERY INPUT INTO
THE REFINERY MUST BE ACCOUNTED
FOR AS A PRODUCT. SO NOTHING CAN
BE LEFT BEHIND. THE REFINERY
MUST ALWAYS STAY IN BALANCE SO
THAT IT CAN SO THAT SO THAT WE
DON'T END UP WITH WHAT'S CALLED,
YOU KNOW, LOSS OF CONTAINMENT
AND MATERIAL ENDS UP GOING
MISSING SOMEWHERE BECAUSE,
SOMEPLACE. SO LET'S GO TO THE
NEXT SLIDE. AND NOW LET'S TALK A
LITTLE BIT ABOUT SPECIFICALLY
ABOUT HOW CALIFORNIA REFINERIES
ARE DESIGNED. CALIFORNIA
REFINERIES WERE REALLY DESIGNED
SORT OF IN TWO, TWO STAGES,
EARLY THE EARLY CALIFORNIA
REFINERIES WERE DESIGNED FOR THE
CALIFORNIA CRUDES. AND THEY WERE
DESIGNED THEY WERE CONFIGURED TO
TAKE THE CALIFORNIA CRUDE,
SPECIFICALLY THE HEAVY CRUDES
COMING OUT OF THE SAN JOAQUIN
VALLEY, AND TO CONVERT THOSE TO
GASOLINE. AND THEN LATER ON,
THERE WAS ANOTHER PHASE OF
CALIFORNIA REFINERIES THAT WERE
DESIGNED WHEN WE STARTED TO
DEVELOP CRUDE OIL IN THE
ATLANTIC, OUT OF COMING OUT OF
ALASKA. BUT AND THOSE REFINERIES
WERE ALSO CONFIGURED TO TAKE THE
OPTIMAL AMOUNT. WHAT WAS THE
OPTIMAL WAY TO TAKE ALASKAN
CRUDE OR CALIFORNIA CRUDE AND
MAXIMIZE THE AMOUNT OF GASOLINE?
AND THAT'S THE IMPORTANT THING
TO REMEMBER, IS THAT CALIFORNIA
REFINERIES WERE DESIGNED TO
MAXIMIZE THE AMOUNT OF GASOLINE
TO MAKE. AND IF YOU LOOK ACROSS
THE UNITED STATES OF PADS, WHICH
ARE THE PETROLEUM ADMINISTRATION
DEFENSE DISTRICTS, IT'S THE WAY
WE GROUP THE PETROLEUM MARKETS
IN THE US, THE GASOLINE YIELD IN
PADD FIVE, WHICH IS WHERE
CALIFORNIA SETS THE GASOLINE
YIELD AND PADD FIVE IS THE
HIGHEST GASOLINE YIELD OF ANY OF
THOSE PETROLEUM MARKETS IN THE
UNITED STATES. AND THAT'S WHAT
THAT WAS BY DESIGN. THE
REFINERIES WERE DESIGNED THAT
WAY. AND SO AS A RESULT, AS YOU
LOOK AT THIS BARREL, THERE'S NOT
A LOT OF FLEXIBILITY FOR
GASOLINE, IN THE CALIFORNIA
REFINING SYSTEM, BECAUSE THE
SYSTEM WAS DESIGNED TO SQUEEZE
AS MUCH GASOLINE OUT OF THE
BARREL AS POSSIBLE. WHAT WE ARE
SEEING, IS IN THE FLEXIBILITY IS
THAT AS MORE RENEWABLE DIESEL IS
COMING INTO CALIFORNIA, THAT
REFINERS ARE PUSHING PETROLEUM
TRYING OR PUSHING PETROLEUM
DIESEL MOLECULES INTO THE JET
FUEL. SO THEY'RE MAKING MORE JET
FUEL. NOW FOR THE SAME CRUDE
SLATE THAT THEY WERE RUNNING,
SAY, 5 OR 6 YEARS AGO. THEY MAKE
MORE JET FUEL TODAY THAN THEY
DID 5 OR 6 YEARS AGO, BECAUSE
THEY'RE TRYING TO FIND A WAY TO
NOT MAKE PETROLEUM DIESEL
BECAUSE THEY'VE GOT THE
RENEWABLE DIESEL AS TYPEKIT IS,
IS FULFILLING. SO MUCH OF
CALIFORNIA'S DEMAND, DIESEL
DEMAND. SO LET'S GO TO THE NEXT
SLIDE AND LET'S TALK ABOUT THIS
TANK, THE TANKAGE ISSUE. YOU'RE
GOING TO SEE TANKAGE ALL
THROUGHOUT THE REFINERY AT
DIFFERENT STAGES. AND LET'S JUST
BRIEFLY TALK ABOUT WHAT IS THAT?
TANKAGE. SO YOU'LL THIS IS A
PICTURE OF A TANK. AND WE'LL
OFTEN TALK ABOUT TWO PARTS, TWO
CAPACITY FIGURES IN A TANK.
WE'LL OFTEN TALK ABOUT THE SHELL
CAPACITY. AND THAT'S THE ENTIRE
SIZE OF THE TANK. BUT YOU DON'T
USE ALL OF THE CAPACITY OF THE
TANK. ALL OF THE SHELL CAPACITY,
BECAUSE THERE'S REALLY KIND OF
TWO SPACES THAT YOU NEED TO
LEAVE IN THE TANK. THE FIRST ONE
IS THE BOTTOMS, WHAT ARE CALLED
THE HEELS, BECAUSE THE PIPE THAT
YOU DRAW THE, THE VOLUME OUT OF
IS AT THE VERY BOTTOM, AND
YOU'VE GOT TO LEAVE SOME SPACE
SO THAT THAT PIPE CAN MAINTAIN
THE SUCTION. AND SO YOU CAN'T
DRAW THE VERY LAST, THE VERY
LAST DROP OUT OF THAT TANK,
BECAUSE YOU'VE GOT TO MAINTAIN A
LITTLE BIT OF VOLUME SO THAT
THAT PIPE CAN STAY, STAYS WET.
AND SO THAT'S CALLED THAT
SUCTION LINE IS CALLED THE HEEL
OF THE TANK UP AT THE VERY TOP.
QUITE OFTEN SOME OF THESE, SOME
OF THESE PRODUCTS, ESPECIALLY
LIKE GASOLINE, WILL HAVE A
TENDENCY TO EVAPORATE. AND SO
YOU'LL SEE AT THE VERY TOP SOME
OF THESE TANKS WILL HAVE A CURVE
TO THEM, BECAUSE YOU'VE GOT TO
ALLOW FOR THAT EVAPORATION. AND
SO YOU DON'T YOU CAN'T USE THAT
VERY TOP. AND THEN THE THIRD
PIECE THAT YOU'LL USE IS WHAT IS
CALLED CONTINGENCY SPACE. AND
THAT'S A LITTLE SPACE THAT YOU
LEAVE THERE FOR OPERATIONAL
REASONS. YOU MIGHT NEED TO USE
MORE SPACE IN THAT TANK BECAUSE
SOME PROCESS DOWNSTREAM MIGHT
NOT BE READY FOR THE BARRELS
COMING OUT OF THIS TANK. AND SO
YOU NEED TO YOU NEED TO USE A
LITTLE EXTRA SPACE IN THAT TANK.
SO ONCE YOU'VE TAKEN OUT THE
HEEL, YOU'VE TAKEN OUT THAT
UNUSABLE. LET'S CALL IT THAT
VAPOR SPACE. AND THEN YOU'VE
TAKEN OUT THE CONTINGENCY.
WHAT'S LEFT IS WHAT WE CALL
WORKING STORAGE. AND THAT'S THE
PART OF THE STORAGE THAT FLEXES
UP AND DOWN. NOW YOU WILL SEE
THAT THE AVERAGE UTILIZATION OF
A TANK IS SOMEWHERE BETWEEN 51
TO 57%. AND WHAT'S IMPORTANT TO
REMEMBER IS ABOUT THAT AVERAGE
UTILIZATION. IS THAT WHAT'S
HAPPENING AROUND THAT AVERAGE IS
THAT THAT UTILIZATION IS THE
AMOUNT OF MATERIAL IS FLEXING
AROUND IT. SO THE AVERAGE MIGHT
BE, SAY, 55%. BUT WHAT'S ALSO
IMPORTANT IS HOW MANY TIMES IS
THAT TANK CYCLING OR WHAT IS
REFERRED TO AS TURNING, TURNING
OVER. AND WHAT'S THE RANGE OF
THOSE SITES? WHAT'S THE RANGE OF
THOSE SWINGS? SO YOU COULD
AVERAGE 55%, BUT ON ANY GIVEN
DAY IT COULD BE AS HIGH AS 90 OR
95%. AND THEN IT DROPS DOWN TO
MAYBE DOWN TO THE HEELS, AND
THEN IT'S FILLING BACK UP,
BECAUSE THAT'S HOW BECAUSE
THAT'S HOW THAT TANK HAS TO FLEX
IN ORDER TO BE ABSORBING
MATERIAL FROM COMING UPSTREAM OF
THAT TANK. IT FILLS ITSELF UP
AND THEN IT DUMPS IT DOWN INTO
THE PROCESS. SO THAT GOES
FURTHER DOWNSTREAM. SO THE
AVERAGE IS ISN'T THE ONLY
STATISTIC YOU NEED TO BE LOOKING
AT TO LOOK AT HOW WELL IS THAT
TANK BEING UTILIZED, LET'S GO TO
THE NEXT SLIDE BECAUSE I THINK
WE'RE NOW GOING TO STEP OUT OF
THE REFINERY Þ BEFORE WE STEP
OUT OF THE REFINERY. THIS KIND
OF GIVES YOU AN IDEA OF THE
BLENDING THAT GOES ON. SO WE'VE
GONE THROUGH ALL THOSE REFINERY
PROCESSES, AND ON THE LEFT HAND
SIDE, WE'RE GOING TO HAVE A
NUMBER OF STORAGE TANKS. AND FOR
EACH BLENDING COMPONENT FOR
GASOLINE. SO WE'VE GOT THAT FCC
GASOLINE, WE'VE GOT REFORMATE
HYDROCRACKING. THESE ARE ALL THE
DIFFERENT BLENDING STOCKS THAT
CAME OUT OF ALL THOSE STREAMS
THAT CAME ALONG THROUGH THE
REFINERY. AND NOW WE'RE GOING TO
RUN IT THROUGH A BLENDER AND
WE'RE GOING TO MAKE FINISHED
GASOLINES ON THE ON THE FINAL
SIDE. SO EACH ONE OF THESE
GASOLINES, WHETHER IT'S REGULAR
CARB, PREMIUM CARGOBOB, AS BOB,
WHICH IS THE, THE, THE
REFORMULATED GASOLINE AROUND THE
PHOENIX AREA OR THE CONVENTIONAL
GASOLINE FOR ARIZONA OR NEVADA,
EACH ONE OF THOSE GASOLINES WILL
HAVE ITS OWN RECIPE, WHICH MEANS
I'M GOING TO DRAW DIFFERENT
MIXES OUT OF THOSE, BLENDING OUT
OF THOSE, BLENDING COMPONENTS.
AND SO WHAT I'M GOING TO BE SO
WHAT YOU'RE GOING TO DO IS I
NEED TO MAKE A BATCH OF REGULAR
CAR, BOB, YOU'RE GOING TO PUT
THE RECIPE IN PLACE AND YOU'RE
GOING TO DRAW OUT OF THOSE TANKS
ON THE LEFT TO MAKE THAT. SO YOU
MAKE ON SPEC CAR, BOB, FILL THAT
CAR BOB TANK. THEN YOU GO TO THE
NEXT PRODUCT YOU'RE GOING TO
MAKE CHANGE THE RECIPE AND FILL
THAT TANK UP AND SO YOU NEED
THAT FLEXIBILITY ON THE LEFT
HAND SIDE SO THAT YOU CAN MAKE
WHATEVER YOU NEED ON THE RIGHT
HAND SIDE, BECAUSE DIFFERENT
GASOLINES HAVE DIFFERENT RECIPES
IN ORDER TO, YOU KNOW, IN ORDER
TO BE, ON SPEC. SO NOW WE'VE
FINISHED. NOW WE'VE FINISHED OUR
PRODUCT, OR WE'VE ALL BUT
FINISHED OUR PRODUCT. IF IT'S AN
IF IT'S AN OXYGENATE AND NOW
WE'RE READY TO MOVE OUR PRODUCT
OUT OF THE REFINERY AND START
MOVING IT TOWARDS, START MOVING
IT TOWARDS THE CONSUMER. SO THE
FIRST THING WE'RE GOING TO DO
IS, AS NEAL WAS SAYING, IS WE'RE
GOING TO MOVE IT OUT ON A
PIPELINE. WE MOVE IT OUT ON
PIPELINES. AND THERE'S TWO TYPES
OF PIPELINES THERE IS A
PROPRIETARY PIPELINE THAT COULD
BE OWNED BY THE REFINING
COMPANY, AND IT OWNS THE THAT
THAT'S A PIPELINE THAT THE
REFINER OWNS THAT COMES OUT OF
THEIR REFINERY. AND IT GOES TO
AND IT GOES AND IT'S A AND IT
GOES TO A TERMINAL. SO IT'S A
CONNECTION THAT GOES STRAIGHT
FROM THEIR REFINERY TO A
TERMINAL. OR IT COULD BE A
COMMON CARRIER LIKE KINDER
MORGAN. THAT'S A PIPELINE WHERE
PIPES COME OUT OF MULTIPLE
REFINERIES AND IT GOES TO A
JUNCTION, JOINS UP ON KINDER
MORGAN, AND THEN ALL OF THOSE
VOLUMES, MOVE DOWN THE SAME
LINE, MOVE DOWN THE SAME PIPE,
AND THEY GET DISPATCHED INTO
DIFFERENT TERMINALS AS THEY GO
DOWN THE LINE. SO IF YOU'RE ON A
COMMON CARRIER PIPELINE, YOU
NEED TO SCHEDULE YOUR BATCHES.
AND A REFINER HAS HAS A SCHEDULE
AND IT BATCHES IN THE SAME WAY,
GASOLINE, DIESEL JET. AND SO AS
A REFINER SCHEDULES A BATCH,
THEY WILL THEY WILL BATCH IN.
THEY WILL INJECT THEIR GASOLINE,
THEIR DIESEL, THEIR JET. THE
NEXT REFINER THEN BATCHES
GASOLINE DIESEL JET AND THEN
EVERYBODY HAS THEIR SCHEDULE. IF
YOU MISS YOUR BATCH WINDOW YOU
HAVE TO WAIT UNTIL YOUR NEXT
BATCH WINDOW. THAT'S PART OF THE
REASON WHY YOU HAVE THOSE
CONTINGENCY SPACES IN THOSE
TANKS INSIDE THE REFINERY IS
THAT IF YOU MISS YOUR BATCH
WINDOW, YOU NEED SOME
CONTINGENCY SPACE SO THAT YOU
CAN WAIT UNTIL THE NEXT BATCH
WINDOW COMES AROUND. AND THEN
YOU CAN YOU CAN DISPATCH INTO
THAT COMMON CARRIER PIPELINE.
LIKEWISE, IF YOU IF YOU
DISPATCH, IF YOU'VE GONE INTO
THE PIPELINE AND THE TERMINAL,
YOU ARE HEADING TO ISN'T READY
FOR YOUR MATERIAL, EITHER. IT'S
NOT AND IT CAN'T TAKE THE
MATERIAL, THEN YOU'RE GOING TO
NEED TO FIND SOMEBODY ELSE TO
TAKE THAT VOLUME. AND THAT COULD
BE SOMEBODY, AND THEN THAT COULD
BE SOMEBODY UPSTREAM OF YOUR
TERMINAL OR DOWNSTREAM OF YOUR
TERMINAL. BUT SOMEWHERE ALONG
THAT PIPELINE, YOU'RE GOING TO
NEED TO FIND A BUYER TO TAKE
THAT TERMINAL, TO TAKE THAT
VOLUME, BECAUSE YOU ARE NOT BE
ABLE TO GET OFF AT YOUR TERMINAL
FOR WHATEVER REASON, FOR
WHATEVER REASON, THAT YOU CAN'T
GET OFF AT THAT TERMINAL. AND
THAT'S GOING TO BE A SPOT SALE.
THAT'S AN EXAMPLE OF A SPOT SALE
WHERE YOU'RE GOING TO CALL UP
PEOPLE, YOU'RE GOING TO TRADERS
ARE GOING TO CALL UP OTHER
TRADERS AND SAY, YOU KNOW, I
CAN'T GET OFF AT THE TERMINAL. I
WAS GOING TO GET OFF AT AND
YOU'RE GOING TO TRY AND FIND
SOMEBODY THAT HAS SPACE AT A
TERMINAL, AND YOU'LL MAKE THAT
TRANSACTION. YOU'LL MAKE THAT
DEAL, AND THEY'LL TAKE THAT
VOLUME OFF YOUR HANDS AND
BECAUSE OF THE SCHEDULING,
THEY'LL KNOW EXACTLY WHEN TO
WHEN TO GO INTO THAT PIPELINE
AND PULL MATERIAL OFF THE
PIPELINE BECAUSE THEY KNOW
EXACTLY WHERE YOUR MATERIAL IS
BECAUSE OF THE SCHEDULING,
BECAUSE THE SCHEDULING IS DONE
SO PRECISELY. SO WE'VE GONE DOWN
THE PIPELINE, AND NOW WE'VE GONE
INTO THE TERMINAL. SO YOU GET
INTO THE TERMINAL AND THERE ARE
DIFFERENT TYPES OF TENANTS
INSIDE THE LINE. SOME OF THEM
ARE CALIFORNIA REFINERS, SOME OF
THEM ARE REFINERS THAT HAVE
REFINERIES OUTSIDE OF
CALIFORNIA, BUT THEY DO
MARKETING INSIDE OF CALIFORNIA.
SOME OF THEM ARE WHOLESALERS.
SOME OF THEM ARE COMMODITY
TRADERS THAT ARE TAKING PHYSICAL
POSITIONS. YOU CAN AND THE
TANKAGE CAN WORK ONE OF TWO
WAYS. YOU CAN LEASE TANKAGE
SPACE, WHICH MEANS THAT'S YOUR
PROPRIETARY TANKAGE ONLY YOUR
MATERIAL WILL GO INTO THAT TANK
OR IT CAN BE COMMUNITY TANKAGE
IT'S A GASOLINE TANK AND
EVERYBODY'S GASOLINE GOES INTO
THAT TANK. THAT'S WHY BEING ON
SPEC IS SO IMPORTANT, SO THAT IF
YOU'RE OFF SPEC AND YOU GO INTO
A COMMUNITY TANK, YOU THERE'S A
RISK THAT YOU SPOIL THE TANK AND
NOW THERE'S GOING TO BE SOME
SORT OF MITIGATION FOR ALL THE
OTHER GAS, ALL THE OTHER
GASOLINE THAT HAS NOW BEEN
THROWN OFF SPECIFICATION. SO YOU
WANT TO MAKE SURE THAT YOU'RE
ON, THAT YOU'RE ON SPEC WHEN YOU
GET IN THERE. SO NOW THAT WE'VE
GOTTEN INTO THIS TERMINAL, NOW
WE'RE READY. NOW THIS IS WHERE,
AS NEAL WAS SAYING EARLIER, NOW
WE'RE AT THE RAC. SO NOW WHAT'S
GOING TO HAPPEN IS THAT YOU'RE
GOING TO GET A TRUCK THAT'S
GOING TO GO TO THAT'S GOING TO
GO TO A RAC, THAT RAC IS GOING
TO PULL GASOLINE OUT OF, OUT OF
THESE TANKS, IT'S GOING TO LOAD
UP. NOW IF YOU'RE IN CALIFORNIA
AND YOU'RE MAKING CAR BOB. SO
THAT TRUCK IS GOING TO PULL UP,
LOAD UP WITH CAR BOB. IT'S GOING
TO WHEEL AROUND TO ANOTHER RAC.
THAT'S WHERE IT'S GOING TO
UNLOAD. ITS ETHANOL. SO NOW IT'S
FINISHED CALIFORNIA GASOLINE.
AND IF IT'S GOING TO BE BRANDED
THEN IT LIKELY GOES TO A THIRD
RAC. AND THAT'S WHERE THE
BRANDED ADDITIVES ARE ADDED IN.
AND AT THAT POINT THAT TRUCK IS
ROLLS OUT OF THE OUT OF THE
TERMINAL AND IT STARTS HEADING
TO WHATEVER RETAIL STATIONS IT'S
GOING TO MAKE ITS DELIVERIES TO.
SO THAT'S KIND OF HOW THOSE TWO
LINKS WORK TOGETHER. AND I'LL
PAUSE THERE BECAUSE THE NEXT
SLIDE IS, ARE THE SLIDES FOR THE
PRICING PANEL. ALL RIGHT. THANK
YOU, MR. YORK. AND I BELIEVE
THAT'S WHEN YOU THEN HAND IT
OVER TO MR. ROBINSON WHO'S
JOINING US FROM ROBINSON OIL.
THANK YOU. FEEL SO LONELY DOWN
HERE. HI. MY NAME IS TOM
ROBINSON. I'M THE CHAIRMAN OF
ROBINSON OIL, WE OWN AND OPERATE
CLOSER. THANK YOU, WE OWN AND
OPERATE 37 ROTTEN ROBBIE GAS
STATIONS AND CONVENIENCE STORES
IN THE GREATER BAY AREA. WE'RE
FOURTH GENERATION CALIFORNIA
COMPANY. I'M A PAST PRESIDENT OF
SIGMA AND A PAST CHAIRMAN OF
NACS. BOTH OF THOSE ARE NATIONAL
ORGANIZATIONS THAT REPRESENT
PETROLEUM RETAILERS OR MARKETERS
AND CONVENIENCE OPERATORS. ALSO,
A PAST BOARD MEMBER OF CFCA.
MAYBE MORE IMPORTANTLY, I'M I'M
ALSO BEEN 50 YEARS IN THE
INDUSTRY WITH THIS BACKGROUND. I
BELIEVE I HAVE A FAIRLY GOOD
WORKING KNOWLEDGE OF THE
INDUSTRY, BOTH HOW THE SUPPLY
CHAIN WORKS AND HOW PRICING
WORKS IN OUR SEGMENT OF THE
INDUSTRY. I WAS INTERESTED IN
TESTIFYING TODAY FOR THE
CALIFORNIA FUELS AND CONVENIENCE
ALLIANCE, POSSIBLY HELP YOU
UNDERSTAND HOW THESE NEW LAWS
AND REGULATIONS WILL LIKELY
CREATE ARTIFICIAL SHORTAGES AND
HIGHER PRICES TO CONSUMERS IN
CALIFORNIA AND NEIGHBORING
STATES. MAYBE WE CAN TALK ABOUT
THAT IN Q&A. WE'RE A PRIVATE
BRANDER. OUR BRAND IS ROTTEN.
ROBBIE. WE DO NOT HAVE ANY OF
THE STATIONS BRANDED WITH THE
COMPANIES LIKE CHEVRON OR SHELL
OR VALERO OR MARATHON, IT'S
INTERESTING, ESPECIALLY WITH
THAT LAST PRESENTER. YOU KNOW,
THE CRUDE, THE REFINERY, THE
PIPELINE, THE TERMINAL SYSTEM IS
WAY MORE COMPLICATED THAN WHAT
WE DO, WHAT WE DO IS WE BUY FROM
MANY COMPANIES AT THEIR REFINERY
TERMINALS OR AT THE OUTLYING
TERMINALS. WE BUY FROM REFINERS
OR OTHER SUPPLIERS IN TRUCKLOAD
QUANTITIES. WE ALSO SHIP
GASOLINE THAT HE ALSO TALKED
ABOUT THROUGH THE PIPELINE
SYSTEM. SO WE ALSO BUY IT IN
BULK THROUGH THE KINDER MORGAN
PIPELINE SYSTEM. THIS REQUIRES
HAVING CREDIT RELATIONSHIPS WITH
ALL OF THE VARIOUS SUPPLYING
COMPANIES. WE DELIVER FUEL TO
OUR STATIONS ON A 24 OVER SEVEN
BASIS. WE RUN OUR TRUCK. WE RUN
OUR TANKS ON A KEEP FULL BASIS.
WE DO MOST OF OUR HAULING WITH
OUR TRUCKS TO BE ABLE TO PROVIDE
THE QUALITY OF SERVICE SO WE
DON'T RUN OUT OF FUEL. SOME
LOCATIONS WON'T BE ABLE TO TAKE
A LOAD AT 10:00 IN THE MORNING,
BUT BY 6:00 IN THE EVENING,
THEY'LL RUN OUT. DELIVERY
WINDOWS CAN BE NARROW UNDER
NORMAL SITUATIONS, THINGS GO
FAIRLY SMOOTHLY, BUT WHEN THERE
IS SOME SORT OF SUPPLY ISSUE AND
THINGS ARE TIGHT OR THERE'S
ALLOCATIONS OR THERE'S OUTAGES,
IT'S A CHALLENGE. PETROLEUM
PRODUCTS ARE COMMODITIES AND
COMMODITY PRICES ARE FREQUENTLY
VOLATILE. MAYBE VERY DYNAMIC IS
A BETTER WORD TO USE. PRICES
CHANGE DAILY OR MORE SO
SOMETIMES THERE CAN BE A
SIGNIFICANT ARBITRAGE
OPPORTUNITY AT FURTHER AWAY
TERMINALS. IF YOU HAVE THE TRUCK
TIME OR THE DRIVERS. WE
CONSTANTLY MONITOR PRICING AND
ATTEMPT TO BUY AS WELL AS WE
CAN, WHILE ALSO FULFILLING OUR
CONTRACTUAL REQUIREMENTS. SO OUR
SUPPLY CHAIN IS USUALLY PRETTY
SIMPLE. OUR DISPATCHER
DETERMINES WHEN A STATION NEEDS
FUEL, DISPATCHES OUR TRUCK TO
THE SUPPLIER WITH THE BEST
PRICE, AND THEN IT IS DELIVERED
TO THE STATION. AND WE DO THIS
OVER AND OVER EVERY DAY. THANK
YOU. ALL RIGHT. THANK YOU, ALL
RIGHT. WITH THAT, WE'RE GOING TO
GO AHEAD AND PAUSE TO OPEN IT UP
FOR MEMBER QUESTIONS THAT ARE
FOCUSED ON THE FUEL PRODUCTION
CYCLE. AND THEN WE'LL MOVE ON TO
KIND OF PART B OF THE PANEL,
WHICH WE'LL DIG INTO THE PRICING
AND HOW THAT WORKS. QUESTIONS.
ASSEMBLY MEMBER PELLERIN, JUST
LOOKING AT THE TESTIMONY FROM
NEIL MAHONEY, HE TALKS ABOUT
THERE BEING 14 RACKS IN THE
STATE OF CALIFORNIA. WHERE ARE
THOSE LOCATED? I THINK HE'S ON A
ZOOM LINK. IS HE STILL ON ZOOM?
ALL OVER THE PLACE. THEY'RE ALL
OVER THE PLACE. MR. MAHONEY, ARE
YOU STILL THERE, I AM STILL
HERE. YES. SOMEBODY ANSWERED THE
QUESTION. THEY'RE ALL OVER THE
PLACE. I, UNFORTUNATELY DON'T
HAVE A MAP THAT I COULD PUT UP
WITH ALL OF THEM, BUT YES, THEY
ARE SPREAD THROUGHOUT THE STATE.
ALL RIGHT. I CAN TELL YOU WHERE
MOST OF THEM ARE. THAT'D BE
LOVELY, MR. ROBINSON. YES,
PLEASE. YOU'VE GOT YOU'VE GOT
TERMINALS AT ALL THE REFINERIES,
YOU'VE ALSO THEN GOES THE
PIPELINE SYSTEM GOES DOWN TO
BRISBANE, IT GOES TO SAN
FRANCISCO AIRPORT. ALTHOUGH
THAT'S NOT THAT WOULDN'T BE A
TERMINAL DEAL, IT GOES OVER TO
SACRAMENTO AND UP TO CHICO. SO
AS FAR NORTH AS IT GOES TO
CHICO, IT ALSO THEN CONTINUES TO
RENO AND SPARKS SO THAT THAT'S
THE PART THAT HEADS EAST. IT IT
GOES SOUTH TO STOCKTON AND
BAKERSFIELD. SAN JOSE, AND THEN
VARIOUS TERMINALS THERE ARE
THERE ARE ALSO PROPRIETARY
TERMINALS, FOR EXAMPLE, IN SAN
JOSE, THERE'S A KINDER MORGAN
TERMINAL, THERE'S A SHELL
TERMINAL. AND THERE'S A CHEVRON
TERMINAL. SOUTHERN CALIFORNIA I
DON'T KNOW AS WELL, BUT SAME
TYPE OF THING. YOU'VE GOT ALL
THE REFINERY TERMINALS AND THEN
IT THEN IT HEADS OUT EAST FROM
FROM THAT WAY OUT TO COLTON AND
SOME OTHER TERMINALS OUT THERE,
AND THEN TO ARIZONA. AND I THINK
THAT COVERS MOST OF IT. AND
THERE IS NO PIPELINE FROM
SOUTHERN CALIFORNIA TO NORTHERN
CALIFORNIA. NO. OKAY ALL RIGHT.
ASSEMBLY MEMBER RUBIO, THANK
YOU. I HAVE QUITE A FEW, FIRST,
ONE OF THE COMMENTS WAS THAT
GASOLINE, IT GOES STALE OR IT
SPOILS. WHAT DOES THAT MEAN? AND
WHAT HAPPENS IF IT DOES SPOIL?
WHERE DOES IT GO? AND IF I GOT
IT FROM THE PROFESSOR'S SLIDES,
OR IF YOU KNOW HOW TO ANSWER IT.
WELL, THAT'S LIKE NOT A PROBLEM.
I MEAN, BECAUSE IT JUST IT THE
SYSTEM IS GOING CONSTANTLY. IT'S
JUST CONSTANTLY FLUSHING THE
SYSTEM. YOUR BIGGEST PROBLEM
PROBABLY IS THAT THAT CAN OF GAS
THAT YOU HAVE FOR YOUR
LAWNMOWER, THAT SITS THERE FOR
TWO YEARS, AND MAYBE THAT WOULD
BE MORE THAT WOULD BE MORE
PROBLEMATIC. BUT THE CHANCES ARE
THAT YOU'RE I MEAN, IT'S
IMPORTANT TO KEEP IT FLOWING,
BUT IT DOES. I MEAN, THE SYSTEM
IS CONSTANTLY FLUSHING STUFF IN
AND FLUSHING STUFF OUT. SO THE,
THE, THE CONSTANT IN AND OUT IS
WHAT PREVENTS IT FROM SPOILING
BECAUSE WE USE BECAUSE WE USE
IT, WE USE IT. OKAY AND THEN
THE, THERE'S ANOTHER COMMENT
ABOUT THAT EACH THE FINAL
PRODUCT HAS TO BE CERTIFIED. WHO
DOES A CERTIFICATION. THE
REFINERY HAS THE RESPONSIBILITY
OF KEEPING IT ON SPEC. SO BUT
WHO CHECKS THE VERIFICATION?
THAT IS IT IN-HOUSE. SO LET ME
TRY TO HELP. SO DOES THE
IN-HOUSE PERSON THE REFINERY
CERTIFY THEIR OWN PRODUCT, OR
DOES THE STATE GO IN AND CERTIFY
THE PRODUCT? I'LL LET SOMEBODY
ELSE ANSWER THAT. OKAY OKAY. I
CAN YEAH, I CAN ANSWER THAT.
THE, THE REFINER, DOES THEIR OWN
CERTIFICATION AND THEN THEY'RE
AUDITED BY SOMEBODY THAT IS
LICENSED BY THE STATE. DO YOU
KNOW HOW OFTEN BY THE STATE. DO
YOU KNOW HOW OFTEN THAT HAPPENS?
HOW OFTEN ARE THEY AUDITED?
RIGHT. IS IT IS IT ANNUALLY?
YEAH. ANNUALLY. ANNUALLY. AND IF
THERE'S A COMPLAINT, DOES IS
THERE A COMPLAINT MECHANISM
WHERE YOU COMPLAIN AND SOMEBODY
GOES IN AND, INSPECTS IT OR
AUDITS? I DON'T KNOW
SPECIFICALLY FOR CALIFORNIA, BUT
I CAN TELL YOU IN TEXAS, THERE
WAS A PHONE NUMBER ON EVERY PUMP.
IT SAYS, YOU KNOW, IF YOU'VE GOT
AN ISSUE, CALL THIS NUMBER. AND
IT'S A IT'S AN AGENCY IN TEXAS.
I WOULD IMAGINE CALIFORNIA HAS
THE SAME PROCESS, BUT I DON'T
KNOW THAT FOR CERTAIN. THANK
YOU. I THINK THERE'S ONE MORE.
HOLD ON. ONE CERTIFIES FINAL
PRODUCT. OH, AND OF COURSE, HOW
MANY REFINERIES DID WE HAVE TEN
YEARS AGO? YOU SAID TODAY WE
HAVE 11. MORE I'M SORRY. MORE
I'M NOT ACTUALLY SURE. OKAY I
CAN TELL YOU. I CAN TELL YOU. 20
YEARS AGO, WE HAD 24. OKAY? 20
YEARS AGO. OKAY. THANK YOU, MR.
WOOD. YEAH. THANK YOU. THIS THIS
IS THIS IS VERY INTERESTING, I'M
CONCERNED ABOUT MY LAWNMOWER
GASOLINE NOW BECAUSE I NEVER
THOUGHT THAT THAT WOULD BE AN
ISSUE, BUT I'M. I'M CURIOUS. AND
THIS GOES BACK TO, I GUESS, MR.
MAHONEY OR DOCTOR MAHONEY. YOU
HAD IN YOUR YOUR NOTES THERE YOU
TALKED ABOUT THE GASOLINE BEING
SOLD IN BULK, ON LA OR OR SAN
FRANCISCO SPOT MARKET. SO, SO
THAT THAT THOSE, THOSE SPOT
MARKETS ARE FOR SALE THAT ARE
NOT GOING TO BE BRANDED BY THE
REFINERY IS THAT CORRECT OR NOT?
HELP ME UNDERSTAND. HELP ME
UNDERSTAND THAT. SO, SO ACROSS
THE COUNTRY, THERE ARE TYPICALLY
AT LEAST A COUPLE OF DIFFERENT
REPORTING, AGENCIES, THE PRIMARY
ONE IN CALIFORNIA IS OPUS OIL
PRICE INFORMATION SYSTEM. PLATTS
IS ALSO ANOTHER ONE THAT TRACKS
PRICES. AND THEY ALSO TRACK SPOT
PRICES. AND THEY AND BASICALLY
WHAT THEY'RE DOING IS THEY'RE
GOING OUT INTO THE OUT EVERY DAY
AND FINDING OUT, YOU KNOW, DID
YOU MAKE AN OFFER? DID YOU MAKE
A TRANSACTION? WHAT WERE THE
TRANSACTION COSTS. AND SO THAT
THEN THEY CAN POST A PRICE THAT
SAYS, WELL, TODAY THE SPOT PRICE
IN NORTHERN CALIFORNIA IS THIS
THIS IS THE PRICE IN SOUTHERN
CALIFORNIA. THIS IS THE PRICE,
YOU KNOW, IN TEXAS OR WHATEVER.
SO IT'S A IT'S AN INFORMATION
SYSTEM THAT'S ATTEMPTING TO
FIGURE OUT EXACTLY WHAT THE
PRICE IS FOR THOSE, THOSE SPOT
TRANSACTIONS. AND THAT'S ALL
THAT'S NOT PUBLIC, THOUGH, IT
YOU I MEAN, I'M SURE YOU COULD
SUBSCRIBE TO IT. I MEAN, THE
INFORMATION IS, IS CERTAINLY OUT
THERE. I MEAN, WE, WE SEE WHAT
WE SEE WHAT THE SPOT PRICES ARE
ON A DAILY BASIS BASED UPON WHAT
THEY WHAT THE INFORMATION THAT
THEY'RE ABLE TO GET. SO IT'S NOT
A SECRET. PUT IT THAT WAY. OKAY.
OKAY. THANK YOU. AND FIRST OF
ALL, AND THEN JUST ONE OTHER
COMMENT I DIDN'T REALIZE, BUT
APPARENTLY A TANK IS NOT A TANK
IS NOT A TANK. SO THE
UTILIZATION OF DIFFERENT TANKS
FOR DIFFERENT FUEL MIXES AND THE
INABILITY TO CROSS-POLLINATE, SO
TO SPEAK, IN SOME OF THOSE TANKS
IS SIGNIFICANT AND PROBABLY NOT.
PROBABLY NOT A QUESTION, MAYBE
NOT A QUESTION YOU MIGHT ANSWER.
IT'S NOT. BUT I'LL TELL YOU, THE
REFINERY IS SUCH A FASCINATING
PIECE OF EQUIPMENT THAT IS THIS
PIECE OF EQUIPMENT AND THIS
PIECE OF EQUIPMENT, AND IT'S
JUST A GIGANTIC DISTILLERY THAT
HAS A LOT OF PRESSURE AND A LOT
OF HEAT. IT'S A IT'S A
FASCINATING PLACE. I WISH I
UNDERSTOOD IT BETTER. ALL RIGHT.
GREAT. THANK YOU. AND, MR. MR.
YORK, DID YOU WANT TO COMMENT ON
THAT? NO, OTHER THAN TO SAY
YOU'RE RIGHT, A TANK IS NOT A
TANK. THERE ARE DIFFERENT TANKS
HAVE DIFFERENT PURPOSES. SOME
TANKS HAVE TO. IF YOU REPURPOSE
IT, THEY HAVE TO BE STEAMED AND
CLEANED, SOME MATERIAL CAN'T BE
STORED IN SOME TANKS, LIKE
BUTANE HAS TO BE STORED IN A
PRESSURIZED TANK WHERE FCC
GASOLINE DOES NOT. IT CAN BE
STORED IN AN ATMOSPHERIC TANK.
SO DIFFERENT MATERIALS HAVE
DIFFERENT REQUIREMENTS, AND THEN
THE TANKS HAVE TO BE, YOU KNOW,
YOU HAVE TO HAVE AN APPROPRIATE
TANK FOR THE APPROPRIATE
MATERIAL. YES, I GUESS, AND JUST
TO FOLLOW UP TO THAT, BECAUSE WE
HAVE A WINTER BLEND AND A SUMMER
BLEND HERE IN CALIFORNIA, I'M
GOING TO GUESS THAT THAT ADDS TO
THE COMPLEXITY A LITTLE BIT. NOT
OH YEAH OKAY. BECAUSE WHAT
HAPPENS AND THIS IS I THINK A
REALLY IMPORTANT PART NOW GOING
FROM SUMMER TO WINTER IS NOT A
PROBLEM. YOU CAN THAT THAT'S,
THE TERMINALS WON'T GET IN
TROUBLE OR NO ONE WILL GET IN
TROUBLE IF THEY, IF THEY'RE
SELLING SUMMER BLEND AND WINTER,
YOU GET INTO TROUBLE. IF YOU'RE
SELLING WINTER BLEND IN SUMMER.
OKAY. AND THAT TRANSITION OCCURS
DEPENDING UPON NORTHERN
CALIFORNIA, SOUTHERN CALIFORNIA,
SOMETIME IN THAT OCTOBER.
TYPEKIT OR EXCUSE ME, APRIL TIME
FRAME. AND SO WHAT HAS TO HAPPEN
IS THOSE TENDERS THAT ARE
GETTING SHIPPED OUT OF OUT OF
THOSE REFINERIES PROBABLY HAS TO
START MOVING A MONTH OR SO
BEFORE BECAUSE THEY'VE GOT TO
FLUSH THE OLD STUFF OUT. SO, SO
THAT THE IN THIS CASE, THE RVP,
THE REID VAPOR PRESSURE, WHICH
IS REALLY THE KEY THING FOR
SUMMER GASOLINE, MEETS THE SPEC.
AND SO WHAT THAT DOES IS, IS
THAT THAT'S ONE REASON THAT
INVENTORIES HAVE TO BE SO LOW
DURING THAT PERIOD, BECAUSE IF
YOU CONTINUE TO CARRY WINTER
GASOLINE, YOU KNOW, YOU JUST
CAN'T GET THE BLEND DOWN. SO YOU
WANT TO GET IT DOWN AS LOW AS
POSSIBLE TO BE ABLE TO DO IT.
AND SO IF THERE'S A PROBLEM AT
THE SAME TIME YOU END UP WITH
WITH A REAL PROBLEM, IT JUST
MAKES IT MORE CHALLENGING. THE
WINTER GOING TO WINTER IS NOT IS
NOT THE BIG DEAL. THE BIGGEST
DEAL FOR THE REFINER IS IT COSTS
MORE TO MAKE THE SUMMER GASOLINE
THAN THE WINTER GASOLINE. SO
THEY'D RATHER NOT WASTE THEIR
MONEY ON SUMMER GASOLINE. THEY'D
RATHER, YOU KNOW, BE ABLE TO
SWITCH OVER TO WINTER GASOLINE,
BUT ANYWAY, THAT THAT TRANSITION
IS EASIER, ASSEMBLY MEMBER
JACKSON, THANK YOU VERY MUCH,
MADAM CHAIR, PROFESSOR MAHONEY,
I WAS INTERESTED ABOUT THE IDEA
OF, OBVIOUSLY, WE KNOW THAT WE
DON'T HAVE THE TYPE OF
INFRASTRUCTURE ENOUGH TO BE ABLE
TO RELY ON IMPORTED CRUDE IN
TERMS OF THE SEA TRANSPORTATION,
IN TERMS OF, YOU KNOW, ALL THE
AND THE PIPELINES. HOWEVER, I
MEAN, I'M INTERESTED IN THESE
THE IDEA OF, THE USAGE OF THE
RACKS THAT, THAT THESE, THAT
THESE SELLERS PURCHASE FROM. I
MEAN, I'M OBVIOUSLY I'M SURE
THERE'S OTHER STATES THAT HAVE
THESE TYPE OF RACKS AS WELL.
THAT AND, AND HOW OFTEN OR WHY
AREN'T WE IF, IF WE'RE NOT,
INCORPORATING OR UTILIZING THE
RACKS OF OTHER STATES THAT MIGHT
ALREADY HAVE THE SUPPLY? THANK
YOU. SO YOU'RE COMPLETELY RIGHT
THAT, BECAUSE OF PIPELINE
INFRASTRUCTURE AND BECAUSE OF
CONSTRAINTS ON SHIPPING,
REFINING, IT TAKES TIME. AND
THERE ARE LIMITS ON HOW MUCH
REFINED PRODUCT CAN BE BROUGHT
INTO CALIFORNIA QUICKLY, IF
THERE ARE SUPPLY SHORTAGES, I
THINK YOU'RE ALSO RIGHT TO POINT
OUT THAT I THINK THIS IS WHAT
YOU'RE GETTING AT, BUT YOU
SHOULD CORRECT ME IF I'M WRONG,
THAT THE INVENTORIES WE HAVE IN
STATE ARE THE SAFEGUARD AGAINST,
SUPPLY SHORTAGES. AND I KNOW
WE'LL TALK MUCH MORE ABOUT THAT,
TOMORROW, BUT I THINK TO SET THE
TABLE, I THINK THE QUESTION IS,
YOU KNOW, CAN INCREASE
INVENTORIES OF REFINED PRODUCT,
BUILD A BRIDGE BETWEEN WHERE WE
ARE WHEN THERE'S A SHORTAGE AND
WHEN WE CAN GET PRODUCT IN FROM
OUT OF STATE OR REFINERIES. CAN
COME BACK ONLINE AND PRODUCE THE
PRODUCT, WE NEED, RIGHT?
PARTICULARLY IF A REFINERY, I
MEAN, I KNOW THERE'S SOME TIMES
WHERE REFINERIES, HAVE TO SHUT
DOWN FOR EMERGENCY REASONS IN
TERMS OF THINGS. BUT THESE
PLANNED ONES, COULD CALIFORNIA
OR SHOULD CALIFORNIA BE RELYING
ON OR INCORPORATING MORE, OTHER
SUPPLY FROM OTHER STATES INSTEAD
OF WHAT WE'RE DOING RIGHT NOW?
COULD WE BE DOING SOMETHING
DIFFERENT WITH THE WAY WE'RE
SUPPLYING OURSELVES? AGAIN, I
DON'T WANT TO GET TOO MUCH INTO
THE CONVERSATION FOR TOMORROW.
OH THAT'S A TOMORROW
CONVERSATION. BUT BUT I DO THINK
THERE IS A QUESTION ABOUT, YOU
KNOW, JUST LIKE A HOUSEHOLD
MIGHT KEEP, YOU KNOW, $400,
$1,000 TO TIDE OVER IF THERE'S A
SHOCK, CAN THE STATE OF
CALIFORNIA HAVE THE BUFFER IN
PLACE, SO THAT WE CAN BUILD A
BRIDGE FROM WHATEVER CHALLENGE
WE FACE TO WHEN A PRODUCT CAN
COME BACK ONLINE? OKAY. THANK
YOU, THANK YOU, ASSEMBLY MEMBER
BENNETT. THANK YOU VERY MUCH.
FIRST QUESTION FOR MR. ROBINSON,
YOU TALKED ABOUT THE SPOT
MARKET, AND THEY PULL THIS THIS
ALL TOGETHER. THOSE SPOT
TRANSACTIONS ARE NOT REGULATED
LIKE THE SECURITIES EXCHANGE,
LIKE THE NEW YORK STOCK
EXCHANGE. EVERYBODY DOESN'T HAVE
TO REPORT THERE'S NO REGULATION
TO MAKE SURE THAT THERE'S NO
EITHER PEOPLE ARE INTENTIONALLY
LEAVING OUT SOME INFORMATION,
ETC. THAT'S AN UNREGULATED
MARKET FROM THE STANDPOINT OF
GOVERNMENT OVERSIGHT. IS THAT
CORRECT? RIGHT OKAY. SECOND
QUESTION, AND I THINK THIS IS
GOING TO PROBABLY BE FOR, MR.
YORK, BUT ALSO, MR. ROBINSON, IF
YOU IF YOU WANT TO WEIGH IN. THE
PRODUCTION, IS THERE ANYTHING IN
THE PRODUCTION CONSTRAINTS THAT
WOULD SUGGEST THAT IF WE IF
THERE WAS SOME MINIMUM INVENTORY
RULE OUT THERE, BUT THAT MINIMUM
INVENTORY RULE MADE ALLOWANCES
FOR INVENTORY DRAWDOWNS DURING
THE SEASONAL CHANGE, IN OTHER
WORDS, SAYING, HEY, YOU KNOW,
SEASONALLY WE'RE GOING TO ALLOW
THE INVENTORIES TO DROP DOWN
BECAUSE THEY HAVE TO MAKE THE
TRANSITION OVER. IS THERE
ANYTHING THAT WE'RE OVERLOOKING
THAT WOULD SAY THAT THAT WOULD
BE A PROBLEM? YES. WHAT'S THAT,
AND I THINK YOUR CONCERN IS
FINISHED. GASOLINE. OKAY. SO
IT'S YOU KNOW, REFINERIES HAVE
LOTS OF TANKS DO LOTS OF THINGS.
BUT REALLY, WHAT YOU'RE TALKING
ABOUT IS WHY CAN'T WE HAVE MORE
TANKS THAT HAVE INVENTORY, THE
CHALLENGE IS WHERE WHERE ARE YOU
GOING TO PUT THEM? I MEAN, WHERE
ARE THOSE TANKS GOING TO GO? NO
I'M SORRY, MY QUESTION IS NOT
THAT MY QUESTION IS IF YOU TAKE
THE CURRENT SYSTEM THAT WE HAVE,
BUT DURING THE TRANSITION PERIOD
FROM THE WINTER BLEND TO THE
SUMMER BLEND, IF WE SIMPLY DON'T
HAVE THE MINIMUM INVENTORY
REQUIREMENT, THINGS WOULD
OPERATE LIKE THEY OPERATE RIGHT
NOW. IS THAT CORRECT? IS THAT
HOW YOU WOULD SEE IT? WELL, IN
OTHER WORDS, IF WE MADE AN
EXCEPTION, YOU KNOW, THERE'S
GOING TO BE A IT'S GOING TO BE A
PROBLEM IF YOU DO THIS, YOU
KNOW, IN THE MIDDLE OF JULY, OR
IF YOU DO THIS IN THE MIDDLE OF
JANUARY, BUT IT'S NOT GOING TO
BE A PROBLEM IF YOU DO IT DURING
THE SEASONAL BLEND TIME. IF THE
CEC CAME UP WITH THOSE KIND OF
RULES, IS THERE A PRODUCTION
ISSUE THAT WE SHOULD BE AWARE
OF? I DON'T I DON'T THINK SO.
OKAY. THANK YOU. THANK YOU. AND
I KNOW WE WANT AND THEN, THE
FINAL QUESTION I HAVE IS FOR MR.
YORK AND MR. YORK, YOU KNOW, THE
HEEL CAPACITY AND THE
CONTINGENCY SPACE THAT'S IN THE
TANKS, I ASSUME BASED ON THE
ANSWER THAT MR. ROBINSON GAVE,
THAT THAT ALL THAT GASOLINE GETS
MIXED AGAIN, IT'S NOT LIKE WE
LOSE THE HEEL THAT THAT AND THAT
SORT OF STAYS AT THE BOTTOM
PERMANENTLY AND QUOTE GOES BAD.
LIKE ANYTHING. BUT BECAUSE IT'S
ALL MIXED IN, MR. ROBINSON, YOU
COULD PROBABLY JUST ANSWER THAT
FOR US BECAUSE IT'S ALL MIXED
IN. ALL OF IT IS AVAILABLE, TO
BECOME GASOLINE BECAUSE OF THE
MIXING. CORRECT. GREAT. THANK
YOU VERY MUCH. THANK YOU,
ASSEMBLY MEMBER FLORA. OKAY.
ASSEMBLY MEMBER LEE, THANK YOU.
THIS IS FOR PROFESSOR MAHONEY,
SINCE IN YOUR SLIDES, YOU NOTED
THAT MOST OF CALIFORNIA'S CRUDE
OIL COMES FROM ABROAD, FROM NOT
FROM CALIFORNIA STATE. WE DO, OF
COURSE, STILL PRODUCE OIL IN THE
STATE. DOES THAT MEAN THE
ENTIRETY OF CALIFORNIA OIL?
SORRY. CALIFORNIA CRUDE IS
PRODUCED FOR CALIFORNIANS. THEN
OR REFINED FOR CALIFORNIANS? AS
YOU SAY. I WOULD HAVE TO PULL UP
THE LATEST NUMBERS FOR YOU. BUT
I THINK WHEN YOU THINK ABOUT THE
CRUDE OIL MARKET, IT IS A GLOBAL
MARKET. AND SO PRICES ARE
DETERMINED AT THE GLOBAL LEVEL,
AND YOU KNOW, THAT INPUT COST IS
AFFECTED BY GEOPOLITICS, BY
EVENTS, ACROSS THE WORLD. RIGHT?
I JUST UNDERSTAND FROM THE
PRODUCTION STANDPOINT, THOUGH,
THAT WE STILL DO PRODUCE CRUDE
OIL IN CALIFORNIA. AND EVEN
THOUGH THE MAJORITY OF THE
REFINED OIL, THE CRUDE WE'RE
GETTING FROM ABROAD, I WONDER IS
IT ARE WE EXHAUSTING OUR SUPPLY
OF IT, OR ARE WE SELLING TO
OTHER PLACES? SO IF NO ONE KNOWS
THE ANSWER RIGHT NOW, THAT'S ALL
RIGHT, MY SECOND ANSWER. Ó. MR.
LÀ, I CAN TELL YOU IT'S VERY
RARE FOR CALIFORNIA CRUDE OIL TO
LEAVE THE STATE. OKAY. VERY
GOOD. THANK YOU. AND THEN MY
SECOND QUESTION IS, IS THERE ANY
SINGLE ENTITY THAT UNDERSTANDS
THE INVENTORY OR THE CAPACITY OF
ALL THE TANKS CURRENTLY IN THE
STATE? BECAUSE I UNDERSTAND FROM
PROFESSOR YORK, YOUR,
PRESENTATION THAT THERE IS A
AVERAGE PER TANK, BUT DO WE HAVE
AN UNDERSTANDING WHAT THE
CAPACITY OF ALL THE TANKS IN THE
STATE CAPACITY IS AT ANY GIVEN
MOMENT? THE EIA, WHICH IS THE
FEDERAL BODY THAT PROVIDES
INFORMATION, THEY TRACK THE
CAPACITY AND THE INVENTORY
LEVELS AT THE STATE LEVEL, YOU
KNOW, AS WE'VE DISCUSSED THE
SITUATION IN EACH TANK IS, YOU
KNOW, COMPLICATED. AND THAT
INFORMATION IS NOT PUBLICLY
AVAILABLE. BUT I THINK AS WE
MOVE INTO A CONVERSATION ABOUT
INVENTORY LEVELS, IT'S IMPORTANT
TO REMEMBER THAT ANY MINIMUM
INVENTORY LEVEL WOULD NOT BE
HAVING INVENTORY LEVELS OUTSIDE
OF THE RANGE OF WHAT THEY'RE
NORMALLY. IT WOULD JUST BE
SAYING THAT THEY WOULDN'T DROP
BELOW A LEVEL. SO WE'RE NOT
THINKING ABOUT EXTRAORDINARY
INVENTORY LEVELS. WE'RE JUST
THINKING ABOUT KEEPING THEM
WITHIN A NORMAL RANGE THAT WE
HAVE A LONG HISTORY OF DOING.
CORRECT. THANK YOU. I JUST
WANTED TO GET CLARIFICATION
WHETHER OR NOT EIA OR ANY ENTITY
WAS TRACKING WHAT THE CURRENT
INVENTORY AT OUR STATE IS.
RIGHT. THANK YOU, ASSEMBLY
MEMBER GIBSON. THANK YOU VERY
MUCH. I WANT TO THANK THE PANEL
FOR YOUR YOUR ARTICULATING SOME
OF THE POINTS AND TRYING TO
CLEAR UP SOME THINGS. I HAVE,
PROFESSOR, BALONEY QUESTION FOR
YOU ON YOUR DIAGRAM, HE TALKS
ABOUT YOU TALK ABOUT FIVE
REFINERY CONTROLS, 90%, 98% OF
THE CALIFORNIA GRADE REFINERY
CAPACITY, AND 11 REFINERIES
PRODUCE 90% OF CALIFORNIA
GASOLINE AND DIESEL, CAN YOU HOW
MANY WAS BEFORE THE HOW MANY
OTHER REFINERIES WERE DOWN TO
FIVE. HOW MANY MORE WERE THERE
BEFORE? FIVE. AND OUT OF THE 11,
HOW MANY WERE BEFORE? SO. SO THE
NUMBER HAS BEEN DECREASING OVER
TIME. AND THAT'S NOT JUST THE
CALIFORNIA STORY. ACROSS THE
UNITED STATES, THERE'S BEEN A
REDUCTION IN REFINERIES, AND
THERE'S ALSO BEEN, MERGERS AND
ACQUISITIONS, WHICH HAVE
INCREASED THE MARKET POWER OF
REFINERIES. I WOULD HAVE TO GET
BACK TO YOU ON THE EXACT NUMBERS
IN CALIFORNIA. I DON'T HAVE THEM
IN FRONT OF ME, BUT THE TREND
HAS BEEN TOWARDS FEWER
REFINERIES AND MORE
CONCENTRATION IN THE MARKET.
OKAY BUT YOU CAN'T GIVE ANY
SPECIFICS ON WHY THIS IS. I
MEAN, THEY'RE JUST BEING BOUGHT
OUT, ARE THEY? I'M TALKING ABOUT
ESPECIALLY IN CALIFORNIA. AND
WHY ARE THERE SO FEW IN
CALIFORNIA? WELL, PLEASE, MR.
ROBINSON, IF YOU CAN ARTICULATE
I THINK I THINK THE ANSWER IS
THERE'S CURRENTLY 11 I THINK 20
YEARS AGO THERE'S 20 A NUMBER
OF. MR. ROBINSON, I'M SORRY, I'M
SORRY, I'M SORRY. I'M GETTING A
LITTLE TOO CASUAL HERE,
COMFORTABLE, A NUMBER OF THEM. A
NUMBER OF THEM WERE JUST ON THE
SMALLER SIDE, REALLY, WHAT WE'VE
SEEN IN THE INDUSTRY THROUGH THE
YEARS IS, YES, WE'VE GOTTEN RID
OF REFINERIES, BUT USUALLY THE
REMAINING REFINERIES END UP
GETTING A LITTLE BIT BIGGER. SO
WE DON'T NECESSARILY LOSE A LOT
OF CAPACITY. BUT SOME, SOME OF
THE REFINERIES IN CALIFORNIA
THAT HAVE JUST BEEN ON THE
SMALLER SIDE HAVE JUST KIND OF
GONE AWAY, THAT THEY JUST WERE
NO LONGER ECONOMICAL, IN
PARTICULAR IN THE BAY WHERE
THERE ARE THERE ARE FIVE
REFINERIES, ONLY THREE OF THEM
NOW PRODUCE GASOLINE. AND THAT
REALLY WAS A MOVE BECAUSE THEY
MADE THE DECISION THEY WERE
GOING TO GO 100% TO RENEWABLE
DIESEL. AND WHEN THEY WENT TO
RENEWABLE DIESEL, THEY WEREN'T
MAKING GASOLINE IN THAT. SO THEY
THEY FELT THAT THEY WERE
INCENTIVIZED TO GO TOWARDS
RENEWABLE DIESEL AND NOT
INCENTIVIZED TO MAKE GASOLINE.
THANK YOU. IS MY GUESS. MY GUESS.
OKAY. MR. OKAY MR. YORK, I HAVE
A QUESTION FOR YOU. IN RECENT
MONTHS, WE HAVE SEEN CHEVRON,
ONE OF THE LARGEST OIL AND GAS
COMPANIES BY MARKET RATE,
RELOCATE THEIR HEADQUARTERS. IN
CALIFORNIA TO TEXAS AFTER BEING
IN CALIFORNIA FOR 145 YEARS.
IT'S A LONG TIME, WHY IS
CALIFORNIA UNABLE TO IMPORT
REFINED OIL FROM OTHER
SURROUNDING STATES? WHAT MAKES
OUR BLEND DIFFERENT FROM THEIRS,
AND IS THERE ANY WAY THAT WE CAN
MAKE THESE BLENDS COMPATIBLE
WITH EACH OTHER? SO WHEN YOU SAY
OIL, YOU MEAN CRUDE OIL OR
GASOLINE? CRUDE OIL? CRUDE OIL,
WELL, YOU DO BRING OIL FROM IN
FROM ALASKA. BUT OUTSIDE OF
THAT, YOU IT'S AN INFRASTRUCTURE
ISSUE. THERE'S NO CRUDE OIL
PIPELINES COMING INTO
CALIFORNIA. IF YOU WANT TO BRING
CRUDE OIL IN, YOU'D HAVE TO DO
IT BY RAIL. AND THAT'S JUST VERY
EXPENSIVE, THERE HAVE BEEN A
COUPLE OF CRUDE OIL TERMINALS
BUILT IN CALIFORNIA, BUT THEY'RE
JUST NOT ECONOMIC. SO THAT'S WHY
YOU DON'T SEE CRUDE OIL. BEING
RAILED IN TO CALIFORNIA. OKAY.
CAN I ADD TO THAT? CAN I ADD TO
THAT? SURE. THROUGH THE CHAIR. I
HAVE NO PROBLEM WITH IT. WELL, I
WOULD JUST I WAS GOING TO SAY,
YOU KNOW, A LARGE PORTION OF THE
CRUDE OIL COMES IN ON TANKERS. I
MEAN, WE USE THE CALIFORNIA
CRUDE, BUT THEN WE BRING IN A
LOT MORE CRUDE, WHETHER IT'S
FROM ALASKA OR, YOU KNOW, A LOT
OF DIFFERENT PLACES. SO CRUDE
OIL IS COMES IN IS A SIGNIFICANT
PIECE OF THE OF THE REFINERY.
CRUDE OIL MIX, IMPORTED CRUDE.
EXCUSE ME FROM THE STANDPOINT OF
FINISHED PRODUCTS, WE CAN ALSO
BRING IN FINISHED PRODUCTS AND
WE DO BRING IN FINISHED
PRODUCTS. IT'S JUST MORE
PROBLEMATIC TO BE ABLE TO DO.
AND YOU GOT TO MAKE SURE THAT
YOU'VE GOT THE INFRASTRUCTURE,
THE WHARF SYSTEM AND THE
PIPELINE SYSTEM AND ALL THAT
KIND OF STUFF. YOU KNOW, FOR
EXAMPLE, IN THE EASTERN PART OF
THE UNITED STATES OR THE
NORTHEAST PART OF THE STATES,
THEY HAVE NO REFINERIES. YOU
KNOW, THEY'RE TOTALLY THEY'RE
TOTALLY SOURCE BY PIPELINES AND
BARGES AND THINGS LIKE THAT. SO
YOU DON'T HAVE TO HAVE A
REFINERY AS LONG AS SOMEBODY CAN
MAKE THE PRODUCT AND GET IT TO
YOU. BUT YOU GOT TO HAVE THE
INFRASTRUCTURE HERE TO OFFLOAD
IT. AND THEN YOU COULD
DISTRIBUTE IT. ALL RIGHT. ONE
FINAL QUESTION, CHAIRMAN
ROBINSON, WHAT DO YOU THINK? HOW
DO WE FIX THIS PROBLEM IN YOUR
MIND? THAT'S. NOT I DON'T THINK
YOU CAN. I THINK THAT ALL YOU
CAN DO IS MAKE IT WORSE. IS ONE
PERSON'S HUMBLE OPINION, BUT I
YOU IF YOU IF YOU STEP BACK AND
UNDERSTAND THE MOTIVATIONS OF
ALL OF THE PLAYERS IN THE
INDUSTRY, THEY'RE WORKING EVERY
DAY TO MAKE THE SYSTEM WORK WELL,
JUST STUFF HAPPENS AND AS WE GET
AS WE AS WE, YOU KNOW, AS, AS
THINGS TRANSITION, IT MAKES IT A
LITTLE BIT MORE FRAGILE OF A
SYSTEM. BUT I DON'T REALLY THINK
THAT EXPECTING SOMEBODY FROM
OUTSIDE THE INDUSTRY TO BE ABLE
TO COME UP WITH A BETTER
SOLUTION, I PERSONALLY WOULD BE
VERY, VERY SURPRISED. BUT YOU'RE
IN, YOU'RE IN, YOU'RE IN, YOU
KNOW, YOU'RE PART OF IT. RIGHT?
AND SO NOT SOMEONE FROM THE
OUTSIDE TRYING TO OFFER
SOLUTIONS FOR THOSE THAT ARE
INSIDE, YOU'RE INSIDE. AND SO
YOUR SOLUTION IS I THINK I THINK
IT WORKS PRETTY WELL. IT
DOESN'T. WE END UP WITH PRICE
SPIKES, THERE'S NO DOUBT ABOUT
THAT. AND WE END UP WITH SOME
OUTAGES. WE END UP WITH SOME
PROBLEMS. BUT THERE'S GENERALLY
IN THOSE SITUATIONS THERE'S
PROFIT INCENTIVES TO SOLVE THEM
AS QUICKLY AS YOU CAN. AND SO
AND THEN WITH THE COMPETITION
THAT WE HAVE USUALLY IT SORT OF
SETTLES BACK DOWN RELATIVELY
QUICKLY. I MEAN, IN OTHER WORDS,
THE SYSTEM THE SYSTEM REALLY
WORKS. YOU KNOW, IT'S
FASCINATING THAT THAT, YOU KNOW,
HERE WE HAVE IN CALIFORNIA WHERE
YOU KNOW, WE'RE CONSTANTLY AT
LEAST A DOLLAR MORE EXPENSIVE
THAN EVERY PLACE ELSE IN THE
COUNTRY. OKAY. AND AT THE SAME
TIME. BUT IS THAT RIGHT? WELL,
IT'S THERE. I QUESTION WE ARE
ALSO THE MOST ACTIVIST STATE AS
FAR AS AS FAR AS INSERTING
OURSELVES INTO THE INDUSTRY. AND
I'M JUST QUESTIONING IF THERE'S
NOT A CORRELATION BETWEEN THAT
AND THE HIGH PRICES THAT WE PAY.
I'M NOT REALLY QUESTIONING IT,
BUT I'M JUST SORT OF I HAVE AN
OPINION. I HAVE A SOAPBOX.
SORRY. THANK YOU. ALL RIGHT,
ASSEMBLYMEMBER PAPIN, SO JUST
REALLY QUICKLY, IT SEEMS LIKE
WITH THE SPOT MARKET AND THE
LIKE, THERE ISN'T A LOT OF FUEL
SITTING AROUND AT ANY ONE TIME.
FAIR TO SAY, MR. ROBINSON. NO,
NO, NO, IT GOES OUT AS FAST AS
IT COMES IN. IT IS SPOKEN FOR
WHEN IT GETS TO THE RACKS. AND
IF IT'S NOT, YOU GOT TO SPOT
MARKET TO PROVIDE FOR THAT. DO I
UNDERSTAND THAT RIGHT. YES, YES,
YES. SO MY QUESTION IS THIS.
YOU'VE BEEN AROUND A LONG TIME,
I KNOW I HEARD FIVE DECADES. YOU
STARTED WHEN YOU WERE SIX. I DID
THE MATH, BUT MY QUESTION IS, IN
YOUR, EXPOSURE TO THE MARKET, IS
THERE ADDITIONAL CAPACITY THAT
CURRENTLY EXISTS TO KEEP MORE
FUEL ON HAND, MORE REFINED FUEL?
SO THAT WE MAY NOT HAVE THESE
SPIKES THAT ARE SEEM TO HAVE
HAPPENED? I SINCERELY DOUBT IT.
I KNOW AT THE RETAIL, I MEAN, AS
WE REMODEL OR OR BUILD STATIONS,
WE PUT IN BIGGER TANKS. SO IT
GIVES US A LITTLE BIT MORE, YOU
KNOW, ROOM, YOU KNOW, FOR, FOR
PROBLEMS TO OCCUR, I CAN ONLY
ASSUME THAT THAT IT'S, IT WOULD
BE ADVANTAGEOUS FOR, YOU KNOW,
OTHER PEOPLE TO DO IT AT THE
TERMINAL LEVEL. AND, AND THE
FACT THAT THEY DON'T MAKES ME
BELIEVE THAT IT'S REALLY NOT
THERE, SO DO ANY OF OUR OTHER
WITNESSES WANT TO CHIME IN ON
THAT? MR. YORK, IF I MAY, SO
PRIVATE SECTOR FIRMS HAVE A
INCENTIVE AND OBLIGATION TO EARN
A PROFIT. AND SO THEIR DECISIONS
ABOUT HOW MUCH TO STORE FOR A
RAINY DAY ARE DETERMINED BY
PROFIT INCENTIVES. AND IN
PARTICULAR, HOLDING ON TO
ADDITIONAL PRODUCT SO YOU CAN
SELL IT WHEN PRICES ARE HIGH AND
DRIVE DOWN, PRICES CAN
CANNIBALIZE THE MONEY YOU'RE
ALREADY MAKING DURING THAT
PERIOD. NOW. NOW, MY VIEW IS,
YOU KNOW, WHEN WE HAVE A PRICE
SPIKE THAT A RESPONSIBLE SYSTEM
WOULD HAVE PRODUCT ON HAND,
WOULD HAVE ANTICIPATED THE,
POTENTIAL OF THERE BEING A
REFINERY TURNAROUND OR A
REFINERY OUTAGE, SOMETHING ELSE.
AND THAT PRODUCT COULD BE
DEPLOYED TO BRIDGE US TO THE
POINT WHERE THE REFINERY CAME
ONLINE, OR WHERE A PRODUCT COULD
COME IN FROM OVERSEAS, THAT
DECISION MAY NOT BE THE PROFIT
MAXIMIZING DECISION FOR FIRMS
THAT ARE TRYING TO MAKE THE MOST
POSSIBLE MONEY. BUT IN TERMS OF
SERVING THE CALIFORNIA PEOPLE BY
PREVENTING A BUDGET BUSTING
PRICE SPIKES, I THINK THAT IS
SOMETHING THAT WOULD BE
DESIRABLE. ALL RIGHT. THANK YOU,
ASSEMBLY MEMBER ZUBER. SO ONE OF
THE QUESTIONS IS SORT OF A
FOLLOW UP, I THINK, TO MY
COLLEAGUE FROM CARSON. SO IN
THE, THE REPORT THAT WAS PART OF
WHAT WE WERE PROVIDED, THE
TRANSPORTATION FUELS ASSESSMENT
THAT WAS ISSUED BY THE
GOVERNOR'S OFFICE IN AUGUST, ON
PAGE 15, THERE'S A GRAPHIC THAT
SHOWS THE NINE REMAINING
REFINERIES, AND IT LOOKS LIKE
THERE'S FOUR THAT CLOSED SINCE
2006, WERE THERE OTHER
REFINERIES, WHEN WE GO BACK TO
20 YEARS, THAT LOOKS LIKE ABOUT
20 YEARS. IT'S 18. WERE THERE, 7
OR 8 REFINERIES THAT CLOSED
BETWEEN 2004 AND 2006 THAT ARE
NOT ON THIS CHART? OR WERE THOSE
JUST SO SMALL THAT THEY WOULD
NOT HAVE BEEN ON THE CHART? I'M
JUST TRYING TO RECONCILE THE.
YEAH, AND I DON'T KNOW IF ANYONE
CAN ANSWER THAT. I KNOW I, I
CAN'T. AND MAYBE WE'LL WAIT
UNTIL WE HAVE FOLKS FROM THE
CEC. SECOND SECOND QUESTION,
WHICH IS A QUICK ONE. AND THAT'S
ON MR. YORK'S SLIDE. THE ONE
THAT SAYS IT HAS A GRAPHIC
SHOWING GASOLINE BLENDING
TANKAGE, IS IT, WHEN YOU LOOK AT
THAT, THAT GRAPHIC, THERE'S A
COLUMN THAT HAS FINAL PRODUCT
AND IT SHOWS, YOU KNOW, REGULAR
CARB, PREMIUM CARB, ARIZONA, IN
ORDER TO HAVE INVENTORY THAT
WOULD BE AVAILABLE DURING A
PRICE SPIKE, WOULD YOU ARE ALL
THESE BEING STORED IN SEPARATE
TANKS? ONCE THEY'RE ONCE IT'S
REFINED, ONCE IT'S BLENDED, YES
THEY ARE. YEAH. YES THEY ARE
BECAUSE THEY ALL HAVE DIFFERENT
SPECIFICATIONS IN ORDER TO BE
SOLD. SO IS, IS IT AN ACCURATE
QUESTION TO UNDERSTAND WHETHER
THERE'S EXCESS CAPACITY IN THESE
DIFFERENT TANK CONFIGURATIONS,
TO UNDERSTAND WHETHER OR NOT
THERE WOULD BE INVENTORY
AVAILABLE FOR A PERIOD OF, A
PRICE SPIKE, ESSENTIALLY, WHERE
REFINING CAPACITY IS, IS BELOW
DEMAND. ARE YOU MEANING LIKE,
COULD THERE BE EXCESS CAPACITY
IN THE ARIZONA CONVENTIONAL
TANKS, OR ARE YOU ASKING THEM TO
GET INTO THE GOVERNOR'S
PROPOSAL? BUT ONE OF THE
COMPONENTS OF THE PROPOSAL IS
ACTUALLY LOOKING AT WHETHER OR
NOT THERE SHOULD BE MINIMUM
INVENTORIES. AND SO ARE WE
TALKING ABOUT MINIMUM
INVENTORIES IN REFINED PRODUCT?
IS THAT IS ONE OF THE QUESTIONS
WE SHOULD BE ASKING WHETHER OR
NOT THERE'S EXCESS CAPACITY IN
THE TANK INFRASTRUCTURE FOR EACH
OF THESE REFINED, CATEGORIES OF
PRODUCT. LIKE I THINK I LET ME
SEE IF I LET ME SEE IF I'M LET
ME SEE IF THIS ANSWERS YOUR
QUESTION. I THINK IF YOU'RE
GOING TO LOOK AT MINIMUM
INVENTORIES FOR CALIFORNIA
FUELS, THE ONLY TANK CAPACITY
YOU YOU CAN LOOK AT IS THE TANK
CAPACITY FOR CARB FUELS. YOU
WOULD HAVE TO EXCLUDE TANKS THAT
ARE USED FOR ARIZONA. BOBS AND
FOR THE ARIZONA, NEVADA FUELS
BECAUSE THOSE MATERIALS COULD
NOT BE USED TO FUEL CALIFORNIA
TO MEET CALIFORNIA FUEL
STANDARDS. OKAY. SO IS THERE
SEPARATE TANK. SO YEAH, I GUESS
A GOOD QUESTION. IS THERE
SEPARATE TANK CAPACITY FOR
REGULAR CARB OR THAT THAT THAT
IS HELD FOR PERIODS OF TIME? OR
ARE WE USING, STORAGE CAPACITY
FOR DIFFERENT CATEGORIES OF FUEL
AND YOU'RE SORT OF USING IT ALL
UP AND THEN IT'S BASICALLY BEING
CONVERTED TO ANOTHER, TO KNOW
THAT THEY WOULD BE DEDICATED
TANKS. IT WOULD BE A, IT WOULD
BE A CARB TANK, A REGULAR CARB
TANK, OR A PREMIUM CARB TANK
THAT YOU WOULD FILL UP AND DRAIN
AS YOUR, AS YOUR, YOU KNOW, AS
YOUR FILL FULFILLING REGULAR
CARB DEMAND OR PREMIUM CARB
DEMAND AND YOUR ARIZONA
CONVENTIONAL TANK WOULD BE
SITTING OVER THERE. AND IT'S A
FUNCTION OF HOW MUCH ARIZONA
DEMAND IS THERE FOR YOUR HOW
MUCH DEMAND IS THERE FOR IN
ARIZONA OR NEVADA FOR YOUR
CONVENTIONAL GASOLINE. SO IT
WOULD BE A FAIR QUESTION TO BE
ASKING ABOUT WHETHER OR NOT
THERE'S EXCESS TANK CAPACITY FOR
CALIFORNIA, REGULAR CARB FOR
CALIFORNIA PREMIUM CARB IS THAT
IS THAT. YEAH. AND THEN EXCLUDE
THE OTHER GRADES OKAY. GREAT.
THANK YOU, MR. JIM PATTERSON OR
JOE PATTERSON. SORRY IT WAS IT
WAS BOUND TO HAPPEN. SO, I KNOW,
LOOK, WE'RE GONNA HAVE A LOT OF
TIME TO TALK ABOUT THE
GOVERNOR'S PROPOSAL, AND THAT'S
NOT THE PURPOSE OF THIS, BUT WE
CAN'T FORGET WE ARE IN SPECIAL
SESSION BECAUSE OF THE GOVERNOR.
CALLED IT TO MAKE A PROPOSAL.
AND THIS IS LAYING THE
GROUNDWORK FOR THAT. AND SO I
WON'T GO TOO FAR DOWN THE RABBIT
HOLE, BUT OBVIOUSLY, I'VE
LEARNED A LOT ABOUT THE
COMPLEXITIES OF, WELL, LEARNED A
LITTLE BIT ABOUT THE
COMPLEXITIES OF MAKING GASOLINE
AND IT'S OBVIOUSLY VERY
COMPLICATED, BUT I HAVE A
QUESTION FOR MR. MAHONEY. IS YOU
KNOW, WE'VE GONE FROM SOMETHING
LIKE 24 REFINERS TO 11 IN THE
LAST COUPLE OF DECADES. AND IT
SEEMS TO ME THAT, YOU KNOW, IF
THE IF, IF THERE, IF THERE WAS
SUCH PROFIT IN THE INDUSTRY AND
SUCH, YOU KNOW, JUST SO MUCH
MONEY AND BILLIONS AND BILLIONS
OF DOLLARS TO BE HAD BY PEOPLE,
WHY WE WOULD GO FROM 24 REFINERS
TO 11 IN 20 YEARS, BECAUSE IT
SEEMS LIKE A BAD IDEA TO CLOSE
YOUR BUSINESS IF YOU'RE MAKING
BILLIONS OF DOLLARS. AND I GUESS
THE QUESTION IS, HOW EXACTLY?
AND ASIDE FROM THAT, HOW WOULD
HAVING A MINIMUM INVENTORY HELP
KEEP THOSE 11 REFINERS IN
BUSINESS? SO AGAIN, I WANT TO
TRY AND ANSWER YOUR QUESTION
WITHOUT GETTING TOO FAR DOWN THE
DOWN THE RABBIT HOLE, AS YOU
SAID. YOU KNOW, I THINK THE
PROBLEM THAT, YOU KNOW, THIS
PROPOSAL IS TRYING TO SOLVE IS
THE MASSIVE PRICE SPIKES LIKE WE
SAW IN SEPTEMBER OF 2023. WE SAW
IN 2022, AND THOSE SPIKES
OCCURRED BECAUSE OF REFINERIES
WENT OFFLINE FOR, FOR PLANNED OR
PERHAPS FOR UNPLANNED
MAINTENANCE. AND THERE WASN'T A
BUFFER STOCK AVAILABLE. TO FILL
IN FOR THAT PRODUCT WHILE WE
WAITED FOR PRODUCT TO COME IN
FROM OVERSEAS. AND SO IF YOU
THINK ABOUT THAT PROBLEM, THE
SPIKE IN, IN GAS, WHICH GETS
FAMILIES TO THINK TWICE ABOUT
GOING ON A LABOR DAY ROAD TRIP,
THAT PUTS PRESSURE OR PEOPLE
SORT OF LOOKING FOR COUCH MONEY
TO PAY FOR A TANK OF GAS, IF
THAT'S THE PROBLEM YOU'RE TRYING
TO SOLVE, THEN I THINK THAT'S
THE FRAME YOU WANT TO BE
THINKING ABOUT WHEN YOU'RE
THINKING ABOUT HOW CAN WE MAKE
SURE THAT WE HAVE A BRIDGE OF
SUPPLY SO WE CAN GET THROUGH
WHATEVER, DISRUPTION WE FACE,
THERE'S A SEPARATE CONVERSATION
ABOUT MANAGING THE ENERGY
TRANSITION IN CALIFORNIA AND
MAKING SURE THAT WE HAVE ENOUGH
REFINERIES TO HAVE CONTINUED
PRODUCTION WHILE WE SHIFT TO
MORE ELECTRIFICATION IN OUR
ECONOMY. BUT I THINK KEEPING
THOSE TWO POINTS SOMEWHAT
DISTINCT IS AT LEAST HELPFUL FOR
ME WHEN I THINK ABOUT WHAT
PROBLEM THIS SOLUTION IS TRYING
TO ADDRESS. WELL, IT SEEMS LIKE
WE'RE GOING TO BE SPENDING A LOT
OF TIME TOGETHER OVER THE NEXT,
COUPLE OF WEEKS. AND SO WHENEVER
IT'S APPROPRIATE TO ANSWER THE
QUESTION ON HOW KEEPING MINIMUM
INVENTORIES, BECAUSE YOU
SUGGESTED IT MULTIPLE TIMES AND
I PROBABLY HEARD IT TEN TIMES,
IN YOUR PRESENTATION, HOW THAT
HELPS KEEP THE 11 THAT WE
CURRENTLY HAVE. THAT'S REALLY
WHAT I WANT TO GET TO. AT THE
END OF THE DAY, BECAUSE I THINK
WE CAN AGREE WE CAN'T LOSE ANY
MORE CAPACITY. AND SO TO THE
EXTENT THAT THESE MINIMUM IN THE
PRODUCTION CYCLE, THAT THE
MINIMUM LEVELS THAT YOU WANT TO
MAINTAIN, THAT YOU THINK IS
NECESSARY WILL HELP MAINTAIN
THOSE 11, REFINERS. I WHENEVER
YOU'RE READY TO ANSWER THAT WHEN
APPROPRIATE, I'LL BE HERE.
FANTASTIC I LOOK FORWARD TO THAT
CONVERSATION. ALL RIGHT. AND I,
I DO KNOW THAT THERE WERE A
COUPLE OF FOLKS WHO WANTED TO
ASK SOME FOLLOW UPS RELATED TO
THE PRODUCTION CYCLE. WHAT I DO
WANT TO DO, BECAUSE I THINK THAT
WAS A GOOD TRANSITION INTO A
CONVERSATION ABOUT PRICING AND
HOW PRICING IS SET, IS IF WE CAN
PAUSE ON THOSE AND YOU'LL BE THE
FIRST FOLKS THAT WE CALL ON. ON
OUR SECOND LAP, WE HAVE THE SAME
PANELISTS. SO WE CAN YOU CAN ASK
WHATEVER QUESTION YOU WENT
AFTER. WE HAVE A CHANCE TO TALK
ABOUT PRICING. BECAUSE I THINK
WE'RE STARTING TO GET INTO SOME
OF THOSE QUESTIONS AS WELL. SO
WITH THAT, LET'S GO AHEAD AND,
MR. MAHONEY, TALK US THROUGH WHO
ARE THE MARKET ACTORS? HOW DO
GAS PRICES GET SET? HOW DOES
THIS ALL WORK? EXPLAIN THE SPOT
MARKET TO US. OKAY, GREAT. I
WILL GO FIRST AND THEN JUST JUST
THRILLED TO HAVE, OTHER DEEPLY
KNOWLEDGEABLE MEMBERS, TO ALSO
SHARE THEIR PERSPECTIVE. SO. SO
IF POSSIBLE, I WOULD LIKE TO
JUMP TO A SLIDE FOR, IN IN MY
SLIDE PRESENTATION.
GREAT. SO YOU KNOW, WHEN I, WHEN
I TEACH, PRICING TO MY STUDENTS,
WHEN I THINK ABOUT MARKETS, YOU
KNOW, I THINK ABOUT TWO
COMPONENTS OF PRICING. ONE IS
SORT OF THE COSTS OF PRODUCTION.
AND THE SECOND IS THE MARKUP ON
THOSE COSTS, WHICH REFLECTS A
MARKET POWER OF THE FIRMS AND
DEMAND CONDITIONS IN THE MARKET.
AND SO WHAT I'M GOING TO DO, AND
I WAS INSTRUCTED TO TAKE NO MORE
THAN FIVE MINUTES, AND HOPEFULLY
I WILL FOLLOW THOSE GUIDELINES
IS TO TALK A LITTLE BIT ABOUT
PRICING FIRST IN THE UPSTREAM
MARKET, WHICH IS WHERE,
REFINERIES OR REFINING PRODUCT,
AND SETTING PRICES, AND THEN
TALK A LITTLE BIT ABOUT THE
DOWNSTREAM MARKET, WHERE GAS
STATIONS ARE BUYING, THE REFINED
PRODUCT AND THEN SETTING PRICES
FOR CONSUMERS, SO THIS SLIDE IS
ABOUT THE UPSTREAM PART OF THE
MARKET. AND IF YOU THINK ABOUT A
REFINERY, IT HAS INPUTS. SO IT'S
BUYING CRUDE, YOU KNOW, BOTH ON
BOTH FROM CALIFORNIA PRODUCERS
AND ON THE GLOBAL MARKET, AND A
NUMBER OF OTHER, INPUTS, AND
THEN IT HAS TO PAY, OBVIOUSLY,
THE COSTS OF OPERATING THE
REFINERY. SO THOSE ARE THOSE
INPUT COSTS INTO SORT OF THE
REFINERS PRODUCTION FUNCTION.
AND THEN THE SECOND THING IT HAS
TO DO, IS TRANSPORT THAT PRODUCT
TO THE RACK. AND WE'VE ALREADY
TALKED ABOUT, THE NETWORK OF, OF
PIPELINES AND THE SEQUENCING OF
DIFFERENT TYPES OF REFINED
PRODUCTS. SO THIS PRODUCT IS
IT'S, TRANSPORTED TO THE RACK,
AND THE RACK PRICE THAT IS
QUOTED IN PUBLIC SOURCES. WE
TALKED ABOUT OPUS, WHICH IS, YOU
KNOW, MY GO TO SOURCE OF PRICE
INFORMATION. THOSE PRICES AT
THAT POINT, WE HAVEN'T YET
INCLUDED THE TAXES OR THE
ENVIRONMENTAL CREDITS. SOMETIMES
COMPLIANCE COSTS ARE INCLUDED,
SOMETIMES THEY'RE NOT, SO THOSE
ARE SORT OF THE INPUT COSTS OF
THAT STAGE. THERE'S ONE OTHER
COMPLICATION WHICH, IS MORE
PREVALENT IN THE CALIFORNIA
MARKET, WHICH IS WE HAVE THESE
VERTICALLY INTEGRATED, REFINERS
TO GAS STATIONS. AND SO CHEVRON,
I THINK, WOULD BE, YOU KNOW, THE
MOST WELL-KNOWN EXAMPLE WHERE
THERE'S A COMPANY THAT OWNS SORT
OF THE MULTIPLE STAGES OF
PRODUCTION, IN THOSE SETTINGS,
THE, THE COMPANY, LIKE CHEVRON,
IS ALSO GOING TO BE CONTROLLING
PRICING ON THE TRANSPORTATION OF
PRODUCT FROM THE RACK TO THE,
GAS STATION. AND THIS IS KNOWN
AS TX OR DEALER TANK WAGONS. AND
THEY'RE CHARGING THE GAS STATION
FOR THAT LAST MILE DELIVERY. SO
THAT'S THAT'S THE COST
COMPONENT. AND THEN, YOU KNOW,
AS I TEACH MY STUDENTS, PRICES
NOT ONLY REFLECT COSTS, BUT THEY
REFLECT, THE MARKET POWER OF
FIRMS TO CHARGE, SOMETHING
BEYOND THE PRICES OF MARGIN. AND
IN THE UPSTREAM SECTOR IN
CALIFORNIA, THERE ARE THREE
SOURCES OF MARKET POWER. ONE IS
THE AVAILABLE REFINING CAPACITY.
SO THERE'S FIVE COMPANIES THAT
DO THE REFINING. IF ONE OF THEM
WENT OFFLINE OR IF SOME OF ITS
REFINERIES WENT OFFLINE, THERE
WOULD BE FEWER SUPPLIERS, AND IF
YOU'RE A BUYER AND THERE'S FEWER
SUPPLIERS, YOU'RE GOING TO FACE
HIGHER PRICES. SO THAT'S POINT
ONE. POINT TWO IS INVENTORIES.
IF WE ARE RUNNING OUT OF
INVENTORIES, WE'RE GETTING CLOSE
TO THE TANK, HEAL THAT SKIP
TAUGHT US ABOUT. THEN THERE'S
LITTLE OPPORTUNITY FOR SUPPLY
FROM INVENTORY TO MEET DEMAND.
AND SO THAT MEANS THE PEOPLE WHO
HAVE PRODUCT CAN PRODUCE PRODUCT
HAVE MORE MARKET POWER. SO
INVENTORIES BLUNT PRICING POWER.
AND THE THIRD THING, AND WE'VE
ALREADY TALKED ABOUT IN A ROBUST
NATURE. SO I WON'T BELABOR IT.
BUT IT'S OUT OF STATE SUPPLY.
WHEN IT IS EASIER TO BRING IN
PRODUCT FROM OUT OF STATE, THE
IN-STATE REFINERIES WILL HAVE
LESS PRICING POWER, BUT WHEN
THEY'RE WHEN IT TAKES TIME AND
IT ALWAYS TAKES TIME, WHEN
THERE'S, THERE'S BEEN A
SLOWDOWNS IN THE PANAMA CANAL
BECAUSE OF LOW WATER LEVELS. AND
THAT MEANS IT TAKES LONGER FOR
PRODUCT TO GET FROM US GULF
COAST OR EUROPE. THAT AGAIN,
FEWER OUTSIDE SUPPLIERS, LESS OF
WHAT ECONOMISTS NÓ CALL A
COMPETITIVE FRINGE. THAT MEANS
THAT, AGAIN, IN-STATE SUPPLIERS
HAVE MORE MARKET POWER. SO THOSE
ARE THE MIX OF FORCES, COSTS AND
MARKET POWER, WHICH DETERMINE
THE PRICES EITHER AT THE RACK OR
THE PRICE THAT THE VERTICALLY
INTEGRATED GAS STATIONS, PAY, AT
THE GAS STATION, AND THEN IF WE
CAN FLIP TO THE NEXT SLIDE, TALK
ABOUT THE DOWNSTREAM COMPONENT.
YOU KNOW, FROM A RETAILERS
PERSPECTIVE, AND I KNOW MY
COLLEAGUES WILL SPEND MORE TIME
TALKING ABOUT THIS, THE, THE
PRICES THEY PAY DEPEND UPON THE
PRICING AT THE RACK. RIGHT. AND
THAT IS BUYING THE PRODUCT, THE
ETHANOL, AND, YOU KNOW, THE
ADDITIVES, IT'S ALL BLENDED
TOGETHER. IT'S THE LAST MILE
TRANSPORT COSTS, INCLUDING,
DEALER, TANK, WAGON, AND THEN
THERE'S OBVIOUSLY A SET OF TAXES
AT THE FEDERAL, STATE AND LOCAL
LEVEL WHICH ARE PASSED ON TO
CONSUMERS, SO THOSE ARE THE
INPUT COSTS IN SOME SENSE, FOR A
GAS STATION, AND ONE THING TO
NOTE, AND WE CAN SPEND MORE TIME
ON THIS, THOUGH IT IS, I THINK,
OPAQUE, AT LEAST IN PUBLIC
INFORMATION, IS THAT THESE
BRANDED, VERTICALLY INTEGRATED
RETAILERS, THEY HAVE VERY
COMPLEX CONTRACTS WITH THE
UPSTREAM REFINERS. THOSE
CONTRACTS DETERMINE THE PRICE.
THEY DETERMINE THE MINIMUM
QUANTITY. SOMETIMES THE MAXIMUM
QUANTITY, THAT GAS STATIONS, CAN
PURCHASE. AND SOMETHING MY
COLLEAGUE SEVERIN BORENSTEIN HAS
DOCUMENTED, AND MAY HAVE SHARED
WITH THIS BODY, IN CALIFORNIA,
BRANDED GAS STATIONS HAVE MUCH
HIGHER PRICES THAN NON-BRANDED
GAS STATIONS. I THINK THERE'S AN
EMERGING SET OF EVIDENCE WHICH
SUGGESTS THAT MAY BE DUE IN PART
TO THESE COMPLICATED CONTRACTS,
WHICH AFFECT THE PRICES THAT
BRANDED GAS STATIONS ARE PAYING
FOR PRODUCT, ONE LAST THING. AND
THEN AND THEN I'LL TURN OVER THE
FLOOR, IS RETAIL PRICES. SO THE
PRICES THAT YOU OR I PAY AT THE
PUMP EXHIBIT A WELL-KNOWN
PHENOMENON CALLED ROCKETS. AND
FEATHERS, ECONOMISTS ARE
TYPICALLY BAD WITH WORDS, BUT
THIS IS ONE CASE WHERE I THINK
WE ACTUALLY HAVE AN APT
DESCRIPTION OF THE PHENOMENON.
AND THE ROCKETS AND FEATHERS
PHENOMENON IS WHEN THERE'S A
INCREASE IN COSTS, THE PRICE AT
THE PUMP SHOOTS UP LIKE A ROCKET,
BUT WHEN THERE'S A DECLINE IN
COSTS, PRICES DON'T, IMMEDIATELY
REVERT BACK TO THEIR STANDARD
LEVEL. THEY FALL SLOWLY. THEY
FLOAT DOWN LIKE A FEATHER, AND
THE IMPLICATION OF THIS IS WHEN
WE SEE, SHOCKS TO THE UNDERLYING
COST, CONSUMERS ARE GOING TO PAY
MORE IMMEDIATELY, BUT THEN IT'S
GOING TO TAKE A LONG TIME FOR
THOSE PRICES TO COME BACK DOWN.
AND THAT'S GOING TO MEAN AN
EXTENDED PERIOD OF TIME WHEN
CONSUMERS ARE FEELING A PINCH,
AT THE GAS STATION, SO I'M SURE
YOU WILL HAVE GREAT QUESTIONS,
LIKE YOU DID AFTER THE PREVIOUS
SESSION, BUT BUT FOR NOW, I DO
WANT TO, YOU KNOW, TURN OVER. I
GUESS, YOU KNOW, THE
CONVERSATION TO EITHER SKIP, OR
TO THE OTHER SPEAKER. THANK YOU.
THANK YOU. PROFESSOR. YEAH,
WE'LL GO AHEAD AND TURN, TO MR.
YORK. YOU HAD SOME SLIDES ON
PRICING, THAT ARE ALSO INCLUDED
IN THE MEMBERS BINDERS. SO
WHENEVER YOU'RE READY. OKAY,
YEAH, I WASN'T EXACTLY SURE WHAT
THE COMMITTEE WANTED TO HEAR
ABOUT PRICES, SO I'M GOING TO
TALK A LITTLE BIT ABOUT CRUDE
PRICES. AND THEN A COUPLE OF
OBSERVATIONS ON PRODUCT PRICES,
IF WE COULD GO TO THE FIRST
SLIDE, THE FIRST SLIDE, THIS
SLIDE JUST KIND OF SHOWS THAT
DIFFERENT CRUDE OILS WILL HAVE
DIFFERENT PRICES. AND IT'S
LARGELY DRIVEN BY THE
DIFFERENCES IN THE QUALITIES AND
BROADLY SPEAKING, THE HEAVIER
THE CRUDE AND THE MORE SULFUR IN
THE CRUDE, THE MORE DIFFICULT IT
IS TO REFINE. SO THE LOWER THE
PRICE. SO YOU KIND OF SEE THAT
SAN JOAQUIN VALLEY CRUDE, IT'S
VERY HEAVY. IT HAS A LOW
SPECIFIC GRAVITY. IT HAS A LOW
API, HAS A HIGHER SULFUR
CONTENT, SELLS FOR A LOWER PRICE
THAN, WHAT WE CALL A LIGHT SWEET
CRUDE LIKE BRANT. SO AND PART OF
THE REASON IS IT TENDS TO BE
MORE EXPENSIVE TO PROCESS, AND
IT'S MORE EXPENSIVE IN TWO WAYS.
IT HAS A HIGHER OPERATING COST
BECAUSE YOU TEND TO NEED MORE
HEAT AND MORE HYDROGEN, AND MORE
ENERGY, AND IT ALSO TENDS TO BE
MORE EXPENSIVE BECAUSE YOU HAVE
TO PUT CAPITAL INVESTMENTS IN
PLACE TO HANDLE THAT, THAT
HEAVIER CRUDE. SO DIFFERENT
CRUDES WILL HAVE DIFFERENT
PRICES, EVEN THOUGH THERE IS A
GLOBAL CRUDE MARKET. WE GO TO
THE NEXT SLIDE. YOU COULD HAVE
TWO CRUDES THAT ARE EXACTLY THE
SAME. AND FROM A REFINERS
PERSPECTIVE, THEY WILL HAVE
DIFFERENT PRICES BECAUSE THEY
COME FROM DIFFERENT LOCATIONS.
AND SO THEY'LL HAVE DIFFERENT
TRANSPORTATION COSTS AND SO THIS
JUST TO GIVE YOU AN IDEA OF THE
ORDER OF MAGNITUDE, IF A CRUDE
IS COMING INTO CALIFORNIA, IF
IT'S COMING FROM THE SAN JOAQUIN
VALLEY BY PIPELINE, IT COSTS
ABOUT A DOLLAR. IF IT'S COMING
FROM BRAZIL, IT WILL COST ABOUT
4 TO $5. IF IT'S COMING FROM
ALASKA, IT'S ABOUT $5. NOW, YOU
MIGHT BE ASKING YOURSELF, WHY
WOULD A CRUDE COST $5 FROM
ALASKA, BUT ONLY $4 FROM BRAZIL,
WHEN BRAZIL IS SO MUCH FARTHER
AWAY THAN ALASKA? AND THAT'S THE
EFFECT OF WHAT ARE CALLED JONES
ACT TANKERS CRUDE THAT COMES
FROM A US BORDER, OR ANY
MATERIAL THAT GOES FROM A US
PORT TO ANOTHER US PORT MUST
SAIL ON WHAT'S CALLED A JONES
ACT TANKER, WHICH IS A US
FLAGGED US MANUFACTURED AND US
CRUDE VESSEL. AND THOSE ARE JUST
MORE EXPENSIVE VESSELS THAN
INTERNATIONAL FLAGGED VESSELS.
AND YOU KIND OF SEE THAT'S THE
DIFFERENCE IN THE COST, BETWEEN
BRAZIL AND ALASKA IS THAT'S THAT
KIND OF SHOWS YOU THE IMPACT OF,
OF A JONES ACT VESSEL. AND THEN
IF WE'RE AND THEN IF WE'RE
COMING FROM THE MIDDLE EAST,
YOU'RE KIND OF LOOKING MORE LIKE
$6 A BARREL BECAUSE IT'S FARTHER
AWAY. SO EVEN IF THE CRUDES ARE
EXACTLY THE SAME, THE MORE THE
CLOSER THE CRUDE IS, THE MORE
ATTRACTIVE IT IS TO A REFINER.
SO THEN YOU WOULD SAY TO
YOURSELF, WELL, SAN JOAQUIN
VALLEY IS VERY CHEAP, CRUDE AND
IT'S VERY CHEAP TO TRANSPORT IT.
WHY DOESN'T EVERYBODY, REFINE
SAN JOAQUIN VALLEY CRUDE? AND
THAT'S BECAUSE IT GOES. LET'S GO
TO THE NEXT SLIDE. SLIDE WAS THE
IS YOUR REFINERY CONFIGURED? IT
GOES BACK TO THE DID YOU MAKE
THE CAPITAL INVESTMENTS TO
REFINE THIS CRUDE, AND GET THE
MOST VALUE FOR IT. AND REFINERS
WILL MAXIMIZE THE VALUE OF THE
ENTIRE VALUE BARREL OF THE
CRUDE. THEY DON'T LOOK AT JUST
ONE PRODUCT. SO THERE'S A
CONCEPT CALLED THE GROSS PRODUCT
WORTH, WHICH IS YOU TAKE THE HOW
MUCH YOU'RE GOING TO MAKE OF
EACH PRODUCT. THE YIELD OF THAT
BARREL TIMES THE PRICE OF THAT
PRODUCT. AND THAT'S YOUR GROSS
PRODUCT WORTH. YOU SUBTRACT OFF
YOUR CRUDE COST AND YOU SUBTRACT
OFF THE OPERATING COST FOR THAT
CRUDE. AND WHAT YOU'RE SEARCHING
FOR IS WHERE IS THAT MARGIN? THE
HIGHEST? AND THOSE ARE THE THOSE
ARE THE THAT'S THE PRODUCT MIX
AND THE CRUDE SLATE THAT YOU'RE
THAT YOU'RE LOOKING FOR. AND SO
NOT EVERY REFINERY WILL PICK THE
EXACT EXACT SAME
PROCESSING EQUIPMENT. REVIEW OF
CRUDE PRICES. AND WE CAN SKIP
TWO CHARTS. LET'S GO. REALLY
QUICKLY, JUST TO TALK REALLY
QUICKLY ABOUT, PRODUCT, PRODUCT
PRICES ARE JUST ON, ON PRODUCT
SALES, A REFINERS FIRST
OBLIGATION IS TO FILL THEIR
CONTRACTUAL IS TO FILL THEIR
CONTRACTS. AND THAT'S WHERE THE
VAST MAJORITY OF THE VOLUME GOES.
THEN THEY HAVE SOME VOLUME THAT
THEY DISCRETIONARY VOLUME THAT'S
LEFT OVER. AND THERE'S REALLY
TWO WAYS, TWO CHANNELS THAT THAT
COULD GO THAT THE DISCRETIONARY
VOLUME CAN GO. IT CAN GO INTO
BULK SALES, WHICH WOULD BE
THINGS LIKE COSTCO OR UNBRANDED
DISTRIBUTORS, OR IT COULD GO
INTO THE SPOT MARKET. SO THE
BULK SALES TEND TO BE BIGGER
THAN SPOT MARKETS. SPOT MARKETS
TEND TO BE. THERE ARE ONE TIME
TRANSACTIONS. THEY TEND TO BE
SMALLER VOLUME TRANSACTIONS THAN
BULK SALES. AND THEY TEND TO BE
HIGHER RISK THAN THE BULK SALES
BECAUSE, YOU KNOW THEY'RE HIGHER
RISK ON BOTH SIDES. THE BUYER
COMES INTO THE MARKET. HE
DOESN'T KNOW IF THERE'S A
REFINER THAT HAS VOLUME TO SELL.
REFINER COMES TO THE MARKET,
DOESN'T KNOW IF THERE'S A BUYER
FOR THAT VOLUME AND THE VOLUMES.
THEN BECAUSE OF THE CONTRACTUAL
VOLUMES ON THE LEFT HAND SIDE
AND THE BULK SALES IN THE MIDDLE
SPOT MARKET VOLUME SALES ARE
ACTUALLY A VERY SMALL PART OF
ALL OF THE VOLUME THAT GETS
SOLD. IN THE MARKET IN THE IN
THE REFINERS AND THE WHOLESALE
MARKETING AS YOU'RE HEADING
TOWARDS, FINAL DEMAND. SO THAT'S
REALLY KIND OF ALL I WANTED TO
KIND OF TALK ABOUT ON PRICING.
AND THEN WE CAN PROBABLY UNCOVER
A LOT MORE THINGS WHEN WE GET
INTO INTO THE QUESTIONS. THANKS.
MR. YORK AND MR. ROBINSON, TALK
US THROUGH HOW DOES PRICING WORK
AT THE RETAIL SIDE? OKAY, OKAY.
WELL, I'M THE PERSON RESPONSIBLE
IN OUR COMPANY FOR DOING THE
PRICING OF THE GASOLINE. DIESEL
FOR OUR COMPANY OPERATED
LOCATIONS. AND IT'S SOMETHING
THAT WE DO ON A SEVEN DAY A WEEK
BASIS. AND SO HOW DO I DO IT? I
BASICALLY LOOK AT FOUR THINGS
EVERY DAY. I LOOK AT FOUR
THINGS. FIRST OFF, FIRST AND
FOREMOST, I LOOK AT PRICE
SURVEYS TO FIND OUT WHAT
COMPETITORS ARE DOING. SECOND
THING IS I MONITOR SALES TRENDS
TO FIND OUT IF WE'RE SELLING
MORE GALLONS OF FUEL VERSUS LAST
WEEK VERSUS LAST YEAR, THE THIRD
THING I DO IS I MONITOR
WHOLESALE PRICES AND WHETHER
THEY ARE TRENDING UP OR THEY'RE
TRENDING DOWN, AND THEN LASTLY,
I REVIEW THE GROSS PROFIT
MARGINS OF EACH OF OUR
INDIVIDUAL LOCATIONS. AND SO
WHEN I'M ALL DONE WITH THAT,
AFTER REVIEWING THAT STUFF, I
MAKE THE DECISION OF EITHER TO
RAISE THE PRICE, LOWER THE PRICE
OR LEAVE IT THE SAME. AND I AND
I ASSUME THAT MOST OTHER
RETAILERS MORE OR LESS GO
THROUGH A SOMEWHAT SIMILAR
PROCESS WHEN THEY SET THEIR OWN
PRICES, I THINK IT'S IMPORTANT
TO NOTE THAT AS A GENERAL RULE,
AS A GENERAL RULE, RETAILERS ARE
LIKE CONSUMERS IN THAT WE DO
BETTER WHEN PRICES ARE GOING
DOWN, NOT WHEN PRICES ARE GOING
UP. IT'S IMPORTANT TO REMEMBER
THAT WE DO ATTEMPT TO BE A FOR
PROFIT COMPANY BECAUSE OUR
EMPLOYEES WANT TO BE PAID WAGES
AND BONUSES AND BANKERS AND FUEL
SUPPLIERS AND LANDLORDS AND
OTHER VENDORS ALL WANT TO BE
PAID, AND NEIGHBORS WANT US TO
MAINTAIN OUR FACILITIES SO WE
DON'T MAKE THE NEIGHBORHOOD LOOK
BAD, AND MORE IMPORTANTLY,
GOVERNMENTS ALWAYS WANT US TO
PAY TAXES. SO IT'S IMPORTANT
THAT WE'RE A FOR PROFIT COMPANY.
ADEQUATE GROSS PROFIT MARGIN IS
IMPORTANT BECAUSE CALIFORNIA HAS
SUCH HIGH COSTS, MANY OF WHICH
ARE UNIQUE TO CALIFORNIA. A
SHORT LIST OF COSTS WHICH IMPACT
OUR PRICING AND OUR
PROFITABILITY ARE HIGH STATE
EXCISE TAXES, STATE GREENHOUSE
GAS, AND LOW CARBON FUEL
STANDARD FEES. SPECIAL
CALIFORNIA FUEL SPECS, SALES
TAXES THAT VARY FROM CITY TO
CITY OR COUNTY TO COUNTY, VAPOR
RECOVERY AND ENHANCED VAPOR
RECOVERY EQUIPMENT MAINTENANCE
AND TESTING. OTHER TYPES OF
MONITORING. TESTING HIGH MINIMUM
WAGE, HIGH UTILITY BILLS, HIGH
INSURANCE, AND THEN IT'S
IMPORTANT IF YOU HAPPEN TO BE
BUILDING SOMETHING, WE HAVE
CERTAINLY HAVE HIGH LAND COSTS
AND SLOW AND VERY EXPENSIVE
PERMITTING NOT TO MENTION SEQUA
THE NEW LAWS AND REGULATIONS IN
THE STATE IS IMPLEMENTING, WHICH
IS GOING TO RUN THE INDUSTRY
MORE COST EFFECTIVELY. AND I SAY
THAT FACETIOUSLY, WILL ALMOST
CERTAINLY BE AN ADDITIONAL COST.
CALIFORNIA ALREADY HAS EXTREMELY
HIGH COSTS TO OPERATE, WHICH
MEANS CALIFORNIA CONSUMERS PAY
VERY HIGH PRICES FOR GAS AND
DIESEL. AND NOW THE BILL THEY
FOOT WILL BE LIKELY BIGGER.
THAT'S IN A NUTSHELL. ALL RIGHT.
THANK YOU ALL RIGHT. QUESTIONS,
WE'LL START WITH MR. BENNETT.
AND THEN MR. GIBSON, THANK YOU,
CHAIR. CHAIRWOMAN. AND, I'M
GOING TO HAVE TO COMBINE MY
QUESTIONS FOR FROM THE LAST
SESSION. AND THIS SESSION, I'VE
BEEN TRYING TO KEEP MY QUESTIONS
VERY TIGHT BECAUSE I KNOW YOU'RE
TRYING TO FIGHT TIME. SO MY
APOLOGIES, JUST TO TAKE TIME, BUT, MY QUESTIONS
ARE FOR PROFESSOR MAHONEY. SO IF
YOU C¯ YOURSELF UP, AND WHILE
YOU'RE COMING UP, I WOULD SAY WE
HEARD FROM MR. YORK THAT THE
FIRST OBLIGATION OF THE
COMPANIES IS TO MEET THEIR
CONTRACTS. AND I WOULD COUNTER
THAT THE FIRST OBLIGATION OF THE
COMPANIES IS TO MEET THE DEMANDS
AND INTEREST OF THEIR
STOCKHOLDERS, THAT'S AND THAT'S
WHY THEIR PROFIT MOTIVE
COMPANIES AND THERE'S IT'S VERY
APPROPRIATE FOR THEM TO TRY TO
MAXIMIZE THEIR PROFITS. BUT FOR
MR. MAHONEY, ARE YOU THERE YET,
I'D LOVE TO, TO PULL YOU UP FOR
THIS PARTICULAR QUESTION. AND
THAT IS THAT, THE COMPANIES
TODAY ARE ABLE TO KEEP NINE DAY,
12 DAY, 15 DAYS WORTH OF
INVENTORY. IS THAT CORRECT, MR.
MAHONEY? FROM WHAT YOU
UNDERSTAND, THAT IS CORRECT. AND
AS YOU STATED, THE DECISION,
WHILE IT'S A COMPLICATED
DECISION, LOTS OF THINGS CAN
INFLUENCE IT. BUT THEIR PRIMARY
FOCUS IN THAT DECISION IS WHAT'S
GOING TO BE BEST FOR THEIR
PROFITS. THEY DON'T WANT TO HOLD
INVENTORIES AND HAVE THAT
STORAGE COST AND ALL OF THAT, IF
UNNECESSARILY. BUT IF THEY CAN
HOLD INVENTORY BECAUSE THEY
THINK DOWN THE ROAD, THEY COULD
BE ABLE TO SELL INTO A HIGHER
PRICED MARKET, THEY MAY MAKE
THOSE DECISIONS, BUT THE
DECISION BASICALLY ON INVENTORY
OR ONE OF THE PRIMARY THINGS IS
SIMPLY THEIR PROFITS. CORRECT
THAT IS CORRECT. MEMBER BENNETT.
SO THESE COMPANIES HAVE AN
OBLIGATION TO MAXIMIZE PROFITS
FOR THEIR SHAREHOLDERS, DO SO
MUCH BETTER WHEN YOU'RE ON THE
SCREEN RATHER THAN, RATHER THAN
JUST HEARING YOUR VOICE. SO GOOD
TO SEE YOU, SO. BUT TODAY THEY
ARE SOMETIMES MAINTAINING AS
MUCH AS 15 DAYS WORTH OF
INVENTORY, AND OTHER TIMES 12
DAYS, AND OTHER TIMES DOWN TO
NINE DAYS. IS THAT CORRECT?
THAT'S CORRECT. THERE'S A RANGE
OF, INVENTORY HOLDINGS THAT THEY
HAVE, AND SO SOMETIMES
SUFFICIENT SOMETIMES PERHAPS
INSUFFICIENT. GREAT. AND SO THE
ISSUE, THE FUNDAMENTAL ISSUE IN
FRONT OF US TODAY, WE HAD THE
QUESTION ABOUT, YOU KNOW, HEY,
IS THERE A LOT OF EXCESS
CAPACITY OUT THERE OR, AND THE
ANSWER WAS NO, THERE'S NOT A LOT
OF EXCESS STORAGE CAPACITY OUT
THERE, BUT THE FUNDAMENTAL
QUESTION THAT WE'RE ASKING HERE
IS NOT, DO THEY HAVE TO COME UP
WITH A LOT OF EXCESS NEW
STORAGE, BUT CAN THEY SIMPLY
FIND WAYS TO OPERATE SO THAT
THEY STAY CLOSER TO THE 15 DAY
INVENTORY LEVEL THAN THE NINE
DAY INVENTORY LEVEL? IS THAT
CORRECT? THAT IS EXACTLY
CORRECT. I THINK THE POLICY IS
NOT FOR THEM TO GO ABOVE AND
BEYOND WHAT THEY DO NORMALLY,
BUT JUST TO MAKE SURE THAT THEY
DON'T GO VERY LOW. SO I THINK
THAT'S REALLY AN IMPORTANT POINT
FOR US TO TRY TO EMPHASIZE HERE,
BECAUSE WE'VE HAD I'VE HAD
NUMEROUS CONVERSATIONS AND LOTS
OF PEOPLE TALKING ABOUT HOW
EXPENSIVE IT WILL BE TO BUILD
MORE, ETC, AND WHAT THE YOUR
CONTENTION IS IF THEY STAY
CLOSER TO THE 15 DAYS, THEN
WE'RE LESS LIKELY TO HAVE PRICE
SPIKES. CORRECT THAT IS EXACTLY
CORRECT. SO IF WE ADD TO THE
DECISION MAKING PROCESS THAT
BESIDES THEIR PROFIT MOTIVE,
THERE IS ALSO THE PUBLIC'S
INTEREST IN TRYING TO KEEP THOSE
INVENTORY LEVELS CLOSER TO 15
DAYS. IF WE COMBINE THOSE TWO,
WE WOULD HAVE IN THE LONG RUN, A
BETTER PUBLIC POLICY, AND WE'RE
NOT CERTAIN WHAT THE IMPACT
NECESSARILY BE ON PROFITS. BUT
IT CERTAINLY DOESN'T SEEM LIKE
THAT WOULD DESTROY PROFITS,
BECAUSE THEY'RE ALREADY DOING
THAT FOR A SIGNIFICANT PERIOD OF
TIME DURING THE YEAR. CORRECT
THAT IS CORRECT. GOOD. AND SO I
WANT TO GO TO THE SECOND THING,
WHICH IS, MY COLLEAGUE SAYING,
YOU KNOW, THE GOAL IS TO TRY TO
KEEP 11 REFINERIES OUT THERE
OPERATING, MY UNDERSTANDING IS
REFINERIES DON'T OPERATE VERY
COST EFFECTIVELY WHEN THEY'RE
OPERATING AT 50 OR 60% CAPACITY.
REFINERIES OPERATE MOST
EFFICIENT. THEY NEED TO BE AT
HIGH CAPACITY, CLOSE TO FULL
CAPACITY. SO WOULD IT BE IN THE
PUBLIC'S BEST INTEREST TO HAVE
AS DEMAND DROPS? LET'S SAY
DEMAND DROPS 50% OVER THE NEXT
TEN YEARS? WOULD IT BE IN THE
PUBLIC'S BEST INTEREST TO HAVE
11 REFINERIES OPERATING AT 50%
CAPACITY? OR WOULD IT BE BETTER
TO DECREASE THE NUMBER OF
REFINERIES AS THE DEMAND DROPS?
SO THAT THEY CAN OPERATE WITH
ECONOMIES OF SCALE AT AT HIGHER
EFFICIENCY LEVELS? IT WOULD BE
BETTER FOR THE REFINERIES TO
OPERATE AT MINIMUM EFFICIENT
SCALE. THAT IS, AT THAT HIGHER,
HIGHER CAPACITY CAPACITY. SO WE
WILL ALMOST INEVITABLY, AS
DEMAND DROPS, SEE A DECREASE IN
THE NUMBER OF REFINERIES.
CORRECT? THAT IS CORRECT. SO AND
PARDON ME, BUT NOW I'M ON THOSE
ARE THE QUESTIONS THAT CAME FROM
BEFORE THAT I WANTED TO TRY TO
COUNTER. SO MR. PROFESSOR DO
INVENTORY LEVELS AFFECT SPOT
PRICES? DO INVENTORY LEVELS
AFFECT SPOT PRICES? THEY DO
AFFECT SPOT PRICES. AND MR.
ROBERTSON ALSO SHOOK HIS HEAD
HERE. RIGHT IN AGREEMENT. SO
I'LL MOVE ON FROM THERE. AND
THEN YOU ALSO SAID HIGHER
INVENTORIES, BLUNT PRICING
POWER, CORRECT? THAT IS CORRECT.
SO IF INVENTORY, IF HIGHER
INVENTORIES AFFECT SPOT PRICES
AND HIGHER INVENTORIES BLUNT
PRICING POWER, THEN IF WE ADDED
TO THE DISCUSSION ABOUT HOW MUCH
INVENTORY SHOULD BE MAINTAINED,
IT WOULD BE IN THE PUBLIC'S
INTEREST TO SAY WHERE POSSIBLE
WITHOUT UNDUE EXPENSE, THE
INDUSTRY, IF THEY NORMALLY ARE
KEEPING 15 TO OR IF THEY IF THEY
OFTENTIMES CAN KEEP 15 DAYS, THE
MORE OFTEN THEY DO THAT, THE
MORE LIKELY WE WOULD NOT HAVE
SPOT PRICES ARTIFICIALLY JUMP UP
AS A RESULT OF LOW INVENTORIES.
CORRECT, PROFESSOR? THAT IS
CORRECT. ALL RIGHT. THAT IS
CORRECT. SO IF I COULD THEN JUMP
OVER, TO THIS. SO RIGHT NOW WE
HAVE AN UNREGULATED SPOT MARKET.
AND MY UNDERSTANDING FROM
READING THE CEC DOCUMENT IS THE
UNREGULATED SPOT MARKET.
ALTHOUGH IT'S A SMALL VOLUME,
MANY CONTRACTS ARE BASED ON THE
SPOT PRICE SO THAT THE SPOT
PRICE HAS AN OUTSIZED, OUTSIZED
INFLUENCE ON THE ON THE PRICE OF
GASOLINE IN CALIFORNIA. IS THAT
CORRECT? THAT IS CORRECT, AND SO
I WANT TO COME TO THE TO THE
FINAL THING ON YOUR LAST SLIDE.
YOU MAKE TWO POINTS. YOU MAKE
THE POINT THAT THE BRAND VERSUS
NON BRAND PRICE GAP IS LARGER IN
CALIFORNIA THAN MOST STATES
BECAUSE YOU SAY POSSIBLY
REFLECTING THE FEATURES OF THESE
OF THESE CONTRACTS. BUT IS THIS
SO IN OTHER WORDS WHAT YOU'RE
SAYING IS IN OTHER STATES THE
DIFFERENCE BETWEEN A BRAND PRICE
AND A NON BRAND PRICE IS A
CERTAIN GAP. AND IN CALIFORNIA
THAT THAT GAP IS MUCH NARROWER.
SO WE DON'T HAVE THE NON BRAND
PRICE HAVING AS MUCH OF A
MODERATING INFLUENCE ON HIGHER
PRICES. IS THAT CORRECT. THAT IS
CORRECT. AND IS THERE ANYTHING
THAT YOU KNOW OF BASED ON OUR
QUOTE, THE THING THAT'S ALL WE
CITED FOR OUR HIGHER PRICES,
THAT'S THIS HIGHER REGULATIONS,
ALL OF THAT. BUT THOSE THINGS
SHOULDN'T BE AFFECTING THE
DIFFERENTIAL BETWEEN THE BRAND
PRICE, THE BRAND PRICE AND THE
NON BRAND PRICE IN ANY
SIGNIFICANT WAY. SHOULD THEY.
NO, THEY SHOULD NOT. SO HAS THE
INDUSTRY OFFERED ANY EXPLANATION
AS TO WHY THERE IS A LESS OF A
GAP BETWEEN THE BRAND PRICE AND
THE NON BANNED PRICE. HERE IN
CALIFORNIA I'M NOT AWARE OF AN
EXPLANATION FOR WHY. THANK YOU.
IF THERE IS ONE, I'D BE HAPPY TO
HEAR IT FROM THE INDUSTRY,
AGAIN, I RECOGNIZE THE INDUSTRY
HAS AN OBLIGATION TO MAXIMIZE
PROFITS. WE HAVE AN OBLIGATION
TO ALSO TRY TO MAXIMIZE WHAT'S
IN THE INTEREST OF THE PUBLIC.
AND THEN THE FINAL THING YOU
TALKED ABOUT, RETAIL PRICES GO
UP LIKE A ROCKET AND DOWN LIKE A
FEATHER, RIGHT? WHEN COSTS GO UP,
RETAIL PRICES GO UP VERY
QUICKLY. WHEN COSTS COME DOWN,
THEY DON'T GO. COME DOWN VERY
QUICKLY. THAT SEEMS TO INDICATE
THAT PRICING POWER IS TAKING
PLACE BECAUSE IN A PURE MARKET,
IN A FREE MARKET WITH
COMPETITIVE MARKETS AND PROPER
INFORMATION, THE PRICE SHOULD GO
DOWN JUST AS FAST AS IT WENT UP
IN NORMAL ECONOMIC ANALYSIS. IS
THAT CORRECT, PROFESSOR? THAT IS
CORRECT. THIS IS A HALLMARK OF
MARKET POWER. THAT'S A HALLMARK
OF MARKET POWER. AND IN THIS
SITUATION IN CALIFORNIA, WE HAVE
TWO SITUATIONS THAT DON'T SEEM
TO BE RELATED TO CALIFORNIA'S
TAXES, TO CALIFORNIA'S
ENVIRONMENTAL REGULATIONS OR
ANYTHING ELSE. THEY SEEM TO BE
RELATED TO HOW MUCH PRICING
POWER THE REMAINING REFINERIES
HAVE. IS THAT YOUR ANALYSIS?
THAT IS MY ANALYSIS OF THE
CALIFORNIA MARKET. THANK YOU
VERY MUCH. AND THANK YOU, CHAIR,
FOR LETTING ME GO ON. THANK YOU,
MR. BENNETT. AND ACTUALLY, I
WANT TO ASK JUST A COUPLE OF
FOLLOW UP QUESTIONS RELATED TO
THE SPOT MARKET. SO, AS YOU
HIGHLIGHTED, AND I THINK MR.
BENNETT'S QUESTIONS HIGHLIGHTED,
THERE'S SORT OF TWO THINGS ABOUT
THE SPOT MARKET. NUMBER ONE,
IT'S INCREDIBLY OPAQUE AND
SEEMINGLY NOT VERY WELL
UNDERSTOOD. AND NUMBER TWO,
THERE'S A VERY SMALL NUMBER OF
TRANSACTIONS THAT ARE MOVING
THROUGH THE SPOT MARKET, WHICH
THEN HAVE AN OUTSIZED IMPACT ON
OVERALL PRICING IN THE MARKET.
SO IT STRIKES ME THAT THAT IS
VERY PROBLEMATIC AND SUBJECT TO
GAMING, IS THAT AN ACCURATE
CONCLUSION? I'M NOT SURE IF THE
QUESTION WAS FOR ME. YES. I
THINK I DO NOT KNOW OF SMOKING
GUN EVIDENCE OF GAMING IN THIS
MARKET, BUT IT WOULD BE
SOMETHING THAT I WOULD BE
SIGNIFICANTLY CONCERNED ABOUT
GIVEN THAT A SMALL AMOUNT OF
CONTRACTS CAN DETERMINE PRICES
IN, YOU KNOW, A BROADER MARKET.
AND CAN YOU EXPLAIN TO US A
LITTLE BIT ABOUT WHO PLAYS A
ROLE IN THE SPOT MARKET AND WHO
ARE THE MARKET, WHO ARE THE
TRADERS AND THE PARTICIPANTS IN
THAT MARKET? YEAH MY VISIBILITY,
AS YOU SAID, THIS MARKET IS
OPAQUE AND THE VISIBILITY I HAVE
WITH PUBLICLY AVAILABLE DATA IS
LIMITED. SO I DON'T WANT TO,
SPECULATE IN THIS FORUM. OKAY,
AND I GUESS LASTLY, IS THERE
ANYTHING THAT WE CAN DO ABOUT IT
EITHER TO GET MORE VISIBILITY
INTO WHAT MIGHT BE GOING ON OR
TO, YOU KNOW, SOMEHOW INTERVENE
TO MAKE THAT A MORE TRANSPARENT
MARKET WITH WHAT SEEMS LIKE
BETTER OVERSIGHT. I'M OF THE
VIEW THAT, YOU KNOW, A BRIGHT
LIGHT IS THE STRONGEST
DISINFECTANT. AND SO, I THINK
THE POLICIES THAT HAVE BEEN PUT
IN PLACE TO PROVIDE MORE
INFORMATION, I THINK ARE EXACTLY
THE RIGHT THINGS THAT WE SHOULD
BE DOING. AND I KNOW, YOU KNOW,
THE SPEAKERS FROM THE CEC, WILL
BE ABLE TO TELL YOU MORE ABOUT
EXACTLY THAT, THAT LINE OF
POLICY WORK. YEP. OKAY. AND THEN
MR. MR. YORK ANY COMMENTS OR
THOUGHTS? ON THE SPOT MARKET
ISSUES WITH THE SPOT MARKET AND,
OPTIONS FOR US TO ADDRESS SOME
OF THOSE ISSUES? THIS IS MR.
YORK. ARE YOU STILL AVAILABLE?
OH, I'M STILL HERE. COULD YOU
REPEAT THE QUESTION I WAS ASKING
MR. MAHONEY A COUPLE OF
QUESTIONS ABOUT THE SPOT MARKET,
WHICH I THINK A NUMBER OF US ARE
TRYING TO UNDERSTAND. UNDERSTAND
MORE FULLY. IT SEEMS INCREDIBLY
OPAQUE, AND THERE'S A VERY SMALL
NUMBER OF TRANSACTIONS THAT ARE
MOVING THROUGH THE SPOT MARKET,
WHICH THEN PLAY AN OUTSIZED
INFLUENCE ON PRICING AND THE
OVERALL MARKET. CAN YOU HELP US
UNDERSTAND, I GUESS, WHO'S
INVOLVED IN THOSE TRANSACTIONS?
IS THERE A MECHANISM BY WHICH WE
GET MORE TRANSPARENCY INTO THOSE
TRANSACTIONS AND THE MARKET
MOVERS? BECAUSE IT FEELS LIKE IN
A WORLD WHERE, YOU KNOW,
PROFESSOR MAHONEY DOESN'T EVEN
REALLY WHO'S AN EXPERT IN THIS
AREA, DOESN'T EVEN REALLY KNOW
WHO WHO'S WHO THE PLAYERS ARE OR
WHO'S MAKING THE TRADES. THAT
SEEMS VERY STRANGE. WELL, I
THINK, YOU KNOW, THE
PARTICIPANTS ARE GOING TO BE
SORT OF LIKE THE SAME THE SAME
PEOPLE WHO HAVE THAT WHO ARE IN
THE WHO ARE IN THOSE STORAGE
TERMINALS. IT'S GOING TO BE, YOU
KNOW, THE REFINERS, MARKETERS,
WHOLESALERS, TRADERS THAT HOLD
PHYSICAL POSITIONS. YOU KNOW,
HOW ACTIVE LIKE WHAT IF YOU SORT
OF DREW A PIE CHART OF THEM? I
DON'T THINK THAT'S I DON'T KNOW
HOW YOU KNOW, YOU KNOW, WHAT
PERCENTAGE OF THOSE PARTICIPANTS
ARE ARE ACTIVE IN THE SPOT
MARKET, YOU KNOW, I THINK, YOU
KNOW, YOU'RE YOU'RE KIND OF
ASKING, YOU KNOW, WHEN YOU THINK
ABOUT IT, IF YOU THINK ABOUT A
SPOT MARKET, YOU KNOW, YOU'D
SORT OF SAY THE EXACT SAME
THING, YOU KNOW, ABOUT, YOU
KNOW, THE STOCK MARKET, YOU
KNOW, WHEN, YOU KNOW, THE STOCK
MARKET'S GOT A LOT OF TRADING
THAT GOES ON. BUT WE DON'T
ACTUALLY KNOW EXACTLY WHO MADE
EVERY SINGLE TRADE. RIGHT. WE
JUST KNOW AT THE END OF THE DAY
A LOT OF SHARES WERE TRADED. AND
YOU KNOW WE DO KNOW WHEN SOME
POSITIONS WERE TRADED BECAUSE
THE SEC DOES HAVE SOME TRADING
RULES. BUT I THINK IT'S JUST A
STRUCTURE OF HOW THE, YOU KNOW,
YOU KNOW, THE, YOU KNOW, THE
SEE, YOU KNOW, THE CTFC HASN'T
DEFINED THE RULES FOR IT FOR
MORE TRANSPARENCY AND YOU KNOW,
AS TO WHY I DON'T KNOW, I MIGHT
BE ABLE TO HELP YOU. I MIGHT BE
ABLE TO HELP YOU ON THAT. SURE
SO IF WE IF WE WENT BACK TO
ASSEMBLYMAN BENNETT'S QUESTION
ABOUT INVENTORY LEVELS, YES.
IT'S BETTER IF YOU HAVE
INVENTORY. REFINERS EVERY DAY
HAVE SALES THAT ARE GOING OUT.
SALES ARE GOING OUT EVERY DAY.
AND SO THE PROBLEM THEY HAVE
ABOUT THEIR INVENTORY IS ALL OF
A SUDDEN THEIR EQUIPMENT BREAKS
AND THEY CAN'T FILL IT, BUT THEY
HAVE SALES. AND SO THEN WHAT
HAPPENS IS THEY GO INTO THE SPOT
MARKET. AND AS SOON AS THEY GO
INTO THE SPOT MARKET, THEY'RE
DEAD MEAT. I MEAN, THEY'RE THEY,
THEY, YOU KNOW, IF I HAVE IT AND
YOU WANT IT, YOU'RE GOING TO
HAVE TO PAY. WHAT WHAT I WANT TO
CHARGE YOU. SO THAT'S THE
CHALLENGE. NOW, AS FAR AS AS FAR
AS THE ILLIQUIDITY AND THE
OPAQUENESS, IT'S NOT SO OPAQUE.
THAT'S THAT'S NOT THE BIG ISSUE.
THE BIG ISSUE REALLY IS THE
ILLIQUIDITY. IT'S JUST NOT A
VERY LIQUID MARKET. I LOOK AT IT
EVERY DAY IN THE SENSE OF THE
REPORTS, AND MANY DAYS THERE'LL
BE THERE'S NO BIDS, THERE'S NO
ASKS, YOU KNOW, AND THAT THAT
THAT HAPPENS. AND SO YOU DON'T
HAVE YOU KNOW, IT'S NOT LIKE
THE, YOU KNOW, THE MERC OR
SOMETHING LIKE THAT THAT'S GOT
LOTS AND LOTS AND LOTS OF
TRANSACTIONS. IT DOESN'T HAVE
LOTS OF TRANSACTIONS. IT'S THERE
IS AN ISSUE WITH THE
ILLIQUIDITY, NO DOUBT ABOUT
THAT. THE OPAQUENESS ISN'T QUITE
AS BIG OF AN ISSUE IN MY
OPINION, THE GAMING OF THE THING
IS, IS, IS AN IMPORTANT THING.
AND IT COULD OCCUR. IT COULD
OCCUR, BUT IT'S IMPORTANT TO
RECOGNIZE THAT IT'S IF, IF, IF
YOU'RE GOING TO HAVE TO BUY
AGAIN, YOU'RE GOING TO WANT TO
MAKE SURE THAT THE PRICES AREN'T
HIGH BECAUSE THAT HURTS YOU. AND
AND SO TO A CERTAIN EXTENT, YOU
KNOW, THE PARTIES SORT OF CLEAN
UP THE SYSTEM AMONGST THEMSELVES
BECAUSE THEY WANT TO MAKE SURE
THAT THE INFORMATION IS, IS, IS,
IS CORRECT BECAUSE SOMEBODY'S
BENEFITING AND SOMEBODY IS
PAYING AND SO THAT BALANCE DOES
HELP THE GAMING ISSUE. BUT ANY
TIME YOU HAVE A MORE ILLIQUID
MARKET, YOU HAVE MORE
OPPORTUNITY FOR SHENANIGANS. NOT
THAT THERE. YEAH. UNDERSTOOD AND
I THINK THAT WAS A GREAT
EXPLANATION THAT BY VIRTUE OF
THE FACT THAT THERE HAS TO BE A
BUYER AND A SELLER, THERE'S SOME
NATURAL TENSION THERE. I THINK
WHAT IS CONFUSING TO ME IS THE
FACT THAT YOU HAVE THIS VERY
SMALL SNAPSHOT, LIKE IT'S NOT
THE FACT THAT THE SPOT MARKET
EXISTS, IT'S THE FACT THAT THEN
THERE ARE CONTRACTUAL LINKS FOR
OTHER PRICING SO THAT IT USES
THE SPOT MARKET TRIGGER, IF I
UNDERSTAND CORRECTLY, TO INFORM
OTHER PRICING, WHICH THAT PART
SEEMS VERY STRANGE TO ME. AND
VERY UNIQUE. IT'S AN INTERESTING
SITUATION, AND IT'S A CERTAIN
AMOUNT OF FRUSTRATION FROM MY
STANDPOINT BECAUSE WE BUY IN THE
BULK MARKET AND WE DON'T HAPPEN
TO GO OUT EVERY DAY AND MAKE A
TRANSACTION. WE TAKE WHATEVER
THE MARKET IS. AND SO WE'RE
WE'RE BASICALLY WE BUY IT BASED
UPON WHAT THE POSTINGS ARE.
THERE'S A LOT OF PRODUCT THAT
DOES MOVE THROUGH THAT SYSTEM.
SO YOU END UP WITH RELATIVELY
FEW, FEW, FEW TRADES IMPACTING A
FAIR AMOUNT OF SALES THAT, THAT
THAT IS THAT CERTAINLY IS AN
ISSUE, AND WHAT WHAT YOU CAN END
UP WITH IS YOU CAN END UP WITH
SORT OF WEIRD LITTLE JUMPS THAT
TEND TO CLEAN THEMSELVES UP
FAIRLY QUICKLY BECAUSE THERE,
AGAIN, YOU KNOW, THERE'S
SOMEBODY THAT'S GETTING HELPED
AND THERE'S SOMEBODY GETTING
HURT AND IT USUALLY GETS CLEANED
UP. BUT IT DOES GET A LITTLE
MESSY FOR A WHILE. ALL RIGHT.
THANK YOU. THAT'S A TECHNICAL
TERM. WE'LL GO TO MR. GIBSON.
THANK YOU VERY MUCH MR. ROBINSON,
HOW HAS THE VOLATILITY OF THE
PRICING IMPACTED YOUR INDUSTRY,
AS WE KNOW THAT THERE ARE MANY
INDEPENDENT MOM AND POP,
GASOLINE STATIONS IN THE STATE.
AND I'M WONDERING, HAS THERE
BEEN ANY OF THOSE STORES SHUT
DOWN DUE TO THE INCREASE OF
PRICES OF GAS AND THUS INCREASE
OPERATING COSTS FROM YOUR
PERSPECTIVE? AND I'LL. YEAH. CAN
YOU SHARE? YEAH. I MEAN, YOU
COULD SORT OF GO DOWN THE STREET
AND YOU CAN SEE WHERE SOME STUFF
GOT GOT CLOSED FOR ONE REASON OR
ANOTHER. IT'S OUR INDUSTRY IS
PRETTY INTERESTING IN THE SENSE
THAT IT'S INCREDIBLY FRAGMENTED.
I MEAN, THERE ARE SO MANY
DIFFERENT PLAYERS OUT THERE.
IT'S NOT JUST LIKE CHEVRON THAT,
YOU KNOW, DOES ALL THE PRICING
OR RUNS EVERYTHING, I, I THINK,
I THINK THAT WHAT HAPPENS WITH
THE VOLATILITY IS PEOPLE ARE
PROBABLY MORE CONSERVATIVE
BECAUSE THEY KNOW THEY'VE GOT
TO, YOU KNOW, THEY MIGHT BE
PAYING A LOT MORE FOR THE NEXT
LOAD THAT COMES IN, OR, OR THE
PRICES ARE GOING DOWN AND
THEY'VE GOT TO GET RID OF THAT
OLD INVENTORY THAT'S A LOT MORE
EXPENSIVE, BUT I DO KNOW FROM A
NATIONAL STANDPOINT, YOU KNOW,
THEY'VE, YOU KNOW, THE NUMBERS
HAVE GONE DOWN, BUT I CAN'T TELL
YOU EXACTLY HOW MANY. OKAY.
THAT'S FINE. CALIFORNIA SO, MR.
PROFESSOR MAHONEY'S DIAGRAM
TALKS ABOUT THE 11 REFINERIES,
AND THAT'S WHAT I TALKED ABOUT
BEFORE, AND WHAT I HEARD FROM MY
COLLEAGUE, THAT THERE LOOKS LIKE
IT'S GOING TO BE AN EVOLUTION OF
THESE, 11 REFINERIES DECREASING
OVER A PARTICULAR PERIOD OF
TIME. AND SO THOSE MOM AND POPS
THAT I MENTIONED, THESE 11
REFINERIES, THAT WAS MORE
BEFORE, THOSE ARE JOBS
ASSOCIATED WITH THOSE PARTICULAR
INDUSTRIES. AND SO I'M TRYING TO
AND I HEARD PUBLIC INTEREST.
THAT'S THE WORD I HEARD USED
PUBLIC INTEREST ISN'T THOSE
EMPLOYEES WHO WORK THERE. AREN'T
THEY PART OF THE PUBLIC AND THE
INTEREST OF THE PUBLIC AND SO
HOW DO AND FROM YOUR IN YOUR
OPINION, HOW DO WE MAKE SURE
THAT ONE THOSE EMPLOYEES,
CONTINUE TO MAINTAIN THEIR JOBS
BECAUSE I DON'T KNOW THAT
CALIFORNIA HAS AN ISSUE IN TERMS
OF THE UNHOUSED AND HOMELESSNESS.
AND IF A PERSON CAN'T TAKE CARE
AND PROVIDE A ROOF OVER THEIR
FAMILY'S HEAD, IN THEIR HEAD,
THEN WHERE WILL THOSE
INDIVIDUALS GO? RIGHT? AND SO
THAT'S ALL ASSOCIATED WITH BEING
ABLE TO ONE TAKE CARE OF THE
HOUSE, THE YOU KNOW, THE
VEHICLE, THE FOOD, ETC. AND I AS
I, AS I'M HEARING A DECREASE IN
ATTRITION IN TERMS OF THESE
JOBS, WHERE DOES WHAT HAPPENS TO
THOSE INDIVIDUALS IN ADDITION TO
THAT? AND MAYBE MR. YORK CAN
ARTICULATE, HOW MUCH DOES THIS
INDUSTRY PROVIDES OVERALL TO THE
CALIFORNIA ECONOMY TO MAKE IT
THE FIFTH LARGEST ECONOMY IN THE
WORLD? BECAUSE WE ALL HAVE
BRAGGING RIGHTS. WE ALL TALK
ABOUT IT. AND I YOU KNOW, I BRAG
ABOUT IT AMONGST OTHER STATES
AND THINGS OF THAT NATURE. WE
ARE VERY ENVIOUS BY OTHER STATES
BECAUSE WE CAN SAY WE'RE THE
FIFTH LARGEST ECONOMY, AND WE
SAY THAT BASED ON FACTS. SO
WHAT? AND HOW MUCH DOES THIS,
THIS INDUSTRY CONTRIBUTE TO THE
LIVELIHOOD OF THE PEOPLE WHO
WORK THERE AND ALSO CALIFORNIA'S
ECONOMY TO BE THE FIFTH LARGEST
ECONOMY IN THE WORLD. SO CAN
SOMEONE ARTICULATE THAT FOR ME?
YOU YOU HAD A LOT OF STUFF IN
THERE. I HAVE MORE. OH, I'M
SORRY THEN. NO PLEASE. I'M
WAITING FOR AN ANSWER. I, I
THINK FROM THE STANDPOINT OF ANY
INDUSTRY, WHETHER IT'S OUR
INDUSTRY, ANY INDUSTRY, I THINK
IT'S REALLY IMPORTANT THAT THE
STATE LOOKS AND QUESTIONS
WHETHER THE REQUIREMENTS AND THE
AND THE REGULATIONS THAT THEY'RE
PUTTING ON ARE NECESSARY OR ARE
THEY BURDENSOME, IN WHICH CASE,
YOU KNOW, THEY'RE COSTLY AND IT
MAKES IT MORE DIFFICULT FOR
ESPECIALLY THE, THE WEAKER
PLAYERS TO SURVIVE. SO I, I
GUESS MY QUESTION IS, IS
WHETHER, YOU KNOW, IS THE
BURDENSOME NATURE OF REGULATION
OR LAWS IS CAN BE CERTAINLY
IMPORTANT IN IN THE LIVELIHOOD
OF SMALL BUSINESSES. MR. YORK
YEAH. SO I CAN ALREADY, LET ME
SORT OF ADD, WHEN YOU'RE TALKING
ABOUT THE EVOLUTION THAT'S
ALREADY HAPPENING, IN THAT WE
DON'T HAVE 11 REFINERIES, WE
HAVE NINE BECAUSE ONE WENT. I'M
SORRY, WHAT HAPPENED, MR. YORK,
WE'VE JUST LOST YOUR SOUND.
HELLO? YOU'RE BACK? AM I BACK
OKAY? SO WHEN YOU'RE TALKING
ABOUT THE EVOLUTION OF THE
REFINERIES, IT'S ALREADY
HAPPENING. WE DON'T HAVE 11
REFINERIES. WE HAVE NINE, NINE
FUELS. REFINERIES. WE WE HAD
MARATHON, MARTINEZ CONVERTED TO
RENEWABLE DIESEL IN 2023. AND
PHILLIPS 66 CONVERTED TO
RENEWABLE DIESEL IN 2024. NOW
NOW FROM AN EMPLOYMENT
STANDPOINT, I DON'T KNOW WHAT
THE EMPLOYMENT COUNT IS FOR
RENEWABLE DIESEL PLANT, BUT I
CAN TELL YOU WHEN MOST
REFINERIES CLOSE, THEY CONVERT
TO A TERMINAL. AND THE HEAD
COUNT THERE IS THAT IT IS ABOUT
AN 80% REDUCTION IN HEAD COUNT.
SO WHATEVER THE REFINERY WAS,
THE TERMINAL HAS ABOUT USES
ABOUT 20% OF THE PEOPLE THAT THE
REFINERY DID THE RENEWABLE
DIESEL PLANT IS GOING TO BE
SOMETHING MORE THAN THAT,
BECAUSE IT'S STILL AN OPERATING
FACILITY. BUT I DON'T HAVE A
FIGURE FOR YOU FOR YOU KNOW,
WHAT THE DIFFERENCE IN, IN
HEADCOUNT WOULD BE? TRYING TO
THINK ABOUT WHAT WHAT WERE SOME
OF THE OTHER Ó AND IN TERMS OF
I'M, I'M TRYING TO FIGURE OUT
WHAT IT CONTRIBUTES TO THE, THE
STATE ECONOMY. I'M TRYING TO DO
SOME FINGER MATH FOR YOU. SO LET
ME MAYBE CIRCLE BACK TO YOU ON
IN A COUPLE OF MINUTES ON ON
THAT, IF THAT'S OKAY. SURE. FINE
WITH ME, MADAM CHAIR. FEEL FREE
TO. YES, WE'LL COME BACK TO YOU
FOR THAT ANSWER, MR. YORK. IN
THE MEANTIME, ASSEMBLY MEMBER
PAPPIN. SO I HAVE A COUPLE
FOLLOW UP QUESTIONS TO
ASSEMBLYMEMBER BENNETT'S LINE OF
QUESTIONING. IT SEEMED SO
COMPELLING, BUT THEN I END UP A
LITTLE CONFUSED AS WELL. SO
MAYBE THE WITNESSES CAN CAN SEE
ME THROUGH IT, IT IS THAT MR.
ASSEMBLYMEMBER BENNETT ASSERTED
THAT WE DON'T NEED ADDITIONAL
STORAGE CAPACITY. IF I
UNDERSTOOD IT. RIGHT. KEEP
NODDING. IF I DON'T GET IT
RIGHT, TELL ME. BUT RATHER WE
MUST OPERATE AT HIGHER CAPACITY.
I THOUGHT, WELL, GEE, THAT MADE
SOME SENSE TO ME, RIGHT? BECAUSE
IF YOU KEEP OPERATING AT HIGHER
CAPACITY, YOU DON'T REALLY NEED
THE STORAGE. NOT NOT QUITE
HIGHER CAPACITY, JUST THERE MUCH
OF THE YEAR. AND PARDON ME, BUT
I THINK SHE'S ASKING ME A
QUESTION MUCH, MUCH OF THE YEAR
THEY MAINTAIN CLOSE TO 15 DAYS
WORTH OF INVENTORY. IF WE JUST
SIMPLY INCREASE THE PERCENTAGE
OF TIME IN THE YEAR THAT THEY DO
THAT, WE DECREASE THE LIKELIHOOD
OF PRICE SPIKES. SO IT DOESN'T
OPERATE AT HIGHER CAPACITY. IT'S
JUST MANY DAYS. THEY'RE AT 15
DAYS. DO THE THINGS THAT WE CAN
DO TO KEEP THAT THERE. NOW THERE
WILL BE UNPLANNED THINGS THAT
WILL HAPPEN. BUT THAT'S WHERE I
WAS HEADED. BUT BUT THAT BUT
THAT DOESN'T MEAN YOU CAN'T.
STILL YOU CAN HAVE UNPLANNED
THINGS HAPPEN AND LET YOUR
INVENTORY DROP. BUT I THINK
WE'RE GOING TO FIND OUT FROM THE
CEC THERE ARE MANY THINGS THEY
COULD DO THAT AREN'T
NECESSARILY, YOU KNOW,
TREMENDOUS INCREASE IN CAPACITY,
PARTICULARLY IF THEY KNOW THIS
IS COMING AND THEY HAVE LOTS OF
TIME TO PLAN. THERE ARE THINGS
THAT YOU CAN DO TO MAKE SURE
THAT YOU DON'T HAVE, YOU
CERTAINLY DON'T START WITH
ARTIFICIALLY LOW ONES, JUST AS
YOU'RE GETTING READY TO DO
PLANNED MAINTENANCE FOR EXAMPLE,
THAT YOU SHOULD BE AT 15 DAYS,
SO IT'S NOT HIGHER CAPACITY,
IT'S HIGHER COMMITMENT TO TRYING
TO KEEP YOURSELF UP AT THE
HIGHER END OF INVENTORY.
UNDERSTOOD UNDERSTOOD. AND I
GUESS MY QUESTION IS IF WE ARE
HAVING OPERATIONAL CAPACITY
LIMITATIONS, IF YOU WILL, IS
THERE SOME ADDITIONAL STORAGE
THAT WOULD BE NEEDED SO THAT WE
DON'T HAVE THOSE EITHER
UNPLANNED OR GEE, WE DIDN'T HAVE
THAT MUCH INVENTORY. WE WEREN'T
PRODUCING QUITE AS MUCH WHEN
BOOM, SOMETHING WENT OFFLINE. SO
THANK YOU FOR EXPLAINING THE
ISSUE WITH ME. DO YOU MIND IF I
TURN IT OVER TO THE WITNESSES
WHO WHO MAY ENLIGHTEN US AS TO
WHETHER THAT'S A POSSIBILITY OR
NOT? YOUR QUESTIONING WAS VERY
COMPELLING, BUT I JUST WANT TO
MAKE SURE WE GET THE WHOLE
PICTURE. OKAY, SO TO THE
WITNESSES, WHY DON'T YOU
ENLIGHTEN ME ABOUT WHETHER OR
NOT WE CAN KEEP CAPACITY AT 15
DAYS MORE TIMES OUT OF THE YEAR,
AS ASSEMBLY MEMBER BENNETT
SUGGESTS, OR NOT, BECAUSE WE
MIGHT HAVE AN UNPLANNED REFINERY
UPGRADE OR NOT UPGRADE, BUT A
REFINERY ISSUE THAT MAKES THEM
NOT WORKING. DOES THAT MAKE
SENSE? I CAN I CAN SHARE MY
PERSPECTIVE. SO I THINK ONE WAY
TO THINK ABOUT IT IS SOMETIMES
OUR, INVENTORIES ARE AT HIGH
CAPACITY, SOMETIMES THEY'RE AT
MEDIUM CAPACITY, AND SOMETIMES
THEY'RE AT LOW CAPACITY AS AN
OPERATIONAL OPERATIONAL, LIKE
WE'RE ACTUALLY GENERATING NØ AS
IN HOW FULL OUR TANKS ARE. AND
SO IF YOU GO BACK TO THE IMAGES
THAT MR. YORK SHOWED, THOSE
TANKS HAD TANK HEAL, THEY HAD A
LITTLE BIT OF SPACE AT THE TOP
THAT WE LIKE TO KEEP OPEN, BUT
THEY HAVE A RANGE IN BETWEEN
THOSE AMOUNTS. BUT ISN'T THAT
STORAGE? ARE WE TALKING ABOUT
STORAGE THEN AT THAT POINT, AND
MAYBE WE'RE WE'RE TALKING ABOUT
DIFFERENT THINGS. I THINK I WAS
TALKING ABOUT, THE STORAGE
CAPACITY, BUT I AGREE THAT THERE
WAS, ANOTHER LINE OF QUESTIONS
ABOUT RUNNING REFINERIES AT FULL
CAPACITY VERSUS 50% OF CAPACITY.
AND MAYBE I'M ANSWERING THE
WRONG QUESTION. SO APOLOGIES.
HE'S ANSWERING THE RIGHT
QUESTION. SORRY. OKAY. AND THEN,
MR. YORK, DID YOU WANT TO
PROVIDE YOUR PERSPECTIVE IN
RESPONSE TO MISS MISS PAPIN'S
QUESTION? I THINK, I'LL JUST
COME BACK TO THE CYCLING. I
THINK IT'S THE IF YOU'RE LOOKING
AT 15 DAYS OF STORAGE OR
WHATEVER, WHEREVER YOU DRAW THE
LINE, IT'S A STATIC NUMBER. AND
THE REALITY IS THOSE TANKS, THAT
VOLUME FLEXES UP AND DOWN. NOT
ON A WEEKLY BASIS, NOT ON A
DAILY BASIS, BUT ON AN HOURLY
BASIS. AND WHEN YOU'RE GOING
DOWN SOME OF THESE LINES, LIKE
SOME OF THE KINDER MORGAN LINES,
YOU KNOW, I DON'T YOU KNOW,
YOU'VE GOT SOME LINES WHERE
YOU'VE DUMPED PRODUCT IN AND YOU
HAVE 24 HOURS TO GET THE PRODUCT
OUT BECAUSE THE NEXT GUY IS THE
NEXT SHIPPER IS COMING IN 24
HOURS BEHIND YOU. SO I'M NOT
REALLY SURE HOW YOU'RE GOING TO
MAINTAIN 15 DAYS OF STORAGE IN
THAT TANK WHEN THAT TANK HAS TO
TURN EVERY 24 HOURS. SO I THINK
IT'S, YOU KNOW, THAT'S WHERE I
SORT OF GET SORT OF TWISTED IS
THE IT'S EASY TO SAY, KEEP 15
DAYS IN THAT TANK. THEN THEN I
START THINKING ABOUT
OPERATIONALLY, HOW DO YOU KEEP
THE OPERATIONS RUNNING IF YOU
TAKE EFFECTIVELY, YOU KNOW,
AREN'T WE TAKING THE HEEL FROM
WHERE IT IS UP TO 15 DAYS AND
THEN THE WORKING CAPACITY IS
FROM 15 DAYS UP TO THE UP TO THE
TOP. I MEAN, THAT'S THAT'S WHERE
I'M NOT SAYING THAT'S THE WAY IT
IS, BUT THAT'S KIND OF WHERE
THAT'S WHERE I'M KIND OF
STARTING FROM AND SAYING CAN,
YOU KNOW, CAN, YOU KNOW, CAN THE
SYSTEM ACTUALLY OPERATE IF THE
HEEL IS 15 DAYS DEEP? MADAM
CHAIR AND I WILL I'LL JUST SAY,
I RECOGNIZE THAT THE ELEPHANT IN
THE ROOM, AS IT WERE, IS THE 15
DAY, LIQUIDITY RESERVE PROPOSAL,
AND WE DEFINITELY WANT TO DIVE
INTO THAT PROPOSAL TOMORROW.
UNDERSTAND THE DETAILS OF THAT
PROPOSAL FROM THE CEC, AND ALSO
UNDERSTAND, YOU KNOW, I THINK
ANSWER THE QUESTIONS THAT WE'RE
ALWAYS ASKING WHEN WE'RE
DEVELOPING POLICY. RIGHT. WHAT'S
THE PROBLEM? WHAT'S THE
SOLUTION? AND IMPORTANTLY, HOW
DO WE IMPLEMENT THAT? BUT I DO
WANT US TO PUT A PIN IN THAT FOR
NOW. SINCE WE'RE, YOU KNOW, AT
330 AND WANT TO BE ABLE TO, TO
FINISH THIS HEARING, BUT, PLENTY
MORE, IT'S LIKE A CLIFFHANGER
TILL TOMORROW. YEAH. STAY TUNED
FOR TOMORROW'S HEARING. OKAY,
ASSEMBLY MEMBER JACKSON. SO
ABOUT THAT 15 DAYS. I'M ONLY
PLAYING, I THINK MY FIRST
QUESTION IS TO PROFESSOR
MAHONEY. WE WERE HAVING SOME
DISCUSSIONS ABOUT ROCKETS AND
FEATHERS, HOW DO YOU TURN THAT
FEATHER INTO A ROCKET? AND CAN
THAT BE LEGISLATED? I IT'S A
GREAT QUESTION, AND YOU KNOW,
ONE WAY TO THINK ABOUT IT IS, IF
THERE ARE FEWER PRICE SPIKES,
THEN CONSUMERS WILL, YOU KNOW,
LESS OFTEN GO THROUGH THIS
PROCESS WHERE THEY'RE OUT OF
POCKET, COSTS INCREASE, AND THEN
THEY'RE SLOW TO SUBSIDE. SO I
THINK ONE AND AGAIN, DON'T WANT
TO GET INTO THE CONVERSATION FOR
TOMORROW. BUT ONE BENEFIT OF
REDUCING PRICE VOLATILITY IS
THAT WE'RE GOING TO BE SPENDING
LESS TIME WAITING FOR THE RETAIL
PRICE TO COME DOWN AND CAN THAT
BE LEGISLATED? I THINK, YOU KNOW,
AS ECONOMISTS, I THINK WE GET A
LITTLE BIT CONCERNED ABOUT,
LEGISLATING EXACT PRICES, AND SO
I WOULD NEED TO THINK MORE
ABOUT, YOU KNOW, THE POLICY
UNDER CONSIDERATION. AND WHETHER
IT COULD BE IMPLEMENTED WITHOUT
UNINTENDED CONSEQUENCES. WELL, I
WOULD LOVE TO CONTINUE TO
EXPLORE THAT, BECAUSE OBVIOUSLY,
THAT'S ONE OF THE THINGS THAT
SEEMS TO BE SOMETHING WE'RE
TRYING TO ACHIEVE. I MEAN, HEY,
I'M AN INLAND EMPIRE GUY. ALL WE
CARE CARE ABOUT IS HOW HIGH IS
OUR GAS PRICES, AND DO WE HAVE
ENOUGH TO GET FROM WORK TO HOME
AND SO I'M TRYING TO FIGURE OUT
WHAT WHAT CONDITIONS, WHETHER
YOU TALK ABOUT SUPPLY, WHERE YOU
TALK ABOUT RACKET RACKS, WHETHER
YOU TALK ABOUT REFINING CAPACITY,
STORAGE CAPACITY, WHAT
CONDITIONS WOULD IT TAKE TO
PROVIDE THE MOST OPTIMAL PRICING
FOR CONSUMERS? AND THIS IS TO
DOCTOR YORK AS WELL. WELL, I'LL
JUST SAY ONE THING. AND THEN TO
DOCTOR YORK AS WELL, I THINK,
REDUCING THE MARKET POWER IN THE
INDUSTRY IS WHAT IS GOING TO
PROVIDE CONSUMERS WITH THE
LOWEST AND THE MOST STABLE
PRICES IN THE MARKET. OKAY
DOCTOR YORK. I THINK, I THINK
SHORTENING THE SUPPLY CHAIN, IS
WHAT HAPPENS BECAUSE WHAT WHAT'S
HAPPENING IS THESE REFINERIES,
AS YOU'RE DROPPING REFINERIES
AND THE CDC HAS THIS WONDERFUL
GRAPH IN THEIR TRANSPORTATION
ASSESSMENT THAT, IN ESSENCE, YOU
KNOW, WHAT'S HAPPENED NOW THAT
WE'RE DOWN TO NINE FUELS
REFINERIES, IS THERE'S NO MORE
SLACK IN THE SYSTEM, WHICH MEANS
THAT, YOU KNOW, BASICALLY, WHEN
YOU LOOK AT WHAT THE CDC HAS
LOOKED AT IS THAT WHEN YOU LOOK
AT PEAK MONTHLY GASOLINE DEMAND
VERSUS GASOLINE CAPACITY OF THE
CALIFORNIA REFINERIES, IT'S
BASICALLY IN BALANCE SO THAT YOU
KNOW, IN ESSENCE, YOU'RE NOW
RIGHT ON THE VERGE OF IMPORT
PARITY. AND TO WHAT NEIL WAS
SAYING EARLIER, IF YOU'RE HAVING
TO BRING IN THE INCREMENTAL
GASOLINE FROM SOMEPLACE ELSE,
LIKE WHETHER IT'S EUROPE OR
ASIA, YOU'RE LOOKING AT 30 DAYS
TO DO THAT. SO HOW DO YOU GET
THAT SHORTER? BECAUSE IF
SOMETHING HAPPENS IN THOSE 30
DAYS, THAT VOLUME DOESN'T SHOW
UP. AND THAT'S WHERE THE PRICE
SPIKE AND THAT'S WHERE THE
VOLATILITY COMES FROM. HOW DO
YOU GET THAT SUPPLY CHAIN. HOW
DO YOU SHORTEN THAT SUPPLY
CHAIN. SO THAT THAT SO THAT, YOU
KNOW, SO YOU MINIMIZE THE CHANCE
THAT SOMETHING HAPPENS IN THAT
30 DAYS BECAUSE IT'S NOT 30 DAYS
LONG. IT'S SOMETHING SHORTER
THAN THAT. I THINK THAT'S I
THINK THAT'S WHAT THE THAT'S
WHAT THE PROBLEM IS THAT SUPPLY
CHAIN, WHEN SOMETHING GOES WRONG
IS 30 DAYS, IT'S A 30 DAY LAG.
HOW DO YOU SHORTEN THAT DOWN AND
HOW DO YOU MITIGATE THAT TIME
RISK. RIGHT. AND PROFESSOR
MAHONEY, INDICATED THAT, ONE OF
THE THINGS THAT WOULD BE HELPFUL
IS TO WEAKEN THE, MARKET POWER.
WHAT HOW DOES ONE DO THAT?
DOCTOR YORK. WELL, I'M NOT
CONVINCED THAT THAT'S, YOU KNOW,
I'LL GO BACK TO. I'M NOT
CONVINCED THAT THAT'S WHAT THE
ISSUE IS, I'M. I THINK THAT THE
PRICE SPIKES AND THE AND THE
VOLATILITY IS BEING DRIVEN BY
THE FACT THAT THE THAT WHEN
SOMETHING WHEN THERE'S AN UPSET
IN THE STATE, WHEN THERE'S AN
UPSET IN THE MARKET BECAUSE
THERE'S NO SLACK IN THE SYSTEM,
IT'S 30 DAYS. IT TAKES 30 DAYS.
AND THAT'S A THAT'S AT BEST CASE
SCENARIO IS 30 DAYS FOR A
REPLACEMENT VOLUME TO SHOW UP.
HOW CAN YOU REDUCE THAT DOWN? IS
THERE SOME WAY TO REDUCE IT? IS
THERE A YOU KNOW, IS THERE SOME
WAY TO YOU COULD, YOU KNOW,
COULD YOU GRANT A WAIVER AND GO
FROM CARB TO RFG AND START
BRINGING RFG FROM OTHER PARTS OF
THE COUNTRY? NOW THERE'S AIR
QUALITY ATTAINMENT ISSUES AROUND
THERE, BUT THAT WOULD SHORTEN
THE 30 DAYS THAT, YOU KNOW,
THERE'S YOU KNOW, THAT'S WHAT I
WOULD BE LOOKING AT. I WOULD BE
LOOKING AT WAYS TO SHORTEN THE
RESPONSE TIME, BECAUSE THAT'S
WHERE THAT'S WHERE THE SPIKE.
THAT'S WHERE THE SPIKE. THAT'S
WHERE THE RUN UPS AND VOLATILITY
COME FROM. IT'S THAT LONG. IT'S
THAT LONG LAG IN RESPONSE
BETWEEN, YOU KNOW, WHEN THE
MARKET HAS AN UPSET AND WHEN THE
WHEN THE RELIEF VOLUMES CAN SHOW
UP. AND DOCTOR YORK AND
PROFESSOR WHAT WHAT DO YOU
BELIEVE NUMBER ONE IF WHAT'S THE
GUARANTEE THAT BY ELIMINATING
THE SPIKES THAT OVERALL AT THE
END OF THE YEAR, CONSUMERS ARE
GOING TO PAY LESS AT THE PUMP
COMPETITION. COMPETITION. YOU
WANT TO TALK MORE ABOUT THAT?
YEAH. WE EVERY DAY, EVERY DAY A
RETAILER IS LOOKING ACROSS THE
STREET TO SEE WHAT THE RETAILER
IS DOING OR DOWN THE ROAD. AND
THEY'RE LOOKING AT THEIR VOLUMES
AND, AND, AND THEY HAVE TO BE
COMPETITIVE. THEY'RE GOING TO BE
COMPETITIVE. AND IF, YOU KNOW,
IF I CAN IF I CAN SELL MORE BY
LOWERING MY PRICE, I'LL DO THAT,
AND, AND SO THAT COMPETITION AND
IT'S A VERY YOU GOT A BETTER YOU
NEED TO UNDERSTAND HOW VERY
COMPETITIVE IT IS. THERE ARE SO
MANY PRICE MAKERS OUT THERE AT
THE RETAIL LEVEL THAT THAT, IN A
SENSE, SOLVES SOLVES THAT
PROBLEM, YOU KNOW, I WOULD LIKE
TO MENTION TOO, IS THAT WE HAVE
HAD PRICE CONTROLS. WE DID PRICE
CONTROLS IN THE 1970S. AND SO
THAT THAT IMPACT WE HAD A FLAT,
WE HAD A MARGIN THAT WE COULDN'T
CHANGE AND THAT WENT THROUGH,
YOU KNOW, AFTER THE SPIKES OF
THE, YOU KNOW, THE VARIOUS
SHORTAGE PERIODS DURING THE 70S.
SO WE'VE DONE THAT, IT WAS
MAINLY CONSIDERED NOT A GOOD
PLAN, BUT IT IT WAS WHAT IT WAS.
AND, AND I HAVE TO SAY SOMETHING
ABOUT THIS INVENTORY LEVEL AGAIN
IS AND I AND I THINK THAT, THAT
I THINK THERE'S A SORT OF
FUNDAMENTAL MISUNDERSTANDING OF
THE WHOLE EQUATION, YOU KNOW,
BASICALLY YOU MAKE STUFF, YOU
SELL STUFF, AND THEN YOU HAVE
INVENTORY AND IF YOU START
MAKING MORE THAN WHAT YOU'RE
SELLING, YOU'RE GOING TO
INCREASE YOUR INVENTORY. AND IF
YOU'RE MAKING LESS THAN WHAT
YOU'RE SELLING, YOU'RE GOING TO
DECREASE YOUR INVENTORY. NOW,
THE BIG PROBLEM IS WHEN YOU
DON'T MAKE ANYTHING BECAUSE NOW
YOUR SALES GO ON AND ON AND ON,
AND ON, AND YOU YOU'RE NOT
ADDING TO IT. AND CONSEQUENTLY,
THE QUESTION IS, IS WHETHER THE
INVENTORY IS FIVE DAYS, 15 DAYS
OR 25 DAYS. I MEAN, OBVIOUSLY
THERE'S A BUFFER THERE THAT
MAKES A DIFFERENCE. BUT IF
YOU'RE NOT MAKING IT AND, AND,
AND IT'S IMPORTANT TO RECOGNIZE
THAT EVERY TIME THESE REFINERIES
GO THROUGH PLANNED TURNAROUNDS,
THEY PLAN FOR ALL OF THESE
THINGS. THEY, THEY THEY SET UP
THEIR IMPORTS, THEY BRING IT
FROM WASHINGTON STATE, THEY
BRING IT FROM SOUTHERN
CALIFORNIA. THEY'RE CONSTANTLY
MOVING PRODUCT, AND, AND THEN
AND THEN THE PROBLEM OCCURS IS
WHEN IT DOESN'T COME BACK
PROPERLY, IT'S A LITTLE BIT LIKE
WHEN YOU TAKE YOUR CAR IN FOR
REPAIRS AND YOU DON'T GET IT
BACK ON WEDNESDAY, YOU GET IT
BACK, YOU KNOW, THREE DAYS LATER
BECAUSE IT DOESN'T COME TOGETHER
AS QUICKLY AS YOU AS YOU THOUGHT.
THAT'S THAT'S WHAT HAPPENS IN
THE PLANNED SCENARIO AND THE
UNPLANNED SCENARIO. IT JUST ALL
OF A SUDDEN YOU'RE JUST TOAST. I
MEAN, SO IT YEAH, MORE INVENTORY
IS PROBABLY BETTER, BUT YOU'RE
STILL YOU'RE STILL HAVE TO GO
OUT INTO THAT MARKET AND YOU
HAVE TO BUY. AND THAT'S WHEN
PRICES SPIKE. AND IS THAT A
CALIFORNIA MARKET OR. WELL IT'S
GOT TO BE AVAILABLE IN
CALIFORNIA. SO YES, IT WOULD BE
A CALIFORNIA MARKET. OH I KNOW
SOMEBODY MENTIONED THINGS ABOUT
SPECS. AND A COUPLE OF YEARS AGO
LAST YEAR, YEAR BEFORE, I'M NOT
SURE EXACTLY WHAT WE ENDED UP
WITH A SOMEWHAT OF A PRICE SPIKE
THAT OCCURRED RIGHT AROUND THE,
THE TIME THAT WE WERE GOING TO
CHANGE FROM SUMMER TO WINTER A
LITTLE. WE WERE STILL A COUPLE
OF MONTHS AHEAD. AND IN THAT
INSTANCE, IN THAT INSTANCE, YOU
KNOW, THE GOVERNOR OR CARB, I
DON'T REMEMBER WHO DID IT. THEY
BASICALLY SAID, OKAY, WE CAN GO
EARLY INTO WINTER SPEC. WHEN WE
WENT EARLY INTO WINTER SPEC,
THIS SOLVED THE PROBLEM THAT
THAT PARTICULAR TIME. SO
ALLOWING A LESSER SPEC DOES HELP
RELIEVE ISSUES BECAUSE YOU CAN
MORE QUICKLY GET IT FROM
SOMEPLACE ELSE. THE CHALLENGE
IS, IS WE'VE GOT TO GET A
SPECIAL ONE. AND IF WE DON'T
HAVE TO GET THE SPECIAL ONE, ALL
RIGHT. THANK YOU VERY MUCH.
OKAY. AND I THINK ASSEMBLYMEMBER
WOOD HAD A QUESTION. AND THEN I
THINK THAT WILL HAVE TO BE THE
LAST QUESTION FOR THESE
PANELISTS. AND THEN WE'LL JUMP
TO OUR SECOND PANEL. ASSEMBLY
MEMBER THANK YOU. THANK YOU, AND
IT'S BEEN A FASCINATING
DISCUSSION HERE. AND I TRY TO
PIECE SOME PIECES TOGETHER HERE,
BUT ONE OF MR. ROBINSON, I THINK
ONE OF THE THINGS I HEARD FROM
YOU IS YOU YOU SET YOUR PRICES
ON A DAILY BASIS. CORRECT? IS
THAT LOOK AT IT ON A DAILY
BASIS. LOOK AT IT ON A DAILY
BASIS. AND YOU SAID ONE OF THE
ONE OF THE FACTORS YOU LOOK AT
IS THE PRICE THAT YOUR
COMPETITORS ARE CHARGING. HOW DO
YOU DO THAT? DO YOU DO YOU SEND
PEOPLE OUT TO LOOK AT THE
STATIONS? DO YOU HOW DO YOU GET
THAT INFORMATION ON A DAILY
BASIS? WE USED TO, BUT NOW
THERE'S PRICING. I MEAN, YOU CAN
LOOK AT GASBUDDY, FOR EXAMPLE,
AND YOU CAN YOU MAKE A DECISION,
WHERE ARE YOU GOING TO GO BUY
GASOLINE THIS AFTERNOON OR
SOMETHING LIKE THAT? SO THERE'S
DEFINITELY THERE'S FEEDS THAT GO
THROUGH IT. AND IN FACT OUR FEED
COMES THROUGH OPUS WHERE THEY'RE
LOOKING AT EITHER CREDIT CARD
TRANSACTIONS OR THEY'RE LOOKING
AT THINGS LIKE GASBUDDY OR OR
WHATEVER. AND THEY END UP WITH
SOMETHING THAT'S A HALFWAY
DECENT SURVEY, BUT IT'S AT LEAST
FAIRLY EASY TO GET. SO GOING
BACK TO, I THINK A COMMENT, I
THINK DOCTOR YORK SAID, SO YOU
GET AN UPSET IN THE MARKET, OR
MAYBE YOU SAID SOMEBODY SAID
THERE WAS AN UPSET IN THE
MARKET, BUT LET'S SAY IT'S AN
UNPLANNED MAINTENANCE. THAT
HAPPENS OUT THERE. SO NOW
PRESUMABLY IF THAT COMPANY THAT
THAT COMPANY THAT HAD THAT IS,
IS STILL GOT OBLIGATIONS. SO
THEY'RE GOING TO HAVE TO GO
PROBABLY TO THE SPOT MARKET OR
TO GET FUEL TO MEET THEIR
OBLIGATIONS. IS THAT A FAIR
ASSESSMENT? YES SO THAT WILL
INCREASE THEIR COSTS AND
INCREASE PRICES FOR THEM. YES
BUT YOU AS A COMPETITOR SEE THAT
INCREASED PRICE AND ALL YOUR
OTHER RETAILERS SEE THAT
INCREASE PRICE AND THE PRICES GO
UP FOR EVERYONE. THAT IS THAT
THAT SEEMS TO BE, FROM OUR
PERSPECTIVE, PART OF WHAT'S
HAPPENING HERE. SO YOU TALKED
ABOUT THERE'S SO MANY PRICE
MAKERS IN THE RETAIL MARKET OUT
THERE. BUT YOU KNOW, IF ONE
LITTLE GLITCH IN THE SYSTEM
LEADS TO A SPOT MARKET PURCHASE
AND HIGHER PRICES FOR THAT ONE
ENTITY, LOGICALLY THAT SHOULD
JUST HOPEFULLY JUST STAY WITH
THAT ENTITY. BUT IT DOESN'T.
BECAUSE IF ALL THE OTHER
RETAILERS ARE LIKE YOU LOOKING
AT ALL THE LOOKING AT THE
PRICES, YOU'RE ALL LOOKING AND
SEEING THAT THAT GUY'S GOT
HIGHER PRICES, THERE'S AN
OPPORTUNITY FOR ME TO HAVE
HIGHER PRICES. AND THEN YOU GET
THEN YOU GET PRICE SPIKES. IS
THAT MAYBE MR. MAHONEY COULD
ANSWER THAT? IS THAT IS THAT A
POSSIBILITY? AM I MISSING
SOMETHING HERE? BUT THAT'S KIND
OF WHAT I'M HEARING. WELL,
PARTLY WHAT'S OCCURRING IS, IS
THE SPOT MARKET IS A SIGNIFICANT
DRIVER TO PRICING IN GENERAL
RELATIVE TO RACK PRICES AND
DEALER TANK WAGON PRICES. SO
WHEN THE SPOT PRICES GO UP,
VIRTUALLY ALL OF THE RACKS WILL
GO UP. SOMETIMES THE SUPPLIER
WITH THE BIGGEST PROBLEM MIGHT
RAISE HIS PRICE THE MOST BECAUSE
HE REALLY HE OR SHE REALLY
DOESN'T WANT TO SELL PRODUCT
BECAUSE HE DOESN'T HAVE ANY. IT
DOESN'T HAVE AS MUCH. AND SO
THAT'S THAT'S ONE WAY HE CAN HE
OR SHE CAN MANAGE THEIR, THEIR
INVENTORIES BY NOT BEING AS
COMPETITIVE. BUT IN GENERAL WHAT
HAPPENS IS THE RACK PRICES ALL
GO UP. SO REACTING TO ONE EVENT
POTENTIALLY. YES. YES THAT'S
TRUE. YOU SAID YOU GET YOU SAID
YOU SAID YOU SOMETIMES GET WEIRD
LITTLE JUMPS. I DON'T KNOW WHAT
A WEIRD LITTLE JUMP IS, BUT. AND
THEY GET CLEANED UP QUICKLY SO
YOU GET A ROCKET AND A HEAVY
FEATHER OR I MEAN, WHAT DO YOU
GET? BECAUSE, WELL, I WOULD, I,
I WOULD ARGUE AGAINST THE ROCKET
THING. THERE IS NO DOUBT. THERE
IS NO DOUBT THAT THAT PRICES
TEND TO GO DOWN SLOWER THAN GO
UP. AND IN FACT, THAT'S ONE
REASON WE TYPICALLY DO BETTER ON
THE BECAUSE BECAUSE WE TEND TO
GET OUR HEAD HANDED TO US ON THE
WAY UP. BECAUSE WHAT HAPPENS,
WHAT HAPPENS IS PRICES WILL
START JUMPING AND EVERYBODY'S
LOOKING AROUND AND SEEING THAT
NOBODY'S MOVING. AND SO THEY
DON'T WANT TO MOVE UNTIL THEY
SEE US MOVE. AND WE DON'T WANT
TO MOVE UNTIL WE SEE THEM MOVE.
AND SO NO ONE MOVES. AND ALL OF
A SUDDEN WHAT YOU'RE DOING IS
YOU'RE RAISING YOUR COSTS
WITHOUT RAISING YOUR RETAIL. AND
SO USUALLY WHAT HAPPENS IS THOSE
SCENARIOS IS THAT THERE'S THERE
IS A DELAY. THERE IS A DELAY.
NOW, YOU KNOW, THE PUBLIC
DOESN'T SEE THAT BECAUSE ALL
THEY DO IS THEY SEE IT WHEN YOU
START TO RAISE YOUR PRICE, THEY
DON'T KNOW WHAT'S GOING ON, THAT
THE PRICES HAVE ALREADY BEEN
INCREASING OVER A PERIOD OF
TIME. AND SO THERE'S ALWAYS
USUALLY TENDS TO BE A LAG IN
SOMETHING LIKE THAT. AND IT ALL
DEPENDS ON KIND OF HOW FAR DOES
IT GO. YOU KNOW SOMETIMES IT'LL
GO $0.10, $0.10, $0.10, $0.10.
SOMETIMES IT'LL GO UP A LITTLE
BIT AND THEN IT'LL COME BACK
OFF. AND SO EVERYBODY FAIRLY
CONSERVATIVE BECAUSE THEY DON'T
WANT TO LOSE THEIR SALES ON THE
WAY UP. AND THEN THEN WHAT
HAPPENS. WHAT TENDS TO HAPPEN IS
THAT OKAY NOW ALL OF A SUDDEN
PRICES START TO DROP. YOU'RE
STILL CARRYING ALL YOUR OLD
INVENTORY. AND SO YOU'RE GOING,
WELL, I'D LIKE TO GET RID OF
THAT TANK OF INVENTORY BEFORE I
START DROPPING MY PRICE. AND SO
AGAIN, YOU'RE LOOKING AROUND AT
ALL YOUR COMPETITORS AND SEEING
WHAT EVERYBODY ELSE IS DOING.
AND, AND, YOU KNOW, ESPECIALLY
IF, IF IT WAS A MORE BLOODY
PERIOD ON THE UPSWING, PEOPLE
WOULD TEND TO BE MORE SLOW GOING
DOWN BECAUSE THEY, YOU KNOW,
THEY GOT HURT, HURT. THEY WERE
HARMED ECONOMICALLY ON THE WAY
UP. AND SO THEY'LL, THEY'LL,
THEY'LL, THEY'LL TAKE ADVANTAGE
OF IT GOING DOWN. BUT YOU KNOW,
THAT THAT'S SORT OF THE WAY IT
WORKS. BUT WE'RE NOT REALLY A
ROCKET ON THE WAY UP. BUT IT'S
NOT IT'S NOT ALWAYS AN INCREASE,
IS IT. YOU SAID ALL THE RACKS
TEND TO RAISE THEIR PRICES
FAIRLY QUICKLY. WHY, IF IT'S
JUST A SINGLE ENTITY THAT
TRIGGERED THIS, WHY WOULD ALL
THE RACKS NOW SUDDENLY INCREASE
THEIR PRICES AND MAKE IT MORE
EXPENSIVE? WHY DOES THAT HAPPEN?
BECAUSE I THINK I THINK ALL THIS
REALLY KIND OF GETS INTERESTING
AND IS THAT I THINK THAT WHEN
YOU LOOK AT ALL OF THE
COMPANIES, THE WAY THAT THEY
JUDGE THEIR VARIOUS DIVISIONS IS
THEIR INTERNAL TRANSFER PRICES
ARE SPOT. AND SO THE FOLKS THAT
ARE SELLING AT THE RACK SELLING
DEALER TANK WAGON, THEIR
TRANSFER PRICE WITHIN THEIR
COMPANY IS RELATED TO SPOT. SO
THEY'RE ALWAYS JUDGED THAT WAY
BECAUSE SPOT IS THEORETICALLY
THE ALTERNATIVE TO THE SUPPLY
FOLKS THAT THEY COULD. THEY
COULD SAY, WELL, WE DON'T HAVE
TO GIVE IT TO YOU. WE COULD GO
SELL IT OUT IN THE MARKET AND
MAKE MORE MONEY. CONSEQUENTLY,
YOUR TRANSFER PRICE BECOMES
SPOT. SO IF IN MOST OF THEM SEEM
TO DO IT THAT WAY, MOST OF THEM
SEEM TO DO IT THAT WAY. SO WITH
SPOT PRICE DOES IMPACT RACK
PRICES AND IT'S IMPORTANT TO
RECOGNIZE THAT WE'RE ALWAYS SORT
OF FIXATED ABOUT HOW BAD WE'RE
GETTING SCREWED ON THE WAY UP.
ON THE WAY DOWN, THE SAME THING
IS HAPPENING. AND SO WHAT
HAPPENS IS SOMEBODY, YOU KNOW,
ONE OF THE RACK SUPPLIER DROPS
THEIR PRICE, AND THEN SOME OF
THE OTHER SUPPLIERS GO, WELL, WE
REALLY DIDN'T WANT TO HAVE TO
DROP YET, BUT WE NEED TO
BECAUSE, YOU KNOW, THE ROTTEN
ROBBIE TRUCKS AREN'T GOING TO
THEIR TERMINALS. THEY'RE GOING
SOMEPLACE ELSE. I MEAN, SO THE
SUPPLIERS GET DISCIPLINED THAT
WAY. WELL THANK YOU I APPRECIATE
THAT. I GUESS IN MY MIND IT
KEEPS CIRCLING BACK TO THE
OUTSIZED INFLUENCE OF SPOT
MARKET HAS ON ON ON THIS ENTIRE
PROCESS HERE AND HOW QUICKLY ONE
ENTITY AND A SPOT PRICE INCREASE
CAN LEAD TO AN INCREDIBLE SPIKE
IN THE MARKET PRICE FOR THE
RETAIL PRICE FOR EVERYONE. YET
THERE'S NOT A LOT OF SCRUTINY ON
ON HOW SPOT SPOT MARKET WILL SAY
THAT. ONE THING IS, IS HIGH
PRICES USUALLY BEGET SOLUTIONS
QUICKER BECAUSE NOW IT'S MORE
THERE'S MORE OF AN INCENTIVE
THAT THAT TANKER OUT THERE THAT
WAS GOING TO GO SOMEPLACE ELSE.
NOW GETS REROUTED. AND SO IT'S
NOT NECESSARILY A 30 DAY DEAL,
BUT THAT TANKER MAY END UP
GETTING HERE. YOU KNOW, IN 3 OR
4 DAYS, IN WHICH CASE THEN THE
PROBLEM'S RESOLVED. BUT THERE IS
NO DOUBT THAT WHEN YOU AND THIS
IS REALLY THE ISSUE IS WHEN YOU
GET THESE UNPLANNED SITUATIONS
AND, AND I THINK SOMEBODY
MENTIONED THE ONE A FEW YEARS
AGO AND IT WAS ONE OF THOSE ONES
WHERE JUST IT JUST WENT ON AND
ON AND ON AND ON. AND I THINK
THAT THAT PARTICULAR REFINER
THOUGHT THAT THEY WERE GOING TO
GET IT SOLVED, THOUGHT THEY'RE
GOING TO GET IT SOLVED, THOUGHT
THEY'RE GOING TO GET IT SOLVED.
AND THEY'RE ALWAYS SHORT AND IT
REALLY, YOU KNOW, IT MADE THE
MARKET HIGH FOR A LONGER PERIOD
THAN NORMAL. THANK YOU. AND
THANK YOU, MADAM CHAIR. ALL
RIGHT. WELL THANK YOU. WELL,
THAT WILL HAVE TO BE THE LAST
WORD, BUT I JUST WANT TO SAY
THANK YOU AGAIN TO ALL OF OUR
WITNESSES. MR. ROBINSON, DOCTOR
YORK, PROFESSOR MAHONEY, FOR
JOINING US AND PROVIDING JUST A
REALLY, I THINK, IN-DEPTH
OVERVIEW AND EXPLANATION OF THE
MARKET, BOTH IN TERMS OF
PRODUCTION AND MARKET PRICING
DYNAMICS WITH THAT, WE ARE IF I
COULD JUMP IN Ó IF I COULD JUMP
IN, REALLY QUICK, I'VE GOT THOSE
NUMBERS FOR YOU. OH YES. ALL
RIGHT. YEP. WE'LL COME BACK TO
YOU. FOR YOU. YOU'LL GET THE
LAST WORD OKAY. SO THEIR,
EMPLOYMENT IS THERE'S 366,000
EMPLOYEES IN THE INDUSTRY IN IN
CALIFORNIA, IT'S ABOUT $152
BILLION OF ECONOMIC IMPACT.
THAT'S ABOUT 5% OF STATE, GROSS
STATE PRODUCT. I DON'T KNOW WHAT
THE I DON'T HAVE A MULTIPLIER.
SO THAT'S THE DIRECT IMPACT. BUT
IF THE I CAN TELL YOU AT THE
NATIONAL LEVEL, THE MULTIPLIER
IS A LITTLE BIT LESS THAN TWO.
SO IF THE NATIONAL MULTIPLIER
APPLIES TO CALIFORNIA, THEN YOU
KNOW, THEN THE DIRECT PLUS
INDIRECT WOULD BE SOMETHING A
LITTLE BIT LESS THAN 10%. ALL
RIGHT. THANK YOU SO MUCH FOR
REMINDING US AND CYCLING BACK ON
THAT. ONCE AGAIN, THANK YOU TO
ALL THREE OF OUR PANELISTS FOR
JOINING US. WE'RE GOING TO PAUSE
FOR A BRIEF COMMERCIAL BREAK AND
REGROUP IN THREE MINUTES AT 350
TO JUMP INTO OUR NEXT PANEL. SO
THANK YOU.
ALL RIGHT. WE ARE GOING TO GO
AHEAD AND CONTINUE TO MOVE
FORWARD ON OUR HEARING. THANK
YOU ONCE AGAIN TO ALL OF OUR
PANELISTS, AND, I THINK WE'RE
GOING TO JUMP INTO OUR SECOND
PANEL. SO OUR SECOND PANEL IS
FOCUSED ON CALIFORNIA'S FUELS
TRANSITION PLAN. OUR FIRST
PANEL, I THINK, PROVIDED A
REALLY GOOD OVERVIEW OF THE
PETROLEUM MARKET IN CALIFORNIA
TODAY. I THINK IT'S IMPORTANT
FOR US TO REMEMBER THAT ALL OF
THE CONVERSATIONS THAT WE'RE
HAVING AS PART OF THIS HEARING
ARE HAPPENING WITHIN THE CONTEXT
OF NOT JUST CALIFORNIA'S
TRANSITION, BUT A GLOBAL
TRANSITION TO A CLEAN ENERGY
ECONOMY. AND SO, AS PART OF
SETTING THE STAGE TO UNDERSTAND
THE CHALLENGES, THE POTENTIAL
SOLUTIONS AND THE CONVERSATION
THAT WE WANT TO HAVE TOMORROW,
WE WANTED TO JUST, I THINK,
REMIND EVERYONE OF CALIFORNIA'S
FUELS TRANSITION GOALS. WHAT IS
WHAT'S OUR WHAT'S OUR PLAN AS WE
MOVE FORWARD, SO WE WILL BE
JOINED TODAY BY SIVA GUNDA, WHO
IS THE VICE CHAIR OF THE
CALIFORNIA ENERGY COMMISSION.
THANK YOU, WE ARE ALSO WELCOMING
RAJINDER SAHOTA, WHO IS THE
DEPUTY EXECUTIVE OFFICER FOR
CLIMATE CHANGE AND RESEARCH AT
THE CALIFORNIA AIR RESOURCES
BOARD, AFTER WE HEAR FROM THE
ADMINISTRATION, THEN WE'LL BE
HEARING FROM A NUMBER OF
STAKEHOLDERS TO SHARE THEIR
PERSPECTIVE ON THE TRANSITION
AND HELP US UNDERSTAND HOW THEY
ARE PLANNING FOR OUR FUELS
TRANSITION. WITHIN THE CONTEXT
OF THIS CONVERSATION. SO THANK
YOU SO, SO MUCH FOR BEING HERE
FOR ALL THE WORK THAT YOU'RE
DOING IN THIS SPACE, VICE CHAIR
GUNDA WILL GO AHEAD AND TURN IT
OVER TO YOU. THANK YOU. CHAIR,
THANK YOU SO MUCH FOR HAVING US
TODAY. I'M HERE CHAIR, VICE
CHAIR, AND ALL THE MEMBERS OF
THE COMMITTEE. FOR THE RECORD,
MY NAME IS SIVA GUNDA. I
CURRENTLY SERVE AS THE VICE
CHAIR OF THE CALIFORNIA ENERGY
COMMISSION, AND I'LL PASS IT TO
MY COLLEAGUE HERE TO INTRODUCE
HERSELF. GOOD AFTERNOON. IT'S AN
HONOR TO BE HERE AND HELP ANSWER
QUESTIONS ABOUT SOME OF THE
POLICIES AND PROGRAMS FOR THE
TRANSITION TO CLEAN FUELS. I'M
RAJINDER SAHOTA, THE DEPUTY
EXECUTIVE OFFICER AT CARB. THANK
YOU. RAJINDER, WITH THAT, WE'LL
GO TO THE SECOND SLIDE. THANK
YOU, CHAIR, AS YOU NOTED, GIVEN
THE CONTEXT OF THE CONVERSATIONS
FOR THE NEXT COUPLE OF DAYS, WE
SEE THAT THE FIRST PANEL
PROVIDED A LOT OF THIS
INFORMATION. WE'LL TRY NOT TO
DUPLICATE THAT INFORMATION, BUT
TO THE EXTENT THAT IT'S RELEVANT
IN OUR TRANSITION PLANNING,
WE'LL TRY TO KIND OF BRING IT UP
A LITTLE BIT. SO WITH THAT, JUST
WANTED TO BEGIN WITH A QUICK
REVIEW OF HOW THE INDUSTRY AND
THE MARKET IS SET UP IN
CALIFORNIA. SO THE MAP SHOWS
HERE WHAT A TYPICAL DAILY FLOW
OF CRUDE OIL AND REFINED
GASOLINE INTO AND OUT OF
CALIFORNIA. LOOKS LIKE ALL
VALUES SHOWN HERE ARE IN
THOUSANDS OF BARRELS. A DAY.
CALIFORNIANS USE ABOUT 800,000
BARRELS OF REFINED GASOLINE A
DAY. OR IF YOU LOOK AT IT, IT'S
JUST ABOUT A GALLON PER CAPITA
PER DAY IN CALIFORNIA. LOOKING
AT 2023, CALIFORNIANS PAID ABOUT
$62 BILLION AT THE PUMP FOR
REFINED FUEL. MOST OF THE
CALIFORNIA'S REFINING CAPACITY
IS CLUSTERED AROUND THE BAY AREA
AND LOS ANGELES. THESE REFINERS
RECEIVE CRUDE OIL THROUGH A
COMBINATION OF LOCAL PRODUCTION
AND MARINE IMPORTS. ABOUT 1.4
MILLION BARRELS PER DAY. THESE
REFINERS, ON AN AVERAGE, PRODUCE
ABOUT 750,000 BARRELS OF
CALIFORNIA SPEC GASOLINE PER
DAY, AND ABOUT 100,000 BARRELS
OF NON CARB GASOLINE, WHICH GOES
TO OUR NEIGHBORING STATES.
CALIFORNIA ALSO RECEIVES ABOUT
100,000 BARRELS OF GASOLINE
BLENDING COMPONENTS AND FINISHED
FUEL VIA MARINE TERMINALS. EVERY
DAY THE CARB GASOLINE IS
DISTRIBUTED, OF COURSE, AS THE
FIRST PANEL DESCRIBED TO VARIOUS
FUEL STATIONS IN CALIFORNIA,
WHILE NEVADA AND ARIZONA ARE
PRIMARILY SERVED THROUGH
PIPELINE INFRASTRUCTURE. NEXT
SLIDE PLEASE. SO IT'S IMPORTANT,
AS WE THINK THROUGH THIS
PARTICULAR CONVERSATION, TO SET
THE STAGE BETWEEN THE DEMAND AND
SUPPLY AND THE POLICY REALM THAT
WE'RE WORKING WITHIN, AND AN
INTEREST OF TIME, I'M GOING TO
GO OVER THE ENTIRETY OF THE
SLIDES, BUT RAJINDER IS HERE TO
ANSWER A NUMBER OF QUESTIONS.
AND SUPPORT THE DISCUSSION.
CALIFORNIA HAS BEEN IMPLEMENTING
POLICIES TO REDUCE HARMFUL AIR
POLLUTION AND GREENHOUSE GAS
EMISSIONS FOR DECADES. FOR THE
TRANSPORTATION SECTOR, THIS
INCLUDES ADOPTING ZERO EMISSION
VEHICLE REGULATIONS SUCH AS
ADVANCED CLEAN CARS, ADVANCED
CLEAN FLEETS AND ADVANCED CLEAN
TRUCKS. THESE CLEAN. THESE CLEAN
TECHNOLOGIES ARE CRITICAL TO
REDUCING HARMFUL AIR POLLUTION
IN SOME OF THE MOST BURDENED
COMMUNITIES LOCATED IN
CALIFORNIA, AS CALIFORNIA. AS
CALIFORNIANS CONTINUE TO
INCREASE DEMAND OF THESE CLEAN
VEHICLES, IT IS CRITICAL TO
ENSURE THAT THE CLEAN ENERGY
TRANSITION AND INFRASTRUCTURE IS
AVAILABLE AND AFFORDABLE IN
TERMS OF JUST LOOKING AT THE
CHARTS THAT YOU HAVE THERE, IT
IS USEFUL TO JUST LOOK AT WHAT'S
HAPPENING TO THE OVERALL DEMAND
OF GASOLINE. WE HAVE REACHED OUR
PEAK GASOLINE DEMAND OR A
DEFINED GASOLINE DEMAND IN 2017,
AND SINCE THEN IT'S BEEN GOING
DOWN. OVER THE LAST FIVE YEARS,
WE'VE LOST ABOUT 10% OF DEMAND
IN CALIFORNIA, AND THAT'S
DIRECTLY CORRELATED TO THE EV
PENETRATION IN CALIFORNIA. AS
YOU LOOK AT THE CHART, WE ARE
ALMOST AT THE PRECIPICE OF ABOUT
2 MILLION CUMULATIVE EVS. OUR
ZERO EMISSION VEHICLES SOLD IN
CALIFORNIA AND AS YOU LOOK AT
THE FORECAST, IT'S GOING TO
CONTINUE TO MOVE FORWARD, AND SO
IT'S THE IMPORTANT THING TO
RECOGNIZE ON THE FORECAST IS
THAT THE FORECAST IS DRIVEN BY
WHAT WE CALL A CONSUMER
PREFERENCES SURVEY. SO EVERY
THREE YEARS, CARB AND CAC C
SPONSOR A CONSUMER SURVEY TO
REALLY UNDERSTAND CONSUMER
PREFERENCES. AND THAT'S WHAT
REALLY GOES INTO OUR FORECAST.
NEXT SLIDE PLEASE. AS MANY OF
YOU KNOW, AB 30 AB 32 CREATED
CALIFORNIA'S CLIMATE PROGRAMS
AND SET A 2020 GREENHOUSE GAS
EMISSIONS REDUCTION GOAL, WHICH
WAS EXTENDED BY SB 32 TO INCLUDE
A 2030 GOAL. AND FINALLY, IN
2022, AB 1279 ESTABLISHED TWO
ADDITIONAL GOALS TO REDUCE
ANTHROPOGENIC GHG EMISSIONS BY
85% BELOW 1990 LEVELS BY 2045,
AND ACHIEVE CARBON NEUTRALITY NO
LATER THAN 2045. IN ADDITION,
AMONG OTHER THINGS, EXECUTIVE
ORDER N 7920 SETS A COURSE TO
END SALES OF INTERNAL COMBUSTION
ENGINE VEHICLES BY 2035.
ACHIEVING THESE GOALS REQUIRES
AN EXPEDITED TRANSITION TO LOW
AND ZERO CARBON VEHICLES ALONG
ALONG IN THE TRANSITION TO LOW
CARBON FUELS TO REDUCE THE
CARBON TOXIC AND UNHEALTHY
POLLUTION FROM TRANSPORTATION
SOURCES AND ENSURE A THRIVING
CALIFORNIA ECONOMY. LONG TERM,
THERE ARE SUBSTANTIAL HEALTH AND
ECONOMIC BENEFITS ASSOCIATED
WITH THE STATE. REALIZING ITS
CLIMATE GOALS, INCLUDING OVER
$10 BILLION PROVIDED THROUGH
CALIFORNIA CLIMATE INVESTMENTS
BENEFITING CALIFORNIA RESIDENTS
THROUGH INCREASED PUBLIC
TRANSIT, HOME WEATHERIZATION,
AND DROUGHT RESILIENCY, JUST TO
NAME A FEW. OF THE $10 BILLION,
5.4 BILLION HAS BENEFITED
PRIORITY COMMUNITIES THAT THAT
THAT SUFFER DISPROPORTIONATELY
FROM THE IMPACTS OF CLIMATE
CHANGE, THE VALUE OF HEALTH
BENEFITS FROM THESE REGULATIONS
IS ESTIMATED TO REACH $78
BILLION IN 2035, AND ABOUT 200
BILLION BY 2045 FROM AVOIDED
MORTALITY. HOSPITAL VISITS AND
SICK DAYS. MANY OF THESE
STRATEGIES THAT WE ARE USING TO
ADDRESS CLIMATE CHANGE ARE THE
SAME STRATEGIES THAT WILL ALSO
DRASTICALLY IMPROVE AIR QUALITY,
FOSSIL FUEL USE IN VEHICLES IS
THE SINGLE SINGLE BIGGEST SOURCE
OF GREENHOUSE GAS, AND CRITERIA
POLLUTANT EMISSIONS IN THE
STATE. ACCORDINGLY, CARB'S
REGULATIONS ARE DESIGNED TO
DECREASE DEMAND FOR PETROLEUM BY
SUPPORTING THE TRANSITION TO
ZERO EMISSION VEHICLES AND
DEPLOYMENT OF CLEANER
ALTERNATIVE FUELS. THE CAR BOARD
HAS ALREADY TAKEN STEPS TOWARDS
THE GOALS IDENTIFIED IN THE
SCOPING PLAN BY ADOPTING
REGULATIONS SUCH AS CLEAN CARS
TIÂU ADVANCED CLEAN FLEETS,
ADVANCED CLEAN TRUCKS AND OTHER
RULES THAT PROMOTE AND HASTEN
THE DEVELOPMENT OF LOW AND ZERO
EMISSION TECHNOLOGIES. NEXT
SLIDE PLEASE. THE SCOPING PLAN
PRIORITIZES THE MOVE AWAY FROM
FOSSIL ENERGY SOURCES AND
COMBUSTION TECHNOLOGIES AND
DEMONSTRATES THE NEED TO BUILD
OUT SIGNIFICANT LOW CARBON FUELS
AND THE DEPLOYMENT OF LIQUID
BIOFUELS FOR HARD TO ELECTRIFY
TECHNOLOGIES SUCH AS AVIATION
AND MARINE USE. THE RESULT OF
SUCCESSFUL IMPLEMENTATION OF THE
TECHNOLOGY AND FUEL SWITCHING,
CALLED FOR IN THE SCOPING PLAN,
IS A DRAMATIC REDUCTION IN
FOSSIL FUEL DEMAND. THE SCOPING
PLAN MODELING RESULTED IN A 94%
REDUCTION IN LIQUID PETROLEUM
DEMAND BY 2045, COMPARED TO
2022, BUT WE ARE ALL WELL ON OUR
WAY BASED ON THE 2023 LCFS
REPORTING, THE LOW CARBON FUEL
STANDARD PROGRAM HAS TRIPLED THE
VOLUME OF LOW CARBON FUELS SINCE
THE START OF THE PROGRAM THROUGH
2023, WITH RENEWABLE DIESEL
DISPLACING OVER 50% OF FOSSIL
DIESEL USE TODAY, THIS SHIFT HAS
NOT ONLY DECREASED GHG
EMISSIONS, BUT ALSO PROVIDES
REDUCTIONS IN PPM AND NOX. NEXT
SLIDE. I'M JUST GOING TO GO
THROUGH A LITTLE BIT OF THE
PROBLEM STATEMENT IN WHICH WE
ARE OPERATING OVER THE LAST TWO
YEARS. SO BEGINNING WITH THIS
CHART I'LL JUST TRY TO SITUATE
YOU BECAUSE WE HAVE ABOUT FOUR
SLIDES IN HERE THAT ALL GO
THROUGH A SIMILAR COLOR COLOR
CODE. SO WHAT WE'RE SEEING HERE
IS 2022 AND 2023 RETAIL PRICES
IN GREEN. THE RED IS THE US
AVERAGE PRICES. AND THE BLUE IS
THE DIFFERENCE BETWEEN
CALIFORNIA AVERAGE VERSUS US
AVERAGE. THAT'S WHAT YOU'RE
SEEING THERE. SO JUST WANT TO
NOTE A COUPLE OF KEY POINTS
HERE. SO WE PUT TWO LINES FOR
THE SEPTEMBER PRICE SPIKES. WE
HAVE SEEN THE LAST COUPLE OF
YEARS. AS YOU SEE THERE WE HAVE
A LINE TO KIND OF SHOW WHERE THE
PRICE SPIKE BEGAN AND THEN A
LINE TO SHOW WHERE THE PRICE
SPIKE MAXIMIZED. TWO THINGS
WORTH OF NOTE HERE, ONE IS THE
CALIFORNIA DIFFERENCE BETWEEN
CALIFORNIA AND THE US WAS ABOUT
$1.47 ON NINE ONE, 2022 BEFORE
THE PRICE SPIKE STARTED. AND IT
ENDED AT 258. THE DIFFERENCE AT
THE AT THE TOP OF THE PRICE
SPIKE AND THE SAME THING ON THE
SPIKE THAT WE SAW IN 2023.
SIMILARLY THE KIND OF THE
AVERAGE PRICE STARTED AT 147.
THE DIFFERENCE AND THEN IT
PEAKED AT 225. SO JUST WANTED TO
OBSERVE THAT AS WE GO INTO THE
NEXT FEW SLIDES TO, FURTHER THAT
UNDERSTANDING. NEXT SLIDE PLEASE.
SO NOW, THERE HAS BEEN AGAIN A
CHAIR. I WANT TO JUST REPEAT
YOUR, KIND OF CALL FOR ACTION
TODAY TO BE FACTUAL AND PROVIDE
INFORMATION. SO YOU COULD USE
THE DATA TO CONTEMPLATE AS WE
MOVE FORWARD IN THESE
DISCUSSIONS. SO THERE ARE SOME,
SOME ASSERTIONS THAT, YOU KNOW,
THE GASOLINE SPIKES HAPPEN
BECAUSE OF TAXES AND FEES OR
CRUDE OIL. SO JUST LET'S KIND OF
TAKE THAT A BIT BY BIT, JUST AS
A WAY TO HAVE THE CONVERSATION
AND THE TRANSPARENCY. SO THE
FIRST PART HERE IS WHAT YOU'RE
SEEING HERE IS A STACKED CHART.
SO AT THE BOTTOM OF THE STACKED
CHART IS THE TAXES AND FEE. AND
I WILL AS I HAVE BEFORE,
ACKNOWLEDGED IN THE HEARINGS AND
THE TAXES AND FEES DO CONTRIBUTE
TO THE PRICES OF CALIFORNIA GAS
PUMP PRICES. BUT IT'S IMPORTANT
TO NOTE THAT IT IS FLAT, IT'S
JUST STATES FLAT THROUGHOUT THE
YEAR. THE NEXT ONE THAT YOU'RE
SEEING ON THE TOP OF THAT IS THE
CRUDE OIL. THE CRUDE OIL PRICES
ALSO CHANGE DURING THE DAY.
SORRY. DURING THE YEAR, AND THE
PRICES IN CALIFORNIA, THE CRUDE
OIL PRICES IN CALIFORNIA, THAT
THAT THE REFINERY SOURCE ARE
SLIGHTLY HIGHER THAN THE REST OF
THE COUNTRY, GIVEN SOME OF THE
UNIQUE PLANTS THAT, ONE OF THE
PANELISTS BEFORE TALKED ABOUT.
SO, SO KIND OF GOING TO THE NEXT
SLIDE, WHAT WE TRY TO DO HERE
IS, OKAY, GIVEN THAT YOU HAVE
TAXES AND FEES, THAT'S FLAT.
ACKNOWLEDGING THAT THE TAXES AND
FEES DO CONTRIBUTE TOWARDS
PRICES, BUT THEY DON'T
CONTRIBUTE TOWARDS THE PRICE
SPIKE. LET'S REMOVE THAT FOR A
SECOND. AND GIVEN THAT THE CRUDE
OIL PRICES VARY THROUGH THE YEAR
AND IT ALSO IS LIKE CLOSELY
INDEXED TO THE REST OF THE
COUNTRY, IT MIGHT BE SLIGHTLY
HIGHER BY A BY A CENT OR TWO,
BUT OVERALL PRETTY WELL INDEXED
IF YOU REMOVE THAT AS WELL. AND
THEN COMPARE WHAT HAPPENS TO THE
PRICE PRICES. JUST THAT THE
INDUSTRY MARGINS ARE. SO WHAT
YOU'RE LOOKING AT HERE IS ONCE A
REFINERY, PROCURES A GALLON OR A
BARREL OF CRUDE OIL. SO ALL THAT
HAS BEEN PAID OUT AT THIS POINT,
TO THAT POINT, TO THE PUMP
BETWEEN THE REFINERY AND THE
RETAIL INDUSTRY. WHAT IS THE
TOTALITY OF MARGIN THAT HAPPENS
AGAIN TO ASSEMBLY MEMBER
BENNETT'S CONVERSATION TODAY, AS
SOME OF THESE ARE PROFITS, SOME
OF THESE ARE OPERATING COSTS AND
WE'RE NOT TALKING ABOUT A
SPECIFICALLY, WHETHER THE
INDUSTRY SHOULD BE PROFITABLE OR
NOT. RIGHT. SO THAT'S NOT THE
QUESTION. IT'S ABOUT HOW CAN WE
HAVE PROFITS COEXIST WITH
CONSUMER PROTECTION. SO THEN
WHEN YOU LOOK AT IT HERE AGAIN
AND LOOK AT IT, CALIFORNIA, LOOK
AT THE PRICE SPIKES THAT HAPPEN
THAT ARE SOLELY, SOLELY STARTING
FROM THE REFINERY ACQUISITION TO
THE RETAIL PUMP. AND THEN WHEN
YOU COMPARE THAT TO THE UNITED
STATES, IT GOES UP AND DOWN VERY
SLIGHTLY, AND YOU DON'T SEE THE
SAME LEVEL OF SPIKE. AND THE
DIFFERENCE IN BLUE REALLY KIND
OF DRIVES THE POINT THAT THERE
IS SOMETHING PECULIAR, PECULIAR
ABOUT OUR REFINING AND RETAIL
SECTOR THAT IS VERY ATYPICAL OF
THE REST OF THE UNITED STATES,
AND THAT CAUSES THAT. SO THE
QUESTION THEN IS WHAT ARE THE
POTENTIAL? VARIABLES THAT ARE
DRIVING THAT? AND WHAT CAN WE DO
TO ENSURE THAT WE HAVE CONSUMER
PROTECTION? AND ONE OF THE KEY
VARIABLES THERE ABOUT CONSUMER
PROTECTION IS HOW DO WE REDUCE
THOSE SPIKES, NEXT SLIDE, SO
JUST LEAVING YOU HERE WITH THE
LAST SLIDE HERE, WHAT WE DID IS
NOT JUST 2022 AND 2023, BUT WE
EXTENDED THIS SLIDE ALL THE WAY
TO THE CURRENT PRICES IN 2024.
AS YOU WILL SEE HERE AT THE
PUMP, WE OVER THE LAST 15, 21ST
TO JUST KIND OF CALCULATE ABOUT
THREE WEEKS OVER THE LAST THREE
WEEKS, WE HAD CLOSE TO 17 $0.18
INCREASE IN OUR PRICES AT THE
PUMP. BUT IF YOU LOOK AT WHAT'S
HAPPENING IN THE UNITED STATES,
THOSE PRICES WERE ACTUALLY GOING
DOWN. SO IF YOU LOOK AT JUST THE
GREEN LINE AND SAY THE PRICE
SPIKE IS VERY SMALL, THIS, THIS
SUMMER, WE WOULDN'T CAPTURE THE
ENTIRE PICTURE BECAUSE THE CRUDE
OIL PRICES ARE ACTUALLY GOING
DOWN. AND IF YOU LOOK AT THE
DIFFERENCE, THE PRICE SPIKE IS
MUCH PEAKIER AND WHAT'S
HAPPENING. SO GIVEN THE
CONDITIONS, IF WE ARE RUNNING AN
ABSOLUTELY, GOOD LIQUID MARKET,
THE PRICES SHOULD ACTUALLY BE
GOING DOWN RIGHT NOW AT THIS
MOMENT, ALONG WITH THE REST OF
THE US. SO WITH THAT, WE'LL GO
TO SLIDE NUMBER TEN, SO WE HAVE
USED THIS SLIDE IN PREVIOUS
HEARINGS AND JUST WANTED TO NOTE
BEFORE WE GO INTO THE
IMPLEMENTATION OF THE SP ONE TWO
AND THE BROADER TRANSMISSION
TRANSITION PLANNING. SO THESE
ARE SOME KEY RECENT ISSUES AND
CHALLENGES THAT HAVE BEEN
ACKNOWLEDGED IN MOST OF OUR
PUBLIC MEETINGS, AS WELL AS THE
REPORT, THE TRANSPORTATION FUELS
ASSESSMENT ACTUALLY RAISES PRICE
SPIKES IN CALIFORNIA HAVE
OCCURRED. THREE OF THE LAST FIVE
YEARS. AND INCLUDING THIS YEAR,
WE HAVE A PRICE SPIKE ON THE
WAY. SO IF YOU LOOK AT IT OVER
THE LAST SIX YEARS, WE HAVE THAT
IN A VOLATILITY IN THE MARKET.
AGAIN, WHAT CAUSES THAT IS A
QUESTION. AND HOW DO YOU FIX IT?
I KNOW WE'RE GOING TO BE
DELIBERATING TOMORROW AND IN THE
FUTURE CONVERSATIONS, BUT JUST
KIND OF LOOKING AT THE FACT OF
THE MATTER IN TERMS OF DATA, THE
PRICES DO TEND TO SPIKE AND IT'S
HAPPENING MORE FREQUENTLY.
SECOND, THE LACK OF, YOU KNOW,
TRANSPARENCY INTO THE FUELS
MARKET. AND I THINK A BIG
PORTION OF THAT HAS BEEN FIXED
THROUGH THE SP ONE TWO. AND WE
WANT TO THANK THE LEGISLATURE
AND THE GOVERNOR. AND FOR THAT
PARTICULAR BILL, WHICH HELPS US
TODAY GATHER MUCH MORE
INFORMATION THAN WE WERE EVER
ABLE TO GATHER AND BE ABLE TO
UNDERSTAND WHAT'S GOING ON
EXACTLY IN THE PRICES AND WE'VE
HEARD TODAY IN THE FIRST
TESTIMONY, AND I AND I DO NOT
AND I WANT TO BE VERY FACTUAL.
ONE OF THE THINGS THAT YOU HEARD
IN THE FIRST PANEL WAS, WHAT ARE
THE SOLUTIONS? AND I DON'T THINK
THERE IS REALLY A SOLUTION THAT
WAS READILY OFFERED. AND THAT'S
SOMETHING THAT WE HAVE. AND
AGAIN, I, I WOULD JUST NOTE THAT
WE HAVE GOOD COLLABORATION WITH
THE INDUSTRY. AND AS THE ENERGY
COMMISSION, WE HAVE THE
RESPONSIBILITY TO HAVE AN HONEST,
TRANSPARENT CONVERSATION TO
WELCOME THE PERSPECTIVES. BUT
ONE OF THE STRUGGLES WE HAVE IS
ATTRACTING A SET OF SOLUTION
METRICS WITHIN THE CONFINES OF
THE EXISTING STATUTORY RULES AND
LAWS OF CALIFORNIA. WE DON'T
READILY GET ANYTHING, HERE'S THE
SOLUTION THAT WE CAN DO TO
IMMEDIATELY HAVE SOME RELIEF.
AND SO AND INDUSTRY AND I THINK
YOU'VE HEARD FROM COLLEAGUES ON
THE PREVIOUS PANEL TO, YOU KNOW,
WHEN, WHEN THESE SPIKES HAPPEN,
IT TRIGGERS PROFITS. IT'S A TRUE
FACT. IT'S NOT ABOUT WHETHER THE
PROFITS ARE ARE WRONG, RIGHT.
IT'S JUST TRUE THAT IT'S A IT'S
A MORE PROFITABLE PORTION OF THE
YEAR. AND SO I THINK IT'S
IMPORTANT TO KIND OF THEN THINK
ABOUT HOW CAN WE HAVE BOTH
PROFIT MAXIMIZATION AND A
HEALTHY BUSINESS ENVIRONMENT
COEXIST WITH CONSUMER
PROTECTION. AND HOW DO WE NOT
MAKE THEM MUTUALLY EXCLUSIVE
THINGS? AND FINALLY, YOU KNOW,
WE TALKED ABOUT DECREASING
COMPETITION IN CALIFORNIA AND
ALSO REDUCED PRODUCTION IN
CALIFORNIA, WHICH WE CAN TALK
ABOUT MORE GOING TO THE NEXT
SLIDE HERE. I REALLY WANT TO
MAKE SURE THAT THAT, YOU KNOW,
FOR THE MEMBERS HERE, YOU KNOW,
THERE'S A GOOD NOTICE THAT THIS
IS NOT A NEW ISSUE. WE HAVE BEEN
TALKING ABOUT THIS ISSUE FOR
ALMOST 25 YEARS IN CALIFORNIA.
AND THE EARLIEST REPORT WAS
PUBLISHED IN 1999 BY THE AG'S
OFFICE. AND THERE WERE SOME
QUESTIONS EARLIER TODAY ABOUT
MARKET POWER, AND SO WE HAD
ABOUT 40 REFINERIES, YOU KNOW,
GOING BACK 25 YEARS. AND THOSE
HAVE REDUCED OVER TIME. BUT IF
YOU LOOK AT IT, THE OVERALL
REDUCTION IN CAPACITY IS NOT THE
SAME, RIGHT? JUST BECAUSE WE
WENT FROM 40 REFINERIES TO TEN
REFINERIES, WE HAVEN'T LOST 75%
OF THE PRODUCTION IN CALIFORNIA.
WHAT HAPPENED IS MORE
PROFITABLE, LARGER REFINERIES
CONTINUE TO STAY IN CALIFORNIA
AND THE SMALLER REFINERIES WENT
OUT OF BUSINESS. AND SOME OF THE
LARGER REFINERIES, FOR EXAMPLE,
THERE ARE MANY EXAMPLES WHERE A
TWO REFINERIES COMBINED INTO ONE
SINGLE REFINERY. GIVEN THE
CO-LOCATION OF THEM. SO AS YOU
LOOK AT THE DATA TODAY, YOU
KNOW, IF YOU IF YOU THINK ABOUT,
YOU KNOW, 40, 30 YEARS AGO WHEN
WE HAD 40 REFINERIES, WE WERE
ABLE TO, REFINE IN EXCESS OF 2
BILLION BARRELS A DAY. TODAY WE
CAN REFINE ABOUT 1.4 BILLION
BARRELS A DAY. AND THEN THAT,
YOU KNOW THAT. AND WHEN YOU LOOK
AT THAT AND LOOK AT THE PEAK
DEMAND, THE PEAK DEMAND IS
ACTUALLY BELOW OUR REFINING
CAPACITY TODAY. SO IT'S
BASICALLY COMPETITION AMONGST
THE PRIVATE PLAYERS THAT
CONSOLIDATED AND MOVED THINGS
ALONG. SO WITH THAT, I JUST
WANTED TO OFFER A COUPLE OF
THINGS THAT THE AG OFFICE PUT
OUT IN THE PAST IN 1999 REPORT.
I'M JUST QUOTING FROM, YOU KNOW,
AG LOCKLEAR BACK THEN IN
CALIFORNIA, JUST SIX COMPANIES
ACCOUNT FOR 90% OF CALIFORNIA'S
REFINING CAPACITY, AND THEY AND
THESE SAME SIX COMPANIES CONTROL
MORE THAN 90% OF GASOLINE SOLD
IN CALIFORNIA. AND THIS THIS IS
COMING FROM THE 1999 REPORT. OUR
CONCERN IS THAT HIGH GAS PRICES
IN CALIFORNIA ARE THE RESULT OF
LOW COMPETITION IN MARKET. SO
THIS IS THE SAME THING THAT WE
HAVE BEEN DISCUSSING OVER THE
LAST 25 YEARS. AND I THINK THE
ISSUE IS LIKE, HOW DO WE SOLVE
IT AND HOW CAN WE IMPROVE THAT
MARKET COMPETITION. GOING TO THE
NEXT SLIDE, PLEASE. SO I HAVE
LIKE 3 OR 4 MORE SLIDES HERE.
AND I JUST WANT TO CLOSE WITH,
YOU KNOW SP ONE TWO UNDER SP ONE
TWO, THE CEC WAS TASKED WITH
SIX, PRIMARY IMPLEMENTATION
ACTIVITIES, FIRST IS DATA
COLLECTION AND MONITORING. A
YEAR AGO, OUR UNDERSTANDING
BEHIND THE SPIKES WAS VERY
LIMITED. THANKS TO YOU AGAIN TO
THE LEGISLATURE AND THE GOVERNOR.
SINCE THE PASSAGE OF THE SP ONE
TWO CEC STAFF HAVE BEEN
ANALYZING OVER 1000 INDUSTRY
DATA REPORTS EVERY MONTH. WE
HAVE SPENT ABOUT 15,000 HOURS
AGAIN, CEC AS AN AGENCY HAS BEEN
DOING PETROLEUM WORK FOR ABOUT
40 YEARS SINCE THE EXISTENCE OF
CEC. IT'S JUST A DIFFERENT AREA
OF WORK. BUT YOU KNOW,
COLLECTING THAT DATA, PROCESSING
THE DATA AND HAVING EXPERTISE IN
THE AREA HAS BEEN SOMETHING
CONSISTENT WITH OUR STAFF. AND
SO JUST THEN LOOKING AT THE
SECOND ONE, WHICH IS THE MARKET
OVERSIGHT AND ANALYSIS, SO THIS
IS THE FORMATION OF THE DPMO. I
KNOW THAT DEPARTMENT OF
PETROLEUM MARKET MONITORING WILL
BE HERE TOMORROW, AND I JUST
WANT TO MAKE SURE I KIND OF
CLEARLY ARTICULATE WE LOOK TO
THE DPMO FOR EXPERTISE ON MARKET
BEHAVIOR. YOU HAVE SPECIFICALLY
TASKED THEM WITH LOOKING AT
MARKET POWER AND POTENTIAL
MARKET MANIPULATION AND AS AS AN
INDEPENDENT DIVISION WITHIN THE
AGENCY. THEY DO THEIR WORK
INDEPENDENTLY, BUT WE BENEFIT
FROM HAVING WITHIN THE CEC SO WE
CAN TALK REGULARLY AND LEARN AND
EXCHANGE INFORMATION WITH EACH
OTHER. WE ALSO PUT OUT THE FUELS
ASSESSMENT, WHICH WILL, YOU
KNOW, HAVE A COUPLE OF SLIDES ON
THAT I CAN TALK ABOUT. AND THEN
WE HAVE SOME GOOD INFORMATION ON
REFINERY MAINTENANCE. FOR
EXAMPLE, IF THERE IS A PLANNED
MAINTENANCE, WE GET TO KNOW
ABOUT THE PLANNED MAINTENANCE
120 DAYS AHEAD OF TIME. SO WE
HAVE A LITTLE BIT OF VISIBILITY
OF WHAT THE PLANNED MAINTENANCE
IS. AND WHAT THE INDUSTRY IS
BEGINNING TRYING TO DO AT THE
REFINER IS TRYING TO DO TO
MITIGATE ANY PRICE SPIKES. AND
FINALLY, WE HAVE THE PENALTY,
WHICH WE ARE WORKING ON, YOU
KNOW, WE HAVE DONE MULTIPLE
WORKSHOPS ON THE PENALTY, AND
THE STAFF ARE HOPING TO BRING
THAT TO THE COMMISSION SHORTLY.
AND FINALLY, THE TRANSITION PLAN,
GOING TO THE NEXT SLIDE, I WANT
TO BEFORE GOING INTO THE
ASSESSMENT, I JUST WANT TO
SHARE, THERE IS A NUMBER OF
FUTURES THAT EXIST GOING YOU
KNOW, AS WE LOOK AT 2045, AS YOU
LOOK AT THE 2035 LAW VEHICLES,
YOU KNOW, IF THERE IS NO MORE
NEW VEHICLES IN CALIFORNIA SOLD,
THAT ARE COMBUSTION VEHICLES,
THERE IS A HUGE VARIATION OF HOW
MANY VEHICLES COULD EXIST. AND
THAT'S SOMETHING THAT
UNCERTAINTY WAS TAKEN INTO
ACCOUNT INTO THE FUELS
ASSESSMENT AS WE DEVELOPED THE
ASSESSMENT. AND NEXT SLIDE
PLEASE, I'LL TRY NOT TO READ
THROUGH EVERYTHING. I KNOW WE'VE
TALKED ABOUT THIS IN PREVIOUS
HEARINGS, BUT BUT JUST WANT TO
MAKE SURE THE SPIRIT OF THE
FUELS ASSESSMENT AND WHAT WE TRY
TO DO AND THE FUELS ASSESSMENT
LISTED ABOUT 14 POLICY OPTIONS
THAT COULD BE CONSIDERED TO
MITIGATE OR REDUCED PRICE SPIKES
IN CALIFORNIA. I WANT TO JUST
MAKE SURE THAT THIS THIS
PARTICULAR STATEMENT IS SET OUT
LOUD, YOU KNOW, BECAUSE IT COULD
BE THE ASSESSMENT COULD BE
MISUSED IN TERMS OF ITS PURPOSE,
THE ASSESSMENT WAS A THOUGHTFUL,
ROBUST EXERCISE IN CAPTURING ALL
THE DIFFERENT OPTIONS WE HAVE TO
MITIGATE. THIS WAS A PUBLICLY
FOCUSED WHITEBOARDING EXERCISE.
THAT'S WHAT WE DID. WE BROUGHT
IN INDUSTRY, ENVIRONMENTAL
JUSTICE GROUPS, LABOR AND SAID,
PUT ALL THE OPTIONS ON THE TABLE
AND AS THE OPTIONS WERE
BEGINNING TO BE DEVELOPED, WE
FAITHFULLY REPRESENTED BOTH THE
PROS AND CONS THAT WERE BROUGHT
TO OUR ATTENTION IN THE FUELS
ASSESSMENT AND THE FUELS
ASSESSMENT. CLEARLY ARTICULATES
THAT NONE OF THOSE PROS AND CONS
CAN BE WELL ESTABLISHED BY THE
CSA. YET THIS IS SOMETHING THAT
WE WILL CONTINUE TO INVESTIGATE,
BUT WE WANT IT TO FAITHFULLY
REPRESENT WHAT WE'VE HEARD IN
OUR RECORD. SO I'M GOING TO THE
NEXT SLIDE. SO THIS IS LOOKING
AT THE FUELS TRANSITION PLAN
WHICH IS THE NEXT COMPONENT. THE
FUELS ASSESSMENT IS A PRECURSOR
IN BOTH THE DEVELOPMENT OF
INITIAL POLICY AND LEGISLATIVE
IDEAS TO THINK ABOUT HOW TO
MITIGATE PRICE SPIKES, BUT ALSO
IT GOES DIRECTLY INTO THE FUELS
TRANSITION PLAN. THE GOAL OF THE
TRANSITION PLAN IS TO HAVE A
CLEAR ROADMAP ON HOW TO
TRANSITION AWAY FROM FOSSIL
FUELS THOUGHTFULLY, WHILE MAKING
SURE THAT WE HAVE AFFORDABLE AND
RELIABLE, FUEL FOR THE FUTURE.
AS PART OF THE TRANSITION PLAN,
IN COORDINATION WITH THE WITH
CARB, THERE WILL BE 3 TO 4
WORKING GROUPS, I THINK I THINK
WE'RE ALL STILL ON 15. WE'LL
JUST GO TO THE NEXT SLIDE,
THERE'LL BE A NUMBER OF WORKING
GROUPS, WHICH WE'VE ALREADY
STARTED THAT IS STABLE SETTING
TO HAVE ROBUST CONVERSATIONS
WITH EACH GROUP TO UNDERSTAND
HOW BEST TO MOVE FORWARD WITH
THE TRANSITION PLAN. AND I WANT
TO THANK, THE CARB
REPRESENTATIVE HERE, BUT ALSO
THE AGENCY AS A WHOLE, WHICH HAS
CONVENED A LOT OF THIS WORK, AND
CÁC AND CARB ARE WORKING
TOGETHER ON THESE THINGS. SO
WITH THE INTEREST OF TIME, I
WILL STOP THERE. I CAN SEE THE
THAT YOU'VE BEEN HAVING A LOT OF
PRESENTATIONS. I'LL STOP THERE
AND TAKE QUESTIONS. THANK YOU.
ALL RIGHT. THANK YOU SO MUCH,
VICE CHAIR. AND BEFORE WE JUMP
INTO QUESTIONS, I THINK WE WILL
HEAR FROM TWO OTHER FOLKS. WE'RE
I THINK ALSO JOINED TODAY BY
CONNIE CHO IS CONNIE HERE? YES.
GO AHEAD AND COME ON UP, WHO IS
THE SENIOR POLICY ADVISOR FROM
THE ASIAN PACIFIC ENVIRONMENTAL
NETWORK? AND THEN IF, DOCTOR
YORK IS STILL ON THE, ON THE
ZOOM, I KNOW THAT HE WAS GOING
TO PROVIDE, A AN INDUSTRY
PERSPECTIVE ON HOW THE INDUSTRY
IS PLANNING FOR CALIFORNIA'S
FUELS TRANSITION. BUT WE'LL
START, MISS CHAIR, WITH YOU.
THANK YOU FOR BEING HERE. HELLO,
I'M CONNIE CHO HERE ON BEHALF OF
THE ASIAN PACIFIC ENVIRONMENTAL
NETWORK. AND I WANT TO THANK
YOU. THANK YOU, THE THANK THE
CHAIR FOR GIVING US THE
OPPORTUNITY TO SHARE HOW THESE
ISSUES ARE IMPACTING
ENVIRONMENTAL JUSTICE
COMMUNITIES AND THE ASSEMBLY
MEMBERS AND GOVERNOR NEWSOM FOR
THEIR LEADERSHIP AND WILLINGNESS
TO TAKE ON BIG OIL, I BELIEVE I
HAVE A SET OF SLIDES. YES. IF WE
CAN GO TO THE NEXT SLIDE, SO
TODAY I'M GOING TO BE DRAWING ON
ALSO THE DECADES OF WORK FROM MY
PARTNERS AT COMMUNITIES FOR A
BETTER ENVIRONMENT. OUR
ORGANIZATIONS REPRESENT
FRONTLINE COMMUNITIES THAT LIVE
NEXT DOOR TO OIL REFINERIES IN
RICHMOND AND SOUTH LA, WHICH
ARE, AS YOU CAN SEE HERE IN THE
CALENVIROSCREEN SNAPSHOT,
PREDOMINANTLY LOWER INCOME
INCOME COMMUNITIES OF COLOR
BEARING THE DISPROPORTIONATE
BURDEN OF SOME OF THE WORST AIR
QUALITY IN THE STATE. AND OF
COURSE, AS HAS BEEN MENTIONED
BEFORE, HIT HARDEST BY THE PRICE
SPIKES AND A GREATER POLLUTION
BURDEN RESULTS IN A HIGHER
INCIDENCE OF HARM TO HEALTH,
INCLUDING RESPIRATORY,
CARDIOVASCULAR DISEASE, CANCER,
REPRODUCTIVE AND DEVELOPMENTAL
DAMAGE. NEXT SLIDE. SO JUST TO
GIVE YOU A SCALE OF THE REFINERY
POLLUTION, TWO THIRDS OF ALL
PARTICULATE MATTER PM25
POLLUTION IN THE RICHMOND SAN
PABLO AREA IS FROM THE CHEVRON
RICHMOND REFINERY MORE THAN
MOBILE SOURCES. AND THIS IS AIR
DISTRICT DATA. AND NEXT SLIDE IN
THE WILMINGTON, CARSON, WEST
LONG BEACH AREA REFINERY AND
REFINERY RELATED COMBUSTION IS
THE LARGEST SOURCE OF DIRECT
PM25. AND WHAT'S REALLY NOTABLE
IS THAT REFINERIES ARE THE
NUMBER ONE SOURCE OF VOLATILE
ORGANIC COMPOUNDS HERE, FAR
BEYOND MOBILE SOURCES. AND
BEFORE I GO ON TO THE NEXT
SLIDE, AND I WON'T GO INTO THE
PROPOSALS OR WHAT'S ON TOPIC FOR
TOMORROW, BUT I DID WANT TO
PROVIDE SOME PROCEDURAL HISTORY
THAT DURING THE SP ONE TWO CEC
PROCEEDINGS, WE HAVE SUPPORTED
THE DEVELOPMENT, THE DATA
ANALYSIS AND THE DEVELOPMENT OF
THE MINIMUM INVENTORY POLICY
OPTION AND ALIGNED BECAUSE THE
IDEA TO OUR UNDERSTANDING HAS
BEEN TO UTILIZE EXISTING
STORAGE, SLACK, NOT ONLY BECAUSE
IT EXISTS, BUT BECAUSE, AS YOU
CAN SEE IN THE NEXT SLIDE, THE
GREATEST SOURCE OF VOCS AT
REFINERIES ARE STORAGE TANKS.
VOCS ARE NOT ONLY KNOWN TO
RESULT IN SERIOUS HEALTH
IMPACTS, BUT ARE ALSO SMOG
FORMING. AND THE LA BASIN IS
ALREADY EGREGIOUSLY
NON-ATTAINMENT UNDER THE CLEAN
AIR ACT. AND ACCORDING TO A
SOUTH COAST COMMISSION STUDY,
REFINERIES WERE ACTUALLY FOUND
TO BE UNDERREPORTING VOC
EMISSION DATA, MOST OF WHICH WAS
COMING FROM THE STORAGE TANKS.
SO FOR YEARS NOW, IT'S BEEN A
CRITICAL GOAL TO STOP THE
EXPANSION OF FOSSIL FUEL
INFRASTRUCTURE GENERALLY, BUT
ESPECIALLY THE EXPANSION OF
THESE STORAGE TANK PROJECTS.
NEXT SLIDE. AND NOW THESE HAVE
BEEN SOME REALLY CHALLENGING
POLICY QUESTIONS AND POLICY
WONKY DETAILS THAT HAVE BEEN
COMING UP. BUT I REALLY WANT TO
ZOOM OUT AND TALK ABOUT THIS
HISTORIC INFLECTION POINT THAT
WE'RE AT. THERE IS A SYSTEMIC
AND MASSIVE INFRASTRUCTURE
TRANSITION THAT WE ARE WE HAVE
EMBARKED ON FOR OUR PLANET FOR A
LIVABLE FUTURE. AND WITH THE OIL
ERA COMING TO AN END, LOCAL
COMMUNITIES HAVE BEEN VISIONING
AND ALREADY STARTING TO BUILD A
FUTURE BEYOND OIL. OUR
COMMUNITIES ARE DEMANDING GREEN
SPACES SAFE, SPEEDY, CHEAP,
PUBLIC TRANSIT, SAFE ROUTES TO
WALK AND BIKE TO SCHOOL. LOCAL
COMMUNITIES ARE BEGINNING TO
TAKE STEPS NOW TO FREE
THEMSELVES FROM THE DEPENDANCE
ON BIG, POLLUTING REFINERIES,
AND HAVE IDENTIFIED A SUITE OF
TRANSITION ISSUES THAT REQUIRES
MULTI-STATE AGENCY ACTION,
PERHAPS NEW REGULATORY
AUTHORITY, MORE STATE
INVESTMENTS ALL OVER THE COURSE
OF MULTIPLE DECADES. SO WHILE
THERE'S A SPECIAL SESSION NOW,
THERE ARE RULEMAKINGS AND LEGAL
AUTHORITIES BEING CONSIDERED.
NOW, THIS IS REALLY A
MULTI-DECADE PROJECT, AND THE
SUMMARY GRAPHIC IN THE SLIDES IS
ACTUALLY FROM A PROJECT THAT UC
BERKELEY'S. OTHERING AND
BELONGING INSTITUTE DEVELOPED
OVER MANY YEARS WITH RICHMOND
COMMUNITY MEMBERS, LOCAL
LEADERS, AND ORGANIZATIONS LIKE
OURS IN RICHMOND, AND ECONOMIC
DEVELOPMENT AND JOB IMPACTS.
WHILE I WILL ALWAYS LET LABOR
SPEAK FOR LABOR, BOTH IN TERMS
OF BOTH REFINERY WORKER AND
PUBLIC SECTOR IMPACTS, I WOULD
POINT YOU TO THE REPORTS ON THE
CALIFORNIA FROM THE CALIFORNIA
LABOR FOR CLIMATE JOBS
COALITION, AND I'M HAPPY TO GET
INTO SOME OTHER BALLPARK WAYS TO
TALK ABOUT JOB IMPACT NUMBERS.
IN THE QUESTION PORTION, NEXT
SLIDE. SO NOW AGAIN, PROCEDURAL
HISTORY AT THE LAST SP 21
OVERSIGHT HEARING, WE SHARED OUR
SUPPORT FOR THE CONCEPT OF A
MINIMUM RESERVE AHEAD OF
REGULARLY PLANNED SHUTDOWNS
WITHOUT EXPANDING FOSSIL FUEL
INFRASTRUCTURE, BECAUSE
CALIFORNIA, AS HAS BEEN
DISCUSSED, IS ACTUALLY A NET
EXPORTER OF FINISHED FUELS. AND
SOUTH COAST DATA HAS SHOWN THAT
THERE'S STORAGE SLACK, NEXT
SLIDE. BUT WE ALSO HAVE
GENERALLY SUPPORTED THE IDEA OF
INCREASED OVERSIGHT, PREPARATION
AND RELIABILITY AROUND
MAINTENANCE BECAUSE OF COURSE,
THERE ARE BENIGN SORT OF
UNPLANNED MAINTENANCE EVENTS OR
PLANNED MAINTENANCE EVENTS AND
OR DELAYS. OFTENTIMES THEY ARE
NOT SO BENIGN, THOUGH, BECAUSE
THERE'S BEEN A RECORD OF
CORPORATE MANAGEMENT AT
REFINERIES, NOT THE OPERATORS
ACTUALLY FREQUENTLY FORCING
DEFERRED MAINTENANCE, MEANING
DELAYED, PERHAPS SHORT TERM COST
CUTTING. DECISIONS THAT HAVE
RESULTED IN CATASTROPHIC IMPACTS
ON FRONTLINE COMMUNITIES. YOU
CAN SEE HERE, PICTURED THE 2012
RICHMOND FIRE AND THE TORRANCE
REFINERY 2015 EXPLOSION, WHICH
HAS ALSO BEEN A FEATURE IN THE
PRICE MYSTERY GASOLINE SURCHARGE
DISCUSSION. BUT THESE WERE
ACTUALLY THE CHEMICAL SAFETY
BOARD FOUND A RESULT OF DEFERRED
MAINTENANCE. SO WE LACK AND NEED
LEGISLATION AND REGULATION THAT
PROTECTS OUR COMMUNITIES IN
THREE WAYS, ALL AT ONCE.
AFFORDABILITY AS CONSUMERS,
HEALTH AND SAFETY AS THE PEOPLE
WHO HAVE BEEN SACRIFICED IN THIS
FOSSIL FUEL ECONOMY. AS A RESULT
OF THE HISTORY OF ENVIRONMENTAL
RACISM AND REDLINING AND
CLIMATE, AS THOSE HIT FIRST AND
WORST IN THIS CLIMATE CRISIS. SO
WE CONTINUE TO SUPPORT A MINIMUM
INVENTORY. BUT FAIR TO SAY, OUR
COMMUNITIES COULD NOT RUN THE
RISK OF BIG OIL TAKING ADVANTAGE
OF ANY INADVERTENT LOOPHOLES TO
SKEW THEIR DATA AND JUSTIFY
INCREASING VOC WRITTEN STORAGE
INFRASTRUCTURE. AND LAST SLIDE,
AS FOR THE TRANSITION PLAN,
THERE ARE, AS DISCUSSED, TWO
TRACKS, TECHNICAL WORK GROUP AND
COMMUNITY WORKSHOPS. AND WE HAVE
SOME INITIAL CONCERNS ABOUT THE
TECHNICAL WORK GROUP THAT WILL
BRING TO CARB SOON, BUT WE ARE
REALLY HOPEFUL ABOUT THAT
CONVERSATION AND REALLY EXCITED
FOR THE CONVERSATION THAT WE'VE
BEEN HAVING WITH YOUR STAFF
ABOUT THE COMMUNITY WORKSHOP
PORTION. BECAUSE THE
TRANSPORTATION FUELS ASSESSMENT
PROCESS ACTUALLY HAS BEEN ABLE
TO START CAPTURING THE NEEDS OF
OUR COMMUNITIES. AS YOU CAN SEE
HERE, TO MAKE SURE WE'RE NOT
PROLONGING, REFINING OR
INCREASING PRODUCTION FOR
FOREIGN EXPORT AT THE EXPENSE OF
CALIFORNIA'S COMMUNITIES, AND WE
REALLY WANT TO ENGAGE IN THIS
PRODUCTIVE DIALOG WITH ALL OF
YOU AND INVITE PARTNERSHIP TO
ENSURE THAT SUCH A TRANSITION
PLAN AND OTHER TRANSITION
PLANNING PROCESSES TAKE REAL
STEPS TOWARDS A WHOLE OF
GOVERNMENT APPROACH AND CENTERS
EQUITY, TO EMPHASIZE, WE REALLY
NEED MORE COORDINATED PLANNING,
BECAUSE IF WE CONTINUE TO DEFER
TO THE INDUSTRY LED PLAYBOOK
THAT'S IN MOTION RIGHT NOW, WE
ARE GOING TO CONTINUE TO
EXPERIENCE THESE UNCONTROLLED
PRICE SPIKES, CONTINUE TO
WITNESS MASS LAYOFFS FROM SUDDEN
CLOSURES, AND CONTINUE TO SEE
JUST ONE POLLUTING INDUSTRY
REPLACE ANOTHER. AND FRONTLINE
COMMUNITIES, ACTUALLY, ALL
TAXPAYERS WILL THEN BEAR THE
BURDEN. THE MULTIBILLION DOLLAR
PRICE TAG OF THE CLEANUP AND
PUBLIC HEALTH COSTS THAT ARE ON
THE HORIZON FOR REFINERIES. SO
AS THE LEGISLATURE, WHEN YOU
EVENTUALLY REVIEW THE TRANSITION
PLAN, I DO HOPE THAT YOU WILL
EVALUATE WHETHER IT SPEAKS TO
THE ISSUES THAT LOCAL
COMMUNITIES HAVE STARTED TO
IDENTIFY AND START TO MAP OUT
PATHWAYS TO SUPPORT THE
FRONTLINE COMMUNITIES AND
WORKERS AROUND THESE ISSUES IN A
COMPLEX, LONG TERM, MULTI-DECADE
PHASE DOWN OF OIL REFINING THAT
IS SO NECESSARY FOR OUR CLIMATE
FUTURE. THANK YOU. HAPPY TO TAKE
QUESTIONS. THANK YOU. ALL RIGHT.
AND DO WE HAVE DOCTOR YORK STILL
ON THE ZOOM AFTER? YEAH I'M
STILL HERE. OH, WONDERFUL,
DOCTOR YORK, DID YOU WANT TO
PROVIDE A BIT OF AN OVERVIEW OR
SUMMARIZE FOR US, KIND OF HOW
THE INDUSTRY IS APPROACHING,
CALIFORNIA'S FUELS TRANSITION,
OR DO YOU JUST WANT TO BE
AVAILABLE FOR QUESTIONS, LET ME
JUST MAKE A COUPLE OF
OBSERVATIONS, ON ON SORT OF THE
PRICE HISTORY IS, I THINK THE
CDC AND THEIR TRANSPORTATION
FUEL ASSESSMENT, WE TALKED ABOUT
IT IN THE PRIOR SESSION IS THAT
THEY DID THIS REALLY THAT GREAT
CHART. IT'S THE EXECUTIVE
SUMMARY CHART Tê. AND THEN IT
REPEATS ITSELF AGAIN IN THE BODY
OF THE PAPER THAT STACKS UP THE
THAT MONTHLY GASOLINE DEMAND,
MONTHLY PEAK GASOLINE DEMAND AND
CAPACITY, REFINING CAPACITY OF
THE CALIFORNIA REFINERIES. THE
REASON WHY THAT'S SUCH A GREAT
CHART IS THAT IT SHOWS YOU AS
THESE REFINERIES HAVE CLOSED
DOWN CALIFORNIA, THE SLACK HAS
COME OUT OF THE CALIFORNIA
SYSTEM, AND YOU'VE KIND OF GONE
TO A KNIFE EDGE. AND IF YOU LOOK
AT THE CHART CLOSELY, AROUND
2015 IS WHEN CALIFORNIA STARTED
TO BECOME STARTED TO APPROACH A
BALANCE TO AN IMPORT PARITY
SITUATION. AND WHEN YOU'RE
STARTING, WHICH MEANS YOU'RE NO
LONGER PRODUCING THE LAST BARREL
OR GALLON OF GASOLINE IN
CALIFORNIA, YOU'RE HAVING TO
BRING THAT IMPORT THAT MATERIAL
IN. AS ONE OF THOSE BLENDING
COMPONENTS WE TALKED ABOUT IN
THE FIRST SESSION, EITHER FROM,
AS NEIL WAS TALKING ABOUT,
EITHER FROM SINGAPORE OR FROM
EUROPE, THAT'S GOING TO BE A
MORE EXPENSIVE COMPONENT THAN IF
YOU REFINED THE SAME COMPONENT
IN CALIFORNIA. SO THERE'S PART
OF THE PRICE INCREASE. AND
THAT'S ALSO GOING TO BE MORE
VOLATILE BECAUSE IT'S BECAUSE
YOU'VE GOT THAT SHIPPING TIME
INVOLVED IN IT AS WELL THAT WE
TALKED ABOUT THAT LONGER SUPPLY
CHAIN, THE OTHER THING IS THAT
I'VE BEEN LOOKING AT THESE
CHARTS WHERE YOU COMPARE
CALIFORNIA GASOLINE PRICES TO US
GASOLINE PRICES AND, AND IT SOME
THINGS ALWAYS KIND OF BOTHERED
ME ABOUT THE CHART. AND I
FINALLY FIGURED OUT WHAT IT WAS
IS US GASOLINE IS ABOUT 70%
CONVENTIONAL GASOLINE. SO IF YOU
STRIP THAT SO FIRST OF ALL, YOU
WOULD EXPECT CALIFORNIA GASOLINE
PRICES TO BE ABOVE THE US
BECAUSE CONVENTIONAL IS JUST A
MUCH SIMPLER FUEL TO MAKE THAN
CALIFORNIA, BUT IF YOU START
STRIP, THEN IF SO, WHAT YOU
OUGHT TO BE DOING IS
VOLUMETRICALLY TAKING OUT THE
CONVENTIONAL GASOLINE AND
COMPARING CARB GASOLINE TO
REFORMULATED GASOLINE AND THE
REST OF THE US. BUT EVEN THERE,
YOU'RE STILL GOING TO HAVE A
PRICE DIFFERENTIAL BECAUSE
THEY'RE COMPLETELY DIFFERENT
FUELS. SO EVEN IF YOU TOOK
CONVENTIONAL FUEL OUT, YOU'RE
STILL COMPARING APPLES TO
ORANGES. WHEN YOU LOOK AT THOSE
PRICE DIFFERENTIALS. AND SO ONE
OF THE THINGS I WOULD LIKE TO
SEE IS NOW THAT CALIFORNIA IS
MOVING TOWARDS IMPORT PARITY,
WHERE AND CALIFORNIA IS HAVING
TO PULL THOSE, THOSE LAST BLEND
STOCKS FROM FARTHER. YOU KNOW,
FARAWAY LOCATIONS IS TO SEE A
BUILD UP OF WHAT IS THE PRICE
SETTING MECHANISM. MEANING WHERE
IS THAT LAST BARREL BLEND STOCK
BARREL COMING FROM. AND WHAT IS
THE COST TO GET THAT BARREL
FROM, SAY, SINGAPORE AND TO SHIP
IT TO CALIFORNIA? AND THEN
COMPARE THAT THAT COST SUPPLY,
YOU KNOW, THAT COST STACK TO THE
PRICE OF CALIFORNIA. IT WOULD BE
CARB BECAUSE IT WOULDN'T BE THE
RETAIL PRICE. BUT COMPARED TO
CARB AND START SEEING HOW MUCH
OF THAT IMPORTING THE COST OF
HAVING TO IMPORT BLEND STOCKS IS
EXPLAINING THAT RISE AND THAT
RISE. YOU KNOW, THE IN THIS
INCREASE IN PRICES YOU'VE SEEN
IN CALIFORNIA SINCE 2015, AND
HOW MUCH OF THE VOLATILITY CAN
BE EXPLAINED BY HAVING THAT
SUPPLY CHAIN IS GETTING LONGER.
AND SO I'LL JUST STOP THERE AND
SAY WE CAN AND FIELD ANY
QUESTIONS. ALL RIGHT. THANK YOU.
THANK YOU SO MUCH DOCTOR YORK.
AND THEN LAST THING I DO WANT TO
SAY QUICKLY BEFORE WE OPEN IT UP
FOR QUESTIONS IS OF COURSE, ANY
TIME THAT WE'RE HAVING A
CONVERSATION ABOUT CALIFORNIA'S
FUEL TRANSITION, FUELS
TRANSITION, THE IMPACT ON
WORKERS AND THE WORKFORCE IS
CERTAINLY FRONT AND CENTER IN IN
OUR MIND, WE HAVE HUNDREDS OF
THOUSANDS OF HARD WORKING
CALIFORNIANS WHO ARE EARNING A
GOOD LIVING AS PART OF THIS
WORKFORCE. UNFORTUNATELY OUR
DESIGNATED LABOR REPRESENTATIVE
WAS UNABLE TO BE PART OF TODAY'S
HEARING, WHICH IS WHY THEY ARE
NOT INCLUDED ON THIS PANEL. WE
DO HAVE A NUMBER OF FOLKS WHO
ARE JOINING US AS PART OF
TOMORROW'S HEARING. FROM LABOR
AND FROM THE TRADE. SO IF FOLKS
HAVE A QUESTION ABOUT WORKFORCE
AND TRANSITION, JUST, AGAIN,
KIND OF MAKE A NOTE OF THAT AND
WE'LL BE ABLE TO ASK THOSE
QUESTIONS AS PART OF OUR
CONVERSATION TOMORROW. OKAY. SO
WITH THAT, LET'S GO AHEAD AND
OPEN IT UP, ASSEMBLY MEMBER
FLORA, ARE YOU, ALL RIGHT.
YOU'RE UP. THANK YOU, MADAM
CHAIR, THANK YOU FOR EVERYBODY
FOR BEING HERE. IT'S BEEN KIND
OF A LONG AFTERNOON, BUT I JUST
WANTED TO, RUN A FEW THINGS BY
FROM THE CDC, YOU MENTIONED, YOU
KNOW, UNDER THE LAST
EXTRAORDINARY SESSION THAT WE
HAD, YOU KNOW, SENATOR SKINNER'S
BILL ON THE SPOT MARKET, THAT
YOU WERE COLLECTING A LOT OF
DATA. WHAT HAVE WE DONE WITH
THAT DATA THAT REGULATES THE
SPOT MARKET PRICING? THANK YOU,
ASSEMBLY MEMBER FOR THAT
QUESTION. SO WE HAVE, WHAT WE'RE
GATHERING IS, AS YOU SAID,
ADDITIONAL SPOT MARKET DATA
THAT'S NOT NECESSARILY REPORTED
IN THE OPUS. OUR CURRENT, HOPE,
YOU KNOW, WE DID A RULEMAKING.
WE WANT TO PUT THAT DATA OUT.
AND WHAT WE'RE RUNNING THROUGH
IS, YOU KNOW, LOOKING AT THE
LEGAL TRAPS AND WORKING THROUGH
WORKING GROUPS ON THE POTENTIAL
LEGAL ISSUES AROUND DISCLOSING
THAT INFORMATION. BUT OUR
CURRENT THING IS TO PUT THE DATA
OUT FOR COMPARISON WITH THE
OPUS. OKAY. THANK YOU FOR THAT.
AND THEN YOU ALSO MADE A COMMENT
THAT THE CEC WAS LOOKING INTO
DEPLOYING ALTERNATIVE FUELS. AND
I'M JUST CURIOUS IF YOU COULD
GIVE AN EXAMPLE OF WHAT THAT
MIGHT BE. YEAH, I WAS SPEAKING
FOR CARB. DO YOU WANT TO JUMP
INTO THE ALTERNATIVE FUELS. GOOD
AFTERNOON, ASSEMBLY MEMBERS. SO
THERE IS A VARIETY OF FUELS THAT
WE'RE LOOKING AT. AND ONE OF THE
SLIDES THAT SHOWED THAT WE'RE
LOOKING AT THINGS SUCH AS,
HYDROGEN ELECTRICITY AND
POTENTIALLY EVEN E15, FOR THE
LIQUID PETROLEUM NEEDS FOR
DISPLACING SOME OF THAT, THAT
PETROLEUM DEMAND, ALL OF THIS IS
GOING TO ADD MORE
DIVERSIFICATION IN THE FUEL
POOL. AND IT WILL INCREASE THE
NUMBER OF FUEL PROVIDERS IN THE
STATE OF CALIFORNIA, WHICH WILL
HELP WITH HEALTHY COMPETITION
FOR THAT ENERGY. NÓ. AND I'D
LOVE TO HEAR THAT, QUITE
FRANKLY. DO WE HAVE ANY TYPE OF
TIME FRAME ON WHEN SOME OF THESE
COULD BE APPROVED AND MOVING
FORWARD? SO ON E15, WE'RE GOING
THROUGH A MULTI-MEDIA PROCESS
WHICH IS IN STATUTE TO MAKE SURE
THAT THERE AREN'T ANY ANY
UNINTENDED CONSEQUENCES OF
INTRODUCING THAT FUEL SPEC INTO
THE STATE. SO WE'RE IN PROCESS
OF DOING THAT. AFTER THAT IS
COMPLETED, THEN WE WOULD HAVE TO
UNDERTAKE A RULEMAKING TO ADD
THAT FUEL SPEC TO THE POOL OF
FUELS THAT ARE USED IN THE
CALIFORNIA ECONOMY FOR
ELECTRICITY AND HYDROGEN. OUR
LOW CARBON FUEL STANDARD IS
DOING A SIGNIFICANT AMOUNT OF
WORK IN HELPING TO MATCH FEDERAL
FUNDING TO MAKE SURE THAT THOSE
FUELS CAN BE PRODUCED AND
DEPLOYED, AND THE INFRASTRUCTURE
BUILT IN THE STATE OF CALIFORNIA
AT LOWER COST TO CALIFORNIANS
AND SO WE LOOK AT THIS
COMPREHENSIVELY. IT'S NOT JUST
ONE TOOL. IT'S MANY TOOLS. AND
WE WANT TO MAKE SURE THAT OUR
POLICIES HANG TOGETHER AND THAT
WE ALSO LEVERAGE THAT FEDERAL
FUNDING THAT'S AVAILABLE RIGHT
NOW. NO, I APPRECIATE THAT. AND
JUST AS IT RELATES TO E15, YOU
KNOW, 49 OTHER STATES OBVIOUSLY
USE E15. SO I FEEL LIKE THERE'S
PROBABLY A PATHWAY THAT WE COULD
PROBABLY GET TO THAT. AND I
THINK ONE THING, YOU KNOW, BEING
ELECTED FOR A NUMBER OF YEARS
NOW, YOU KNOW, I DON'T WANT TO
SEE PERFECT BE THE ENEMY OF
GOOD. YOU KNOW, THERE IS A
TRANSITION AND SO I THINK I DO
APPRECIATE, YOU KNOW, ACCEPTING
ALL SORTS OF RENEWABLES IS AND,
YOU KNOW, CLEANER ENERGIES IS
WHERE WE NEED TO START WITH. AND
I UNDERSTAND THAT, YOU KNOW, IF
WE COULD FLIP A SWITCH FOR SOME
PEOPLE TOMORROW, THAT WOULD BE
WHAT THEY PREFER AND GO ALL
ELECTRIFICATION. BUT AS A GUY
THAT REPRESENTS THE CENTRAL
VALLEY AND AN AG COMMUNITY, THAT
SIMPLY DOESN'T EXIST FOR US, YOU
KNOW, WHEN WE TALK ABOUT
ELECTRIC VEHICLES, THE
CONCENTRATION OF ELECTRIC
VEHICLES IS IN LA, THE BAY AREA,
NOT IN MODESTO. RIGHT. AND SO I
THINK WE HAVE TO BE VERY HONEST
WHEN WE TALK ABOUT COMMUNITIES
AND WHO WE SERVE AND WHO WE
REPRESENT, THAT ALL COMMUNITIES
ARE REPRESENTED AND NOT JUST THE
ONES THAT ARE IN THE MORE URBAN
SETTINGS. SO I JUST APPRECIATE
YOUR TIME AND THANK YOU FOR
BEING HERE. ALL RIGHT. THANK
YOU. ASSEMBLY MEMBERS, FOR.
THANK YOU. MR. IT'S NICE TO SEE
YOU AGAIN. I JUST HAVE ONE QUICK
QUESTION, WHICH I ASKED EARLIER
AND IT'S RELATED TO, PAGE 15 ON
THE TRANSPORTATION FUELS
ASSESSMENT, THE CHART THAT HAS
THE NINE, IT WAS SAID EARLIER
TODAY THAT THERE WERE 20
REFINERIES THAT ARE NOW DOWN TO
NINE. AND I THINK WE HEARD
ANOTHER NUMBER THAT WERE 40. 20
YEARS AGO, COULD YOU JUST,
ELUCIDATE A LITTLE BIT MORE LIKE
WHAT'S ACTUALLY HAPPENED WITH
THIS? LIKE, WERE THERE OTHER
REFINERIES THAT CLOSED IN THE
COUPLE OF YEARS BEFORE 2006, AND
THEN ALSO THEN TALK A LITTLE BIT
ABOUT WHAT THE ACTUAL REFINING
CAPACITY IS, BECAUSE I KNOW THAT
THE NUMBER OF REFINERIES IS NOT
REALLY THE MOST IMPORTANT PIECE
OF THAT. BUT IF YOU COULD JUST
JUST GIVE US A SENSE OF SORT OF
HOW REFINING CAPACITY HAS
DECLINED OVER THE 20 YEARS, IT
DOESN'T LOOK LIKE IT'S DECLINED
BY THAT MUCH. IT'S BEEN ONE, YOU
KNOW, 1.2 MILLION BARRELS A DAY
DOWN TO UNDER 1 MILLION NOW. AND
I ASSUME IT'S PROJECTED TO
DECLINE SORT OF GRADUALLY IN THE
NEXT FEW YEARS. IF YOU COULD
JUST TALK ABOUT THOSE ISSUES.
YEAH. THANK YOU. ASSEMBLY
MEMBER. I JUST WANT TO KIND OF
GO BACK TO THINK THROUGH THIS AT
THE TOP, AT THE HIGHEST LEVEL,
WE HAD ABOUT 40 REFINERIES IN
CALIFORNIA, AND THIS WAS GOING
INTO THE 80S. AND THEN AS WE,
YOU KNOW, CAME IN TODAY, WE HAVE
ABOUT 13 REFINERIES IN
CALIFORNIA, NINE OF THEM PRODUCE
CARB, INCLUDING KERN, WHICH IS A
VERY SMALL REFINERY. AND THAT
DOESN'T THAT'S ABOUT A PERCENT,
IN TOTAL. SO WHEN WE THINK ABOUT
WHAT HAPPENED IN TERMS OF
CONSOLIDATION, I THINK, YOU KNOW,
IF WE WORK WITH THE PRESUMPTION
THAT 2017 WAS THE PEAK GASOLINE
DEMAND, RIGHT. JUST GOING TO
TALK WITH THAT DATA POINT AS AN
ANCHOR, THE PEAK HAPPENED IN
2017. SO ANY KIND OF INCREMENTAL
VOLUME BEYOND THAT IN CALIFORNIA
WAS ACCESS FOR COMPETITION. SO
AS YOU LOOK THROUGH THE
CONSOLIDATION, MUCH OF THE
CONSOLIDATION HAPPENED BEFORE AB
32, FOR EXAMPLE. AND IT'S PRIOR
TO, YOU KNOW, SOME OF THE
CLIMATE LEGISLATION THAT WE HAD
AND THAT CONSOLIDATION PRIMARILY
HAPPENED WITH THE SMALLER ONES
GOING OUT OF BUSINESS AND LARGER
ONES EITHER COMING TOGETHER INTO
A SINGLE REFINERY OR SOMETIMES,
YOU KNOW, BEING USED FOR
DIFFERENT PURPOSES. DOES THAT
DOES THAT HELP? YEAH. AND I
GUESS THE QUESTION I HAVE IN
TERMS OF THE 40 OR 20, DROPPING
DOWN TO 11 AND THEN NINE FOR
CARB, WHAT IS THE ACTUAL, YOU
KNOW, OVER THAT 20 YEARS, WHAT
HAS BEEN THE REDUCTION IN THE
ACTUAL CAPACITY, IN TERMS OF,
YOU KNOW, MILLIONS OF BARRELS A
DAY? YEAH, IT'S ALMOST A THIRD.
IF I PUT A NUMBER, IT'S LIKE
ABOUT 2.5 BILLION BARRELS IS
WHAT OUR PEAK REFINING CAPACITY
IN CALIFORNIA WAS. AND TODAY
IT'S ABOUT 1.5. GREAT. THANKS
ANSWER THE QUESTION. ASSEMBLY
MEMBER BENNETT. THANK YOU VERY
MUCH. I'LL TRY TO GO AS QUICK AS
I CAN. JUST REAL QUICK QUESTION
FOR CÁC REPRESENTATIVE. SOME
REFINERIES ACTUALLY HAVE GROWN
IN CAPACITY WHILE WE'VE HAD THIS
REDUCTION. CORRECT. SO PARTIALLY
WHAT'S HAPPENED IS THE DEMAND
HASN'T DROPPED AS MUCH AS YOU
MIGHT THINK WITH THE REFINERY
DROP THAT IS OUT THERE. SECOND
QUESTION OR SECOND POINT I'D
LIKE TO MAKE IS I WANT TO GIVE
CARB CREDIT, ASSEMBLY MEMBER
ASKED A QUESTION ABOUT ETHANOL
AND CARB DID WHAT WE ASKED THEM
TO DO, AND THAT IS THEY HAVE
INVESTIGATED IT. AND IN THEIR
REPORT ON PAGE 48 THEY SAY, HEY,
WE THINK 15% IS PROBABLY GOING
TO BE OKAY. SO CREDIT TO THEM
FOR FOLLOWING THROUGH ON THAT.
THE INDUSTRY REPRESENTATIVE WAS
ASKED A QUESTION. DO YOU THINK
PRICING POWER IS PART OF THE
PROBLEM HERE? AND THE INDUSTRY
REPRESENTATIVES RESPONSE WAS,
NO, IT'S THESE OTHER THINGS. AND
WE JUST HEARD THE EXPLANATION
ABOUT, WELL, IT'S BECAUSE WE'RE
NOT WE'RE NOT COMPARING APPLES
TO ORANGES. I FIND THAT THAT
DOESN'T, I DON'T THINK THAT
EXPLAINS THE PRICE DIFFERENTIALS
IDENTIFIED BY THE CEC. IT
CERTAINLY DOESN'T EXPLAIN WHY
NON-BRAND AND BRAND HAVE A
SMALLER PRICE DIFFERENTIAL IN
CALIFORNIA THAN THEY DO EVERY
PLACE ELSE. THAT'S ALMOST
CERTAINLY PRICING POWER, BECAUSE
THE BIG VERTICALLY INTEGRATED
COMPANIES CAN SIT THERE AND
CHARGE THE NON-BRAND COMPANIES A
HIGHER PRICE, ALLOWING THEM TO
KEEP THEIR PRICE HIGHER. THAT'S
THE NORMAL ECONOMIC EXPLANATION.
I'M NOT SAYING, YOU KNOW, LIKE
WE HAVE WHERE WE HAVE THE
SMOKING GUN. IT ALSO, THE
EXPLANATION THAT WAS PRESENTED
BY MR. YORK DOESN'T EXPLAIN WHY
THE FEATHER DOWN COMES SLOWER
THAN THE THAN THE SPIKE UP.
RIGHT. AND SO BOTH OF THOSE ARE
ALMOST CERTAINLY FROM PRICING
POWER. AND I THINK ANYBODY WITH
COMMON SENSE WOULD SAY PRICING
POWER IS PART OF THE PROBLEM
HERE, PRICING POWER IS NOT BEING
USED. FOR THE BENEFIT OF THE
PUBLIC. PRICING POWER IS BEING
USED FOR THE BENEFIT OF THE
CORPORATION. AND THAT'S WHAT
CORPORATIONS DO. IF THEY CAN DO
IT, FINE. IT'S OUR
RESPONSIBILITY TO SAY IT'S TIME
FOR US TO DO SOMETHING ABOUT IT
IN THE PUBLIC'S INTEREST. AND SO
IF I COULD, VERY QUICKLY, MR.
YORK MADE THE POINT THAT WE ARE
CLOSER TO THE KNIFE EDGE IN
TERMS OF SUPPLY AND DEMAND THAN
WE'VE EVER BEEN. AND I WOULD
OFFER, IF WE'RE CLOSER TO THE
KNIFE EDGE THAN WE'VE EVER BEEN
IN TERMS OF SUPPLY AND DEMAND.
IN OTHER WORDS, IF WE DON'T HAVE
VERY MUCH CUSHION, THEN THE
AMOUNT OF NORMAL INVENTORY THAT
WE KEEP BECOMES MORE CRITICAL,
NOT LESS CRITICAL. IT BECOMES
MORE IMPORTANT IN THE PUBLIC'S
INTEREST TO HAVE APPROPRIATE
INVENTORY WHEN WE ARE OPERATING
AT THE KNIFE EDGE. IMAGINE IF
THE ELECTRIC UTILITIES AND WE'VE
ALREADY DONE THAT HERE. THE
ELECTRIC UTILITIES CAME TO US
AND SAID, WHEN WE ARE GOING TO
HIT OUR PEAK DEMAND, WE DON'T
THINK WE HAVE ENOUGH ELECTRICITY
THAT FOR ALL THE CONTINGENCIES.
SO WE HAVE AT GREAT POLITICAL
EXPENSE SAID WE NEED TO KEEP
SOME GAS POWER PLANTS ON. WE
NEED TO DO SOME THINGS WE,
PUBLIC POLICY WISE, SAID. WE
NEED TO DO THAT. IT'S NOT
INAPPROPRIATE FOR US TO AT LEAST
CONSIDER, AND THAT'S ALL WE'RE
DOING IS CONSIDERING AUTHORIZING
THE CEC TO LOOK AT THAT AND SEE
IF IT MAKES SENSE. AND A
QUESTION I WANT TO EMPHASIZE,
BECAUSE IT KEEPS COMING UP OVER
AND OVER TODAY. AGAIN, DO WE
NEED TO BUILD A SIGNIFICANT
NUMBER OF NEW STORAGE TANKS TO
STAY AT A 15 DAY STORAGE
CAPACITY? NO, THAT'S THE SHORT
ANSWER. SO I THINK, AS A MEMBER,
IF YOU MAY ALLOW, ALLOW ME TO
JUST KIND OF EXPAND ON THAT A
LITTLE BIT. SO IF I WAS GOING TO
REPEAT THE QUESTION JUST TO
EMPHASIZE IT. YES. SO I'D RATHER
YOU EXPAND. RIGHT, RIGHT. SO I
THINK, YOU KNOW, THE SO FIRST OF
ALL, I KIND OF WANT TO BE
RESPECTFUL OF, OF THE SETTING
TABLE SETTING HERE AND DO NOT
WANT TO MAKE, ASSERTIONS THAT
MIGHT COME OFF AS MOTIVATED BY,
BY TRYING TO MAKE A POINT. SO
I'LL TRY TO KIND OF JUST STAY
WITH THE FACTS OF THE MATTER. SO
IF YOU LOOK AT THE LAST THREE
YEARS AND IF YOU LOOK AT AND SAY
THE PRICE SPIKES HAPPENED OVER
THE LAST THREE YEARS, 22 WAS A
HIGHER SPIKE THAN 23 AND 23 WAS
A HIGHER SPIKE THAN 24. AND JUST
LOOK AT THE INVENTORIES IN 2024,
WE HAVE HIGHER INVENTORIES IN
THE WEST. THAT IS LARGELY
CALIFORNIA AT THIS POINT OF TIME
COMPARED TO THE LAST COUPLE OF
YEARS. AND THAT'S THE REASON WHY
YOU DON'T HAVE PRICE SPIKE. SO
IF, LET'S SAY, THE ASSERTION IS
TRUE, THAT, THAT WE DON'T HAVE
THE CAPACITY AT ALL, WHY ARE MY
CAPACITY, WHY ARE MY INVENTORIES
HIGHER TODAY THAN THE LAST
COUPLE OF YEARS AT THIS POINT IN
TIME? SO THE QUESTION AT THE TOP
LEVEL IS, YOU KNOW, I WANT TO BE
VERY RESPECTFUL TO THE INDUSTRY
COLLEAGUES THAT WERE ON THE
PREVIOUS PANEL. AND ONE THING
THAT WAS MENTIONED ON THE
PREVIOUS PANEL WAS THE IDEA OF
LINEAR PROGRAMING. RIGHT, THEY
TALKED ABOUT THE COMPLEXITY OF,
OF THE ENTIRE INDUSTRY AND THE
OPERATIONS 100%. IT'S ONE OF THE
MOST COMPLEX LOGISTICALLY
OPERATIONALIZED IN THE INDUSTRY.
ABSOLUTELY. BUT WHAT HAPPENS IS,
YOU KNOW, WHAT WHAT LINEAR
PROGRAMING IS, IS THE WORD IS
FOR OPTIMIZATION. AND EVERY
OPTIMIZATION HAS AN OBJECTIVE
FUNCTION AND CONSTRAINTS. THAT'S
THAT'S HOW YOU DO OPTIMIZATION.
SO FOR EXAMPLE, IF YOU GET ON A
GOOGLE MAP AND YOU WANT TO GIVE
A AND B, IT OPTIMIZES YOUR
DISTANCE OR IT OPTIMIZES YOUR
TIME. SO IN THIS CASE, WHAT
THEY'RE OPTIMIZING FOR IS
ENSURING REVENUE MAXIMUM
REVENUE. NO COMPLAINTS. IT'S A
FOR PROFIT BUSINESS. AND THE
CONSTRAINTS ARE NOT NECESSARILY
LOOKING AT EVERY CONTINGENCY
THAT THEY HAVE TO COVER THE
CONSTRAINTS ARE ABSOLUTELY SURE.
THERE ARE SOME OPERATIONAL
CONSTRAINTS WITHIN THE
REFINERIES. THE QUESTION IS, ARE
WE MAXIMIZING OUR PRE-PLANNING
AHEAD OF THE SUMMER? THAT WOULD
REDUCE OUR REACTIVE BEHAVIOR AS
AN INDUSTRY DURING A CRISIS THAT
WILL BE DIRECTLY TRANSLATED TO
THE SPOT MARKET, WHICH WILL THEN
GO TO THE RACK, WHICH WILL THEN
GO TO THE WHOLESALE, WHICH WILL
THEN GO TO THE RETAIL PUMP, THAT
IS WHAT WE'RE TALKING ABOUT. SO
WHILE 15 DAYS OF SUPPLY WAS A
METRIC THAT CDC PUT OUT THERE AS
AS KIND OF AN INTERESTING CURVE
THAT WE'VE OBSERVED, IF THE
LEGISLATION WERE TO PASS, THE
CEC WILL HAVE TO TAKE ALL THESE
DIFFERENT VARIABLES AND THINK
ABOUT HOW DO WE MAXIMIZE OUR
PRE-PLANNING. THAT MIGHT NOT
MEAN THAT WE WILL COMPLETELY
ELIMINATE THE SPIKE. THAT MIGHT
NOT MEAN THAT WE CAN MAGICALLY
SOLVE THE ISSUE. BUT IF YOU ASK
ME, BASED ON THE INFORMATION I
HAVE, WHICH I CANNOT TALK
PUBLICLY BECAUSE OF REGULATION,
I CAN SHOW YOU OVERALL KIND OF
CONSOLIDATED INFORMATION. I
ABSOLUTELY BELIEVE, BASED ON THE
INFORMATION WE HAVE, THAT THERE
ARE EFFICIENCIES TO GAIN IN THE
SYSTEM. GREAT. THANK YOU. THANK
THANK YOU VERY MUCH, ASSEMBLY
MEMBER PATTERSON. I'M NOT I'VE
GOT A COUPLE MORE QUESTIONS HERE
REAL QUICK. HERE AND THEN IN THE
INTEREST OF TIME, TWO MORE
MINUTES. SURE THANK YOU, IN OUR
REPRESENTATIVE, WE HAVE NUMBER
ONE. JUST FOR THE BENEFIT OF MR.
JACKSON, I ASKED THE QUESTION.
DO WE NEED DO WE NEED MORE
STORAGE TANKS? AND THE ANSWER
WAS NO. AND Ã. NO, I'M NOT SURE
YOU CAUGHT THAT, BUT, OUR OUR
ENVIRONMENTAL JUSTICE
REPRESENTATIVE HERE, THERE ARE
TWO GOALS THAT WE HAVE. AND ONE
GOAL IS THE ENVIRONMENTAL
IMPACTS THAT ARE HAPPENING IN
DISADVANTAGED NEIGHBORHOODS. AND
THE OTHER IS THE PRICE IMPACTS
OF GASOLINE THAT MR. JACKSON
CLEARLY POINTED OUT. YOU KNOW,
YOU DON'T HAVE ENOUGH MONEY TO
BE ABLE TO GET THERE. I THINK
THAT MY QUESTION FOR MR, FOR MR.
GUNDA IS THAT IF WE DO THIS
APPROACH, THAT THAT POTENTIALLY
IS BEING TALKED ABOUT, DO YOU
SEE THAT SIGNIFICANTLY
LENGTHENING THE AMOUNT OF TIME
REFINERIES ARE OUT THERE DOING
BUSINESS, OR DOES IT PRIMARILY
SIMPLY AFFECT THE PRICE SPIKE
IMPACT THAT'S OUT THERE? BUT THE
LENGTH OF TIME REFINERIES ARE
GOING TO BE THERE, HAVING A
NEGATIVE IMPACT ON DISADVANTAGED
COMMUNITIES IS GOING TO BE ABOUT
THE SAME. YEAH, I THINK IT'S THE
FORMER. I THINK WE WILL. WE ARE
TRYING TO MITIGATE THE PRICE
SPIKE. ASSEMBLYMEMBERS I THINK
ONE OF THE THINGS THAT I WE
ALWAYS LOOK TO THE LEGISLATION,
ANY LEGISLATION THAT WE, YOU
KNOW, THAT WE HAVE TO I'M GOING
TO CUT YOU OFF BECAUSE I'VE GOT
A TWO MINUTE LIMIT, BUT YOU
DON'T THINK IT'S GOING TO DO ANY
MORE. AND IF AN UNPLANNED EVENT
HAPPENS, AS THEY KEEP TALKING
ABOUT IT'S UNPLANNED EVENTS, IF
AN UNPLANNED EVENT DOES HAPPEN,
CHEVRON HAS TO GO DOWN FOR THE
DAY. ARE WE BETTER OFF WITH A
NINE DAY INVENTORY OR ARE WE
BETTER OFF WITH A 15 DAY
INVENTORY? 15. THANK YOU. GREAT.
AND JUST AS A REMINDER, WE ARE
GOING TO DIG INTO ALL THE
DETAILS OF THE GOVERNOR'S
PROPOSAL TOMORROW AND WE'RE
GOING TO HAVE AMPLE TIME FOR
QUESTIONS AND COMMENTARY ON SAID
PROPOSAL. OKAY, LET'S GO TO
ASSEMBLY MEMBER JACKSON. THANK
YOU VERY MUCH. THANK YOU VERY
MUCH FOR THE INFORMATION, I WANT
TO GO BACK TO THE IDEA OF JUST
FOCUSING ON A SOLUTION TO DEAL
WITH THE SPIKES AND MY OVERALL
GOAL. I'M I'M TRYING TO ALWAYS
BE TRANSPARENT IS TO MAKING SURE
THAT AT THE END OF THE DAY, WHEN
PEOPLE DO THEIR ANNUAL
ASSESSMENT OF WHAT THEY'VE BEEN
SPENDING THEIR MONEY ON, THAT
THAT DOLLAR AMOUNT ON THEIR GAS
ACTUALLY TRENDS DOWN. NOT UP.
WHAT HOW MUCH IS IT YOUR GOAL TO
MAKE SURE THAT PRICES OVERALL
ARE LOWER, NOT JUST GETTING RID
OF THE SPIKE? THANK YOU.
ASSEMBLYMEMBER, I THINK LET ME
JUST KIND OF UNDERSTAND THE
QUESTION. SO WE SEE TWO
PROBLEMS. AS YOU MENTIONED,
OVERALL PRICES ARE GOING UP,
BETWEEN, YOU KNOW, OVER THE LAST
TEN, 15 YEARS AND THE SPIKES ARE
HAPPENING MORE AND MORE
FREQUENTLY. WHAT WE'RE LOOKING
AT IS BOTH RIGHT. SO I THINK
WHETHER YOU'RE TALKING ABOUT
JUST THE SPIKE OR THE
OVERARCHING PRICES GOING UP,
OBVIOUSLY WITH INFLATION, WITH
JUST THE COST OF LIVING, THOSE
THINGS WILL GO UP LIKE
EVERYTHING ELSE. BUT OVERALL,
OUR OBJECTIVE AS THE STATE
AGENCY IS TO STUDY ALL OPTIONS
THAT CAN ULTIMATELY REDUCE THE
PRICE OF THE PUMP IN WHOLE AND
THE PRICE SPIKE. RIGHT. BUT WE
WILL OPERATE WITHIN WITHIN THE
GUARDRAILS THAT YOU'VE YOU KNOW,
THAT YOU CREATE THROUGH THE
LEGISLATION AND IT WILL TAKE
INTO ACCOUNT LOCAL IMPACTS, WILL
TAKE INTO ACCOUNT LABOR
IMPLICATIONS AND POTENTIAL
REFINERIES AND LIQUIDITY. SO ALL
THOSE THINGS WILL BE CONSIDERED
AS A PART OF ANY RULEMAKING
PROCESS TO THOROUGHLY
INVESTIGATE THE PROS AND CONS
AND ANY ADOPTION OF ANY RULE
EVER WILL HAPPEN ONLY IF THE
BENEFITS REALLY ARE
SIGNIFICANTLY OVERWEIGHT. ANY
SORT OF DOWNSIDE. AND THEN WE
ALWAYS CREATE THOSE OFF RAMPS
FOR RISKS. BUT IF YOU'RE LOOKING
AT THE RUBRIC THAT HAS ALL THESE
ITEMS, I'M WONDERING WHICH HOW
THEY'RE ALL WEIGHTED IN ITS
TOTALITY. RIGHT AND SO,
OBVIOUSLY THINGS THAT WOULD NOT
HAVE, LOW INCOME COMMUNITIES
HAVE A LIGHTER WEIGHT THAN
OTHERS, RIGHT? THEN OF COURSE,
YOU KNOW, I WOULD CERTAINLY HAVE
AN ISSUE WITH THAT. RIGHT. IF
JUST THE SPIKE IS, MORE WEIGHTED
THAN THE DRIVING DOWN ON GAS
PRICES, I WOULD CERTAINLY HAVE
AN ISSUE WITH THAT. SO I'M JUST
TRYING TO MAKE SURE THAT AS WE
ALL KNOW WHAT IS THE
CONSIDERATION, BUT HOW IS
WEIGHTED IS ALSO A FACTOR,
CORRECT? YEP. THAT'S ABSOLUTELY
A GREAT POINT. AND I THINK PART
OF THE PROCESS, YOU KNOW, ONE,
WE LOOK FOR HAVING AN ACTIVE
COLLABORATION WITH THE
LEGISLATION. WE ALWAYS WELCOME
THAT INPUT. AND I THINK THE
PROCESS YOU KNOW HOPEFULLY
WITHIN THE OVERSIGHT HEARINGS
WILL HAVE AN ABILITY TO COME
BACK TO YOU. WE WILL BE ABLE TO
BE TRANSPARENT, NOT JUST
HOLISTICALLY ON THE PRICE
DECLINES. BUT AS YOU TALK ABOUT
WHAT ARE THE INDIVIDUAL
GEOGRAPHIC LOCATIONAL IMPACTS.
AND I THINK WE WILL DEVELOP THAT
AS A PART OF THE PROCESS AND
WILL ABSOLUTELY BE TRANSPARENT
AND BRING IT BACK TO YOU. WELL,
I NEED YOU TO I NEED YOUR HELP
ON THAT. ABSOLUTELY. BECAUSE,
PLEASE ALLOW ME TO BE ABLE TO GO
BACK HOME. YEAH RIGHT. I WANT TO
BE ABLE TO STILL LIVE IN MY
DISTRICT. YOU KNOW, I DON'T WANT
TO HAVE TO BE SCARED TO GO HOME
TO MY CONSTITUENTS WHO, AGAIN,
RIGHT? THIS IS THIS IS AN
EVERYDAY THING, RIGHT? ABOUT HOW
MUCH IS IN THE GAS TANK. AND
THERE ARE SOME OF OUR REGIONS
WHO CAN'T ABSORB AN INCREASE OF
GAS, RIGHT. NOR CAN A NOR CAN
MAKE SURE THAT THEY CAN EVEN
PLAN FOR AN INCREASE, BECAUSE
WAGES ARE NOT. IF WAGES DON'T
INCREASE, WE CAN'T EXPECT THEM
TO PAY FOR INCREASE IN GAS
EITHER. RIGHT. AND SO I JUST
WANT TO MAKE SURE, IMPLORE THAT
WE CONTINUE TO MAKING SURE THAT
THOSE ISSUES ARE ADDRESSED.
THANK YOU SO MUCH, MADAM CHAIR.
THANK YOU. ASSEMBLY MEMBER
JACKSON, ASSEMBLY MEMBER
PATTERSON. GREAT. THANK YOU SO
MUCH. ASSEMBLY MEMBER JACKSON'S
SPEAKING MY LANGUAGE TODAY, AND
IT'S NOT SOMETHING THAT HAPPENS
EVERY DAY, BUT IT IS TODAY. I
OBJECT I OBJECT. HE MADE A
MISTAKE, YOU KNOW, HE SAID HIS
INTEREST WAS, TO SEE GASOLINE,
YOU KNOW, THE PRICE OF GASOLINE
TREND DOWN AND NOT UP AND
COULDN'T AGREE MORE WITH THAT.
AND I THINK THAT'S MY OVERALL
CONCERN. AND I MENTIONED THAT
EARLIER TODAY AT A PRESS
AVAILABILITY, IS THAT AT THE END
OF THE DAY, MY BIGGEST INTEREST
IS MAKING SURE THAT PEOPLE ARE
ABLE TO AFFORD GASOLINE, BUT
THAT DOES LEAD ME TO SOME
QUESTIONS FOR CARB. AND, IF YOU
IF YOU WOULDN'T MIND, WE SENT A
LETTER TO THE CHAIRWOMAN ON MAY
14TH AND, A GROUP OF MY
REPUBLICAN COLLEAGUES, AND WE
HAVEN'T RECEIVED A RESPONSE YET.
AND I KNOW WE'RE THE SUPER
MINORITY PARTY AND ALL, BUT I
WAS WONDERING IF YOU HAD ANY
IDEA WHEN WE MIGHT GET A
RESPONSE. IT WAS REGARDING THE
LOW CARBON FUEL STANDARD AND
ALSO CAP AND TRADE. I WILL GO
BACK AND CHECK ON THAT TO SEE
WHAT THE STATUS IS. I KNOW THAT
WE RECEIVED SEVERAL LETTERS FROM
THE LEGISLATURE ON BOTH OF THE
PROGRAMS, AND SOMETIMES JUST ON
THE SINGULAR PROGRAM, LCFS, AND
I KNOW THAT WE'VE RESPONDED TO
SOME OF THOSE, SO I WILL GO BACK
AND ENSURE THAT WE WERE
RESPONSIVE TO YOUR LETTER. OKAY.
I KNOW THE ANSWER TO THAT. YOU
WEREN'T. BUT, WE WOULD LIKE TO
GET A RESPONSE ON THAT, SO, BUT
ON THAT, I MEAN, I THINK THE
THING THAT IS VERY CONCERNING TO
ME AND OTHER PEOPLE IS THAT
THESE TWO POLICIES, THE LOW
CARBON FUEL STANDARD, AS WELL AS
THE CAP AND TRADE PROGRAM, COULD
POTENTIALLY INCREASE THE COSTS
OF GASOLINE ON A, WHETHER IT'S
DIRECT OR INDIRECTLY. AND SO I
WAS WONDERING, IN THE, IN THE
SREA, IF, IF IT WOULD BE
REQUIRED, THE ECONOMIC IMPACT TO
ACTUALLY SAY WHAT THAT COST PER
GALLON COULD POTENTIALLY BE, FOR
PEOPLE FILLING UP THEIR, THEIR
TANKS. SO I BELIEVE YOU'RE
TALKING ABOUT THE SREA, THE
STANDARDIZED REGULATORY IMPACT
ASSESSMENT FOR THE LOW CARBON
FUEL STANDARD THAT CAME OUT
ALMOST A YEAR AGO, AND THAT WAS
A SNAPSHOT IN TIME, AND THAT
DOES NOT REFLECT THE PROPOSAL
THAT IS CURRENTLY BEING AMENDED
FOR CONSIDERATION BY THE BOARD
ON NOVEMBER EIGHTH, IN TERMS OF
THE CO-MINGLED IMPACTS OF LCFS
AND CAP AND TRADE, THE PROGRAMS
ARE DESIGNED SO THAT IF YOU
COMPLY WITH ONE, THE COMPLIANCE
COUNTS WITH THE OTHER AS WELL,
SO AS NOT TO PUT A DUPLICATIVE
BURDEN ON THE SAME FUELS, ON THE
SAME CARBON CONTENT IN THE
CALIFORNIA ECONOMY. THE OTHER
PIECE IS THAT WHEN WE DO THE AB
32 SCOPING PLAN, WE LOOK AT ALL
OF THE AGGREGATE IMPACTS OF ALL
OF THE POLICIES TOGETHER TO
ACHIEVE OUR AIR QUALITY TARGETS
AND TO ACHIEVE OUR STATUTORY
CLIMATE TARGETS. AND WHAT WE SEE
THERE IS THAT WE CONTINUE TO SEE
THE ECONOMY GROW TO $5.1
TRILLION. WE SEE A GROWTH IN
JOBS, AND WE ALSO SEE $200
BILLION IN SAVINGS FOR HEALTH
IMPACTS IN 2045. SO WE DO LOOK
AT ALL OF THESE POLICIES
TOGETHER. IT'S PART OF THE
COMPREHENSIVE AB 32 PLANNING
PROCESS. SO I'D BE HAPPY TO GO
BACK AND PULL OUT SOME OF THOSE
PIECES AND HAVE THOSE AVAILABLE
TO YOUR OFFICE AND TO ANY OTHER
INTERESTED MEMBER HERE, BUT THAT
THE MOST RECENT PLAN WAS ADOPTED
IN DECEMBER OF 2022. SO IT'S
QUITE RECENT. AS A RESULT OF
THAT, WE'RE AMENDING SOME
REGULATIONS TO ALIGN WITH WHAT
THAT PLAN INCLUDED.T IT IS
IMPORTANT TO LOOK AT THE JOINT
IMPACTS OF ALL OF THE CLIMATE
POLICIES TOGETHER. AND WE DO
UNDERTAKE THAT EXERCISE
PERIODICALLY WITH THE WITH THE
SCOPING PLAN. YEAH, I'VE NEVER
SEEN A STATE AGENCY WALK BACK
THE $0.47 PER GALLON FASTER THAN
CARB, WALKED THAT BACK. THE
POTENTIAL IMPACT OF THE LOW
CARBON FUEL STANDARD, BUT WILL
THERE BE IN WHATEVER IS ACTUALLY
PROPOSED? BECAUSE I KNOW THERE'S
A LOT OF DISCUSSION AND
NEGOTIATIONS. IS THERE
DISCUSSION OVER WHETHER WHAT IS
VOTED ON BY CARB WILL ACTUALLY
HAVE, AN UNDERSTANDING OF THE
AVERAGE PERSON OUT THERE OR EVEN
A LEGISLATOR? HOW MUCH THAT
COULD POTENTIALLY IMPACT THE PER
GALLON PRICE OF GASOLINE. SO
THERE'S A COUPLE OF POINTS THAT
I THINK I'D LIKE TO SHARE. ONE
IS, AGAIN, THAT SYRIA WAS A
SNAPSHOT IN TIME. IT DOES NOT
REFLECT THE CURRENT PROPOSAL
THAT IS BEING AMENDED TO GO TO
THE BOARD IN NOVEMBER. IT ALSO
REFLECTS A MODEL THAT CAN NEVER
CAPTURE REAL WORLD CONDITIONS.
NO MODEL CAPTURED THAT WE WERE
GOING TO HAVE A PANDEMIC AND
THAT WE WOULD SEE PRICES CRASH
ACROSS ALL COMMODITY MARKETS,
AND WE CAN'T ACTUALLY PREDICT
RECESSIONS OR ANY OTHER KINDS OF
WARS AND THINGS THAT ACTUALLY
HIT GLOBAL ENERGY MARKETS. AND
SO IT IS VERY LIMITED IN ITS
USE, AND IT'S VERY LIMITED IN
WHAT IT LOOKED AT. IT DOESN'T
CAPTURE THE BENEFITS AND THE
AMOUNT OF, SUPPORT WITH FEDERAL
FUNDING AND STATE FUNDING THAT
GOES TOWARDS THE CLEAN FUELS
THAT ARE ALSO GOING TO BE
NECESSARY AS WE TRY TO MEET OUR
AIR QUALITY STANDARD TARGETS IN
THE STATE, ON THE, ON THE PIECE
ABOUT, YOU KNOW, OVERALL, THE
LOW CARBON FUEL STANDARD AND
LIKE, YOU KNOW, WHAT IS THE PASS
THROUGH, WHAT IS HAPPENING IN
TERMS OF WHAT YOU FEEL AT A
RETAIL PUMP PRICE? THERE'S NO
CORRELATION. THERE'S NO DATA
THAT SHOWS THERE'S CORRELATION
BETWEEN THE CREDIT PRICES AND
THE LOW CARBON FUEL STANDARD.
AND PRICES AT THE PUMP. IN FACT,
THE MOST SALIENT DATA THAT WE
HAVE IS THE SELF-REPORTED DATA
BY THE REFINERS THEMSELVES TO
CEC UNDER NEW REGULATIONS. AND
IT'S NOT EVEN CLOSE TO $0.47.
IT'S MUCH, MUCH LOWER THAN THAT.
$0.05, IF I REMEMBER CORRECTLY,
I THINK IT'S BETWEEN 8 AND $0.10
FROM FROM THE REPORTING THAT'S
ON THE WEBSITE RIGHT NOW, 8 TO
$0.10 PER GALLON. YES. I BELIEVE
THAT'S WHAT THEY SELF REPORTED.
BUT WE ALSO WANTED TO LOOK AT
WHAT'S BEEN GOING ON IN PRICES
OVER THE LAST FEW YEARS, BECAUSE
I SEE THAT WE'RE FOCUSED ON
2022, 2023. WHEN YOU LOOK AT
THAT SAME SELF-REPORTED DATA,
YOU CAN SEE THAT THE PRICE
INCREASE OVER 80% OF IT IS
DRIVEN BY GLOBAL CRUDE PRICES
AND BY MARKETER AND REFINER,
PRICING POLICIES. IT'S NOT
DRIVEN OVERWHELMINGLY BY
ENVIRONMENTAL REGULATIONS OR BY
TAXES AT THE FEDERAL, STATE OR
LOCAL LEVEL. THE LAST FEW YEARS
ARE DOMINATED BY GLOBAL
COMMODITY PRICES AND BY REFINER
PRICING POLICIES, AND THAT'S
THEIR OWN SELF-REPORTED DATA ON
THE WEBSITE. SO I THINK WHETHER
GASOLINE IS $10 A GALLON OR $1 A
GALLON, $0.08 TO $0.10 PER
GALLON MATTERS TO PEOPLE. AND
I'LL TELL YOU, YOU KNOW, MY
MOM'S A WAITRESS AND SHE
LITERALLY GIVES ZERO RIPS ABOUT
THE SIZE OF THE CALIFORNIA'S
ECONOMY. AND I THINK THAT THAT'S
THE AVERAGE PERSON, WHETHER YOU
LIVE IN ASSEMBLYMEMBER JACKSON'S
DISTRICT OR MY DISTRICT, NOBODY
CARES ABOUT THE SIZE OF THE
ECONOMY. THE PERSON CARES ABOUT
HOW MUCH THEY'RE GOING TO BE
PAYING FOR GASOLINE. SO THROUGH
THIS DISCUSSION ABOUT WHAT WE'RE
HAVING, ABOUT WHAT THIS STORAGE
CONTAINER YOU KNOW, MIGHT, YOU
KNOW, 15 DAYS, WHATEVER IT IS,
MIGHT CHANGE PRICES. I MEAN,
INDEPENDENT OF THAT, WE HAVE
ANOTHER REGULATORY AGENCY THAT
IS MOVING FORWARD WITH TWO
ACTIONS THAT DEMONSTRABLY, IN
THEIR OWN DOCUMENTATION, WILL
SAY WILL INCREASE THE COST OF
GASOLINE. AND IN YOUR OWN
STATEMENT HERE, YOU SAID THAT AS
WELL. AND I THINK THAT THAT'S
REALLY IMPORTANT TO IDENTIFY IN
THESE STATEMENTS OF ECONOMIC
IMPACT. I MEAN, IF IT GROWS THE
ECONOMY, GREAT. BUT IF THE
AVERAGE PERSON IS HAVING TO
SPEND MORE MONEY FOR GASOLINE,
THAT HAS A VERY LARGE IMPACT ON
THE ACTUAL PERSON BECAUSE THEY
DON'T ALL LIVE IN, YOU KNOW,
PLACE THAT CAN, YOU KNOW, WITH A
GOLD BALL AT THE TOP THAT GETS
TO MAKE THE DECISIONS. I MEAN,
THEY ACTUALLY HAVE TO PAY THESE
AT THE PUMP. AND I THINK I
REALLY BELIEVE THAT CARB Ã
SHOULD RESPOND TO THE LETTER
THAT A GROUP OF LEGISLATORS
SENT, I THINK REPUBLICAN OR
DEMOCRAT, WHEN A LEGISLATOR
SENDS A LETTER TO ANY REGULATORY
AGENCY, THEY SHOULD RESPOND.
IT'S BEEN FOUR MONTHS, AND I
THINK IT'S TOTALLY UNACCEPTABLE.
IT'S TOTALLY OUT OF LINE. AND
THEN THE OTHER THING IS, I THINK
WE NEED TO KNOW HOW MUCH THIS IS
GOING TO COST FOR A PERSON TO BE
ABLE TO PAY FOR GASOLINE. THAT'S
WHAT'S IMPORTANT. AT THE END OF
THE DAY, I DON'T CARE HOW MUCH.
HONESTLY, I DON'T REALLY CARE
HOW MUCH THE REFINERIES MAKE OR
WHATEVER. ALL I CARE ABOUT IS
HOW MUCH MY CONSTITUENTS ARE
GOING TO BE PAYING FOR GASOLINE.
THANK YOU. ASSEMBLY MEMBER
GIBSON. NOT SURE HOW TO FOLLOW
THAT, BUT I DO THINK IT'S
UNACCEPTABLE THAT ANYBODY,
REGARDLESS DEMOCRAT OR
REPUBLICAN, SHOULD SHOULD HAVE
THE COURTESY OF GETTING A LETTER
RESPONDED TO. SO WITH THAT BEING
SAID, I JUST WANT TO MAKE SURE
THAT I HEARD THE CAC CORRECTLY.
DID I HEAR YOU SAY THAT THAT
THERE IS ENOUGH STORAGE
STATEWIDE, STATEWIDE OR THAT
EACH REFINERY HAS 15 DAYS
STORAGE CAPACITY? THAT EXISTS?
WAS I WAS THAT CORRECT? YES. SO
YOU'RE BASING THAT ON WHAT
EXACTLY? SO THE DATA WE HAVE
TODAY, LIKE IN THE AGGREGATE. SO
I THINK I WANT TO MAKE TWO
POINTS, MAKING SURE ASSEMBLY
MEMBER GIBSON, INDIVIDUAL
REFINERIES MIGHT HAVE DIFFERENT
STRUCTURAL CONSTRAINTS AS AS IT
WAS NOTED PREVIOUSLY. AND I ALSO
WANT TO NOTE THAT THE 15 DAY
LANGUAGE OR THE 15 DAYS DAYS OF
SUPPLY THAT WE TALKED ABOUT WAS
ONE DATA POINT THAT SUGGESTS IF
YOU IF YOU ARE ABOVE THAT LEVEL,
WE CAN NOT HAVE SPOT MARKET,
ESCALATION WHAT THE WHAT WE'RE
TRYING TO DO AND I THINK WE'LL
TALK ABOUT IT MORE TOMORROW. BUT
IN THE SPIRIT OF YOUR QUESTION,
WE ARE GOING TO TRY AND MAXIMIZE
THE EXISTING STORAGE CAPABILITY
TO HAVING HIGHER INVENTORY. BUT
WOULD THAT INCLUDE YOU DOING AN
ASSESSMENT OF EACH REFINERY?
YES. TO IN ORDER TO DERIVE AT
THAT PARTICULAR WE WILL WORK. I
MEAN I THINK THIS WOULD BE A
PARTNERSHIP SO THEY COULD WOULD
YOU AGREE WITH ME? THERE COULD
BE IN FACT SOME REFINERIES THAT
DON'T HAVE THE CAPACITY. YES,
ABSOLUTELY. AND THEN WHAT
HAPPENS THEN. SO THIS IS SO
GREAT QUESTION. SO I THINK THIS
WOULD BE THE PARTNERSHIP
SPECIFICALLY WITH THE INDUSTRY.
YOU KNOW, AS IF YOU WERE TO GIVE
US THIS AUTHORITY TO WORK WITH
THE INDUSTRY, I THINK IT WILL BE
A PARTNERSHIP WITH THE INDUSTRY.
IT WILL BE A PARTNERSHIP WITH
THE LEGISLATURE TO THINK THROUGH
HOW DO WE OPTIMIZE THAT
EXISTING, YOU KNOW, AMOUNT OF
STORAGE WE HAVE. AND AS I
MENTIONED PREVIOUSLY, YOU KNOW,
I CANNOT IN THIS PUBLIC FORUM
GIVE YOU REFINERY BY REFINERY
DATA, RIGHT? I JUST CAN'T GIVE
IT TO YOU TODAY BECAUSE OF THE
PUBLIC FORUM. BUT BASED ON THE
DATA WE HAVE, EACH OF THEM HAVE
SLACK AT DIFFERENT TIMES. RIGHT.
SO THE OPPORTUNITY HERE WOULD BE
WORKING WITH THEM TO FIGURE OUT
ONE. IF YOU HAVE A PLANNED
OUTAGE, HOW ARE YOU GOING TO
THINK THROUGH MAINTAINING
CERTAIN LEVEL OF INVENTORIES
THAT YOU CAN GET THROUGH THAT
PLANNED MAINTENANCE TIME? AND
SECOND, I'M SORRY, DON'T THEY
HAVE THAT RIGHT NOW FOR OUTAGES?
THEY. YES, YES. AND NO. SO IT
DEPENDS ON. SO AGAIN I WILL
SHARE WITH YOU AS MUCH AS I CAN
PUBLICLY, SO I WAS PRIVATELY I
MEAN I THINK IT WILL BE IF SO, I
MEAN PUT IN THE, LIGHT
HEARTEDNESS THERE. I THINK WE
WOULD SHARE WITH YOU ANY
INFORMATION WE CAN IN THE
AGGREGATE FORM. I THINK THE
BILL, SB ONE TWO ALLOWS US TO
SHARE THAT AGGREGATE INFORMATION
WITH THE LEGISLATURE UPON
REQUEST, AND WE'LL ABSOLUTELY DO
THAT WITHIN THE CONFINES OF THE
LAW TODAY. SURE. AND BUT AND THE
AUTHOR I CAN HAVE A CONVERSATION
WITH BUT IN HIS BILL IT IT
GIVES. I'M SORRY TO INTERRUPT,
BUT WE DON'T WANT TO WE'RE NOT
GOING TO DIG INTO THE BILL
TODAY. AND I KNOW IT'S KIND OF.
SO WE SHOULD HAVE DONE ONE EIGHT
HOUR HEARING, BUT WE WANTED TO.
SO LET ME SO LET ME UP TOMORROW.
YOU'RE GOING TO BE THE FIRST
PERSON TO ASK A QUESTION
TOMORROW. LET ME LET ME ASK
ANOTHER QUESTION. I THINK HE
POSSIBLY CAN ANSWER, DURING MY
TIME AS THE CHAIR OF THE SELECT
COMMITTEE ON PORTS AND GOODS
MOVEMENT, THAT GIVES ME SOME
ABILITY TO HAVE KNOWLEDGE IN
THIS SPACE BASED ON SPEAKING TO
STAKEHOLDERS, I'VE HEARD THAT
MULTIPLE DIFFERENT PORTS, ABOUT
THE ISSUES SURROUNDING THE SHORE
POWER AND THE AT BERTH
REGULATIONS, WHILE I KNOW THAT
THE CARB REGULATIONS AND PERHAPS
THE REPRESENTATIVE FROM CARB CAN
SPEAK TO THIS MORE, POINTEDLY, I
HAVE A QUESTION ABOUT
INFRASTRUCTURE NEEDS FOR THE
PROGRAMS AND HOW THIS PROGRAM
ACTUALLY WORKS. IT THE ESTIMATE
THAT THERE'S 600MW OF POWER WILL
BE NEEDED TO POWER AT BERTH
REGULATIONS ACROSS THE STATE.
WHILE, WHILE IT SEEMS THAT THE
ENERGY GRID WILL NOT BE ABLE TO
SUSTAIN THAT KIND OF POWER TO
KEEP THE ENERGY DEMANDS AT THE
600 MEGA MEGAWATTS, WHICH IS NO
SMALL FEAT, BECAUSE
INFRASTRUCTURE IS GOING TO BE AN
ISSUE MOVING FORWARD. AND WE
KNOW THAT THESE REGULATIONS ARE
POISED TO GO INTO EFFECT JANUARY
THE 1ST, 2025. AND SO I WANTED
TO FIND OUT, BECAUSE IF THIS
DOESN'T HAPPEN, THEN THE PORTS
WILL THEN CARGO AND, WILL HAVE
TO BE DIVERTED TO EITHER MEXICO,
TO CANADA AND TO OTHER PLACES.
BUT WOULDN'T THAT HAVE A
VOLATILITY IMPACT ON THE PRICES
OF GASOLINE? SO I THINK I'LL
JUST ANSWER THE PART OF THE
QUESTION AROUND THE CONSTRAINTS
AND WHAT IT WOULD DO TO THE
PRICES. YES SO I THINK ANY
RULEMAKING THAT WE MIGHT DO
UNDER, UNDER THIS WOULD TAKE
INTO ACCOUNT ALL EXISTING
CONSTRAINTS AND WORK THROUGH A
PROCESS THAT ALLOWS FOR
UNDERSTANDING WHAT THE
ADDITIONAL SLACK IS AND WITHIN
THAT, IN A CONSTRAINTS THAT WE
HAVE, WE WANT TO MAXIMIZE THE
ABILITY TO TAKE, ADVANTAGE OF
THAT SLACK IN THE SYSTEM. SO
THAT'S WHAT WE WOULD DO. OKAY.
TOMORROW'S GOING TO BE
INTERESTING. THANK YOU. THERE
YOU GO, OKAY. SEEING NO OTHER
QUESTIONS FROM Ó MEMBER LEE.
YES, MADAM CHAIR, THANK YOU. AND
I'LL BE BRIEF, I DID WANT TO ASK
SOMETHING PERTAINING TO OUR
SPEAKERS TODAY, I JUST WANTED TO
CLARIFY WITH CONNIE. JOE, YOU
TALKED ABOUT HOW. AND I KNOW YOU
STATED IN YOUR PRESENTATION
THAT, BROADLY SPEAKING, A PEN
SUPPORTS A MINIMUM REFINERY
RESERVE, BUT YOU DID NOTE THAT
THERE IS CONSIDERABLE HEALTH
CONCERNS FROM THE VOLATILE
ORGANIC COMPOUNDS THAT COME FROM
REFINERIES. IS THERE ANY FROM
THE ORGANIZATION'S PERSPECTIVE,
IS THERE ANY HEALTH RISK OR
CONCERN WHEN WE ARE THINKING
ABOUT UPPING THE AMOUNT OF
RESERVES AT AT REFINERIES OR
ANYTHING LIKE THAT? THE VERY
SHORT ANSWER IS, NO. BUT, AND
THAT'S BECAUSE I THINK THAT IF
WE UNDERSTAND THIS BILL TO BE
ABOUT MAXIMIZING THE USE OF
EXISTING STORAGE AND MINIMIZING
CUMULATIVE POLLUTION BURDENS, AS
HAS BEEN DISCUSSED ALL
THROUGHOUT THE XBOX ONE TWO
PROCEEDINGS, WE'VE BEEN IN
ALMOST EVERY SINGLE WORKSHOP IN
THE DEVELOPMENT OF THIS CONCEPT
OVER TIME, AND OUR UNDERSTANDING
WOULD REALLY BE THAT IT WOULD
VERY MUCH, OR NOT HAVE THAT
IMPACT BECAUSE OF KIND OF THE
DYNAMICS THAT YOU HEARD ABOUT
TODAY AND THE LIQUIDITY IN THE
SYSTEM. OKAY. VERY GOOD. I JUST
WANTED TO MAKE SURE AS WE START
TO SMOOTH OUT THE PRICING
SPIKES, WE ALSO DON'T WANT TO
MAKE SURE FRONTLINE COMMUNITIES
ARE DISPROPORTIONATELY IMPACTED
TOO. SO I APPRECIATE THAT. THANK
YOU. THANK YOU, AND I JUST HAVE
ONE QUESTION, FOR YOU, MISS
SAHOTA, RELATED TO, WINTER AND
SUMMER BLEND. SO DOES CARB
ALREADY HAVE THE AUTHORITY TO,
SWITCH BETWEEN SUMMER TO WINTER
BLEND TO ACCELERATE THE
TRANSITION FROM SUMMER NGUYEN TO
WINTER BLEND? I KNOW THAT
THERE'S BEEN EXECUTIVE ORDERS IN
THE PAST. ARE THOSE EVEN
NECESSARY, OR DO YOU HAVE THE
AUTHORITY TO DO THAT? WE DON'T
HAVE THE AUTHORITY TO
AUTOMATICALLY DO THAT ON OUR
OWN, AND WE HAVE ACTED ON
EXECUTIVE ORDERS WHEN THOSE
VARIANTS OR THOSE WAIVERS HAVE
BEEN PUT IN PLACE. OKAY, AND
THEN ONE OTHER QUESTION COMING
BACK, I THINK ASSEMBLY MEMBER
FLORA HAD ASKED YOU ABOUT SPOT
MARKETS AND THE FACT THAT WE DID
THAT. WE AUTHORIZED SOME
ADDITIONAL DATA COLLECTION AS
PART OF SB ONE TWO. AS YOU MAY
HAVE HEARD IN THE PREVIOUS
PANEL, I THINK A LOT OF US ARE
REALLY SCRATCHING OUR HEADS
ABOUT THIS SPOT MARKET AND THE
FACT THAT YOU HAVE SOMETHING
THAT'S A VERY NARROW SNAPSHOT OF
TRADES AND TRANSACTIONS THAT
SEEM TO THEM HAVE THIS OUTSIZED
IMPACT ON THE MARKET AS A WHOLE,
WHAT I GUESS WHAT, AS YOU'VE DUG
INTO THIS ISSUE A BIT MORE THAN
WE HAVE, DO YOU HAVE CONCERNS
ABOUT THAT? I MEAN, SHOULD WE
HAVE CONCERNS ABOUT THAT? AND
WHAT, WHAT MORE IF ANYTHING, DO
YOU THINK WE NEED TO DO TO
FURTHER DIG INTO SOME OF THESE
QUESTIONS? YEAH. AND THANK YOU,
CHAIR, ON THE QUESTION. SO
YOU'RE CORRECT. SO WE HAVE LET
ME JUST KIND OF MAKE SURE THAT I
INDICATE WHAT KIND OF DATA WE
GET. SO OPUS WHICH IS THE
CURRENT FORM THAT'S, THAT'S USED
BY THE INDUSTRY TO PRICE AT THE
RAC, THAT COMES EVERY DAY. IT
CLOSES ABOUT THE MARKET CLOSES
ABOUT 2:00 EVERY DAY, AND THEN
THAT COMES, THE REPORT COMES OUT
ABOUT THREE OR SO. SO AT 3:00 IN
THE, IN THE AFTERNOON, OPUS WILL
PUT OUT HERE ARE THE DIFFERENT
RATES THAT WERE REPORTED TO US.
AND BASED ON THE REPORTS THAT WE
HAVE SEEN, HERE'S HOW WE ARE
GOING TO ADJUST THE PHYSICAL
PRICES. WHAT WE GET IS A DAY
AFTER. SO ALL THE TRANSACTIONS
ARE DONE, DAY AFTER WE GET WHAT
HAPPENED PREVIOUSLY. SO I'LL
JUST TELL YOU OBSERVATIONS
WITHOUT, DRAWING TOO MANY
CONCLUSIONS YET, YOU KNOW, ON
THE SPECIFICITY OF THE
PROBLEMATIC NATURE OR ANYTHING
LIKE THAT. SO I'LL JUST STAY
AWAY FROM THAT FOR A SECOND.
OBSERVATIONS. NOT ALL
TRANSACTIONS ARE REPORTED, SO
OPUS, SO BASICALLY, YOU KNOW,
THE OPUS REPORT REPORTS ONLY
THOSE WHO GO TO OPUS AND REPORT
THOSE TRANSACTIONS. SO, FOR
EXAMPLE, IF TWO REFINERIES HAD
AS TRANSACTIONS TODAY, ONE MIGHT
DECIDE TO KEEP IT CONFIDENTIAL
VERSUS THE OTHER. ONE MIGHT
DECIDE TO MAKE IT PUBLIC. SO
THAT IN ITSELF CREATES, YOU
KNOW, AN INFORMATION ASYMMETRY.
SO I JUST WANT TO NOTE THAT AS
AN OBSERVATION TWO, THE TRADES
THAT HAPPEN ON THE OPUS, RIGHT?
THE OPUS HAS A MINIMUM
REQUIREMENT OF ABOUT 10,000, YOU
KNOW, BARRELS. SO THAT'S THE
MINIMUM, SO IF YOU LOOK AT THE
OVERALL TRADING AND OVERALL KIND
OF DEMAND IN CALIFORNIA, WE'RE
TALKING ABOUT 850,000 BARRELS A
DAY OF DEMAND. AND ONLY THE SPOT
MARKET TRADES COULD BE AS LOW AS
10,000 TO 25,000 BARRELS. SO
WHAT WE OBSERVE IS THAT THERE
ARE A LOT MORE TRADES THAT
HAPPEN THAT COULD BE BIGGER BULK
VOLUMES THAT ARE NOT ALSO PUT
OUT THERE. SO WHAT WE'RE TRYING
TO DO RIGHT NOW IS ESTABLISH IF
THERE IS A CORRELATION, YOU
KNOW, TO LOOK AT MARKET
BEHAVIOR. AND I WANT TO HOLD MY
COMMENTS ON THAT UNTIL WE HAVE
CONCLUSIVE REPORT. ALL RIGHT.
THANK YOU. THANK YOU FOR THAT.
AND I THINK ASSEMBLY MEMBER
PELLERIN, DID YOU HAVE A
QUESTION BEFORE WE CLOSE? OKAY.
SO, THANK YOU AGAIN TO ALL OF
OUR PANELISTS FOR BEING PART OF
TODAY'S HEARING. THANK YOU TO
ALL THE COMMITTEE MEMBERS FOR
BEING PART OF THIS DISCUSSION.
AS WE'VE LEARNED TODAY AND
DISCUSSED, WE'RE SEEING THAT
CALIFORNIA'S MARKET FOR, FOSSIL
FUELS IS DECLINING AND GASOLINE
DEMAND IS SHRINKING. THAT IS
CREATING SOME REALLY FUNDAMENTAL
MARKET CHALLENGES. AND SOME
REALLY PROFOUND CHALLENGES FOR
OUR OUR FAMILIES AS WELL. AND,
SO I THINK WE'VE SET A GOOD
STAGE. WE'VE DUG IN A LITTLE BIT
TO THE TOPIC FOR TOMORROW, BUT
WHAT WE WANT TO REALLY DO WITH
TOMORROW'S HEARING JUST TO SET
THE COMMITTEE MEMBERS
EXPECTATIONS, IS TO DIVE IN IN A
BIT MORE DETAIL TO THE SOLUTION
THAT THE CEC HAS PROPOSED, TO
UNDERSTAND THE PROS AND CONS OF
THAT SOLUTION. WE ARE ALSO GOING
TO BE DIVING INTO SOME OF THE
OTHER POLICY OPTIONS THAT THE
CEC HAS FRAMED IN THEIR VERY
EXCELLENT TRANSPORTATION FUELS
ASSESSMENT. SO IN TERMS OF
HOMEWORK FOR THE COMMITTEE, IF
YOU AND YOUR TEAMS HAVE NOT
REVIEWED THE TRANSPORTATION
FUELS ASSESSMENT YET, I WOULD
HIGHLY RECOMMEND. IT IS JUST
REALLY IMPORTANT FOUNDATION. AS
WE HEAD IN INTO THE CONVERSATION
TOMORROW. SO ONCE AGAIN, I THINK
WE AS OTHERS HAVE SAID, THIS IS
A VERY DIVERSE COMMITTEE
REPRESENTING EVERY PART OF THE
STATE. AND I THINK EVERY
PERSPECTIVE ACROSS THE
LEGISLATURE. I THINK THE ONE
THING THAT WE ALL SHARE IN
COMMON IS THAT WE CARE
PASSIONATELY ABOUT THE PEOPLE
THAT WE REPRESENT, WE ARE ALL
HERE IN THIS SPECIAL SESSION AS
PART OF THIS COMMITTEE, AS PART
OF THIS. WHAT IS IT? YOU KNOW,
4.5 HOUR HEARING, BECAUSE WE ARE
DEEPLY COMMITTED EACH AND EVERY
DAY TO DOING THE WORK TO DO THE
VERY BEST FOR OUR CONSTITUENTS.
AND, I THINK THAT WHEN FOLKS ASK
US, YOU KNOW, IF WE ASK 100
CALIFORNIANS, HEY, DO YOU WANT
LOW GAS PRICES OR SAFE ROADS OR
CLEAN AIR? YOU WANT TO KNOW WHAT
THEY'RE GOING TO SAY? YES. AND
SO THAT'S THE WORK THAT WE'RE
DOING EACH AND EVERY DAY IS TO
DO THE BEST THAT WE CAN AS A
STATE TO DELIVER ON ALL OF THOSE
OBJECTIVES FOR OUR COMMUNITIES.
SO APPRECIATE EVERYONE BEING
PART OF THIS AND LOOK FORWARD TO
OUR HEARING TOMORROW. ALL RIGHT.
ALL RIGHT. ONE QUICK ONE. YES.
NO, I JUST WANTED TO POINT OUT
THAT I SENT A SET OF QUESTIONS
TO YOUR OFFICE AND HOPEFULLY WE
CAN GET THOSE ANSWERS JUST SO
THAT, AS PART OF THE HEARING
TOMORROW. ALL RIGHT? YES. FOR
TOMORROW, OBVIOUSLY. BUT I JUST
WANT TO MAKE SURE THAT YOU DID
GET THE QUESTIONS. THANK YOU.
YOU DID PREP. SO YOU'VE GOT
HOMEWORK. WE'VE GOT HOMEWORK.
AND WITH THAT WE WILL SEE YOU
TOMORROW AT WHAT, 10 A.M. WITH
THAT, WE ARE ADJOURNED.
YES. SORRY. WE ARE. WE ARE, WE
ARE STILL. THE HEARING IS STILL
IN SESSION. THAT WAS A LITTLE
FAKE. I AM SO SORRY. WE
NEGLECTED TO DO PUBLIC COMMENT.
SO THANK YOU TO THE PANELISTS
AGAIN FOR YOUR PARTICIPATION AND
MY APOLOGIES TO THE PUBLIC WHO'S
BEEN SITTING HERE SO PATIENTLY
WAITING, FOR US. THANK YOU.
MADAM CHAIR. AND MEMBERS, THANK
YOU FOR REMEMBERING THAT, PAUL
YODER, ON BEHALF OF THE KERN
COUNTY BOARD OF SUPERVISORS.
FIRST, I WANT TO REMEMBER I WANT
TO REMIND THE MEMBERS IN THE
PUBLIC, KERN COUNTY, NOT ONLY
PRODUCES THE MAJORITY OF OIL IN
CALIFORNIA, BUT ALSO STILL SENDS
OVER 60% OF THE ALTERNATIVE
ENERGY TO THE GRID THAT'S
PRODUCED IN CALIFORNIA. SO
HAVING SAID THAT, THE KERN BOARD
BELIEVES THAT CALIFORNIA IS NOT
ONLY ONE OF THE LARGEST OIL
PRODUCING STATES, BUT RESIDENTS
HERE SHOULD ENJOY LOW PRICES.
JUST TO YOUR LAST COMMENT, MADAM
CHAIR, WE'RE AT A POINT WHERE,
WE'RE EITHER GOING TO IF YOU'RE
GOING TO TALK ABOUT STORAGE,
YOU'RE GOING TO TALK ABOUT
SUPPLY. IT IS JUST TRUE THAT
YOU'RE EITHER GOING TO PULL OIL
FROM THE BASRA OIL FIELD IN
IRAQ, RUN IT ALMOST 15,000
NAUTICAL MILES, AND FLOATED ON
BARGES IN LA AND LONG BEACH, OR
YOU'RE GOING TO ALSO TALK ABOUT
OIL PRODUCTION IN CALIFORNIA.
AND THANK YOU FOR ACCEPTING
THOSE COMMENTS ON BEHALF OF THE
CURRENT BOARD. THANK YOU. GOOD
AFTERNOON, CHAIR AND COMMITTEE
MEMBERS. THANK YOU SO MUCH FOR
THESE HEARINGS AND FOR GIVING US
THE OPPORTUNITY TO TALK.
CASSANDRA MÀ WITH NHIÀU PAPPAS
AND ASSOCIATES ON BEHALF OF THE
CAMPAIGN FOR A SAFE AND HEALTHY
CALIFORNIA. WE REALLY JUST WANT
TO SAY THAT THIS COALITION IS
COMPRISED OF ENVIRONMENTAL
JUSTICE GROUPS, HEALTH
PROFESSIONALS AND COMMUNITY
LEADERS THAT ARE AGAINST ANY
EFFORTS TO KEEP OIL INVENTORY
LOW AND ARTIFICIALLY INFLATE GAS
PRICES. WE LOOK FORWARD TO
SEEING CONTINUED TRANSPARENCY
AND ACCOUNTABILITY, AND WE LOOK
FORWARD TO CONTINUED DISCUSSIONS
TOMORROW. SO THANK YOU. THANK
YOU. GOOD AFTERNOON, CHAIR AND
MEMBERS. REBECCA MARCUS, ON
BEHALF OF THE UNION OF CONCERNED
SCIENTISTS, WE JUST WANT TO
ALIGN OUR COMMENTS WITH THOSE
MADE BY MISS CHO WITH APAN
REGARDING A MINIMUM STORAGE
REQUIREMENT AS A MEANS TO ENSURE
A SMOOTH TRANSITION TO CLEAN
TRANSPORTATION. THAT PRIORITIZES
CONSUMERS AND THE ENVIRONMENT.
AND AS CONVERSATIONS CONTINUE,
èC US SUPPORTS THE INCLUSION OF
INSURANCE ASSURANCES THAT THESE
STORAGE REQUIREMENTS WILL NOT
ADD ADDITIONAL REFINERY
INFRASTRUCTURE AND LOOKING
FORWARD TO TOMORROW'S
DISCUSSION. THANK YOU. THANK YOU.
MADAM CHAIR AND MEMBERS,
ROSEMARY SHAHAN, PRESIDENT OF
CONSUMERS FOR AUTO RELIABILITY
AND SAFETY. WE'RE BEST KNOWN FOR
INITIATING CALIFORNIA'S AUTO
LEMON LAW FOR CAR BUYERS AND
DRAFTING THE INITIATIVE THAT
BECAME A LEGISLATIVE COMPROMISE
CALLED THE CAR BUYERS BILL OF
RIGHTS. IN CALIFORNIA. AND I'M
VERY HUMBLED BY THIS WHOLE
DISCUSSION. I FEEL LIKE I'VE
LEARNED A LOT. THIS IS SOMEWHAT
OUTSIDE OUR NORMAL BAILIWICK,
BUT WE FEEL SO STRONGLY ABOUT
AFFORDABILITY FOR CAR OWNERS IN
OUR STATE THAT I JUST WANTED TO
THANK YOU AND THE GOVERNOR FOR
DELVING INTO THESE ISSUES IN
SUCH A THOUGHTFUL WAY. AND WE
WILL BE CHEERING YOU ON, AS MUCH
AS WE CAN IN YOUR EFFORTS. AND
WE'RE HOPING FOR GOOD, SENSIBLE
POLICY SOLUTIONS. THANK YOU.
THANK YOU. ALL RIGHT. THANK.
GOOD EVENING. CHRISTINA SCARINGE
WITH THE CENTER FOR BIOLOGICAL
DIVERSITY, WITH THANKS TO THE
COMMITTEE AND FOR THE GOVERNMENT
AND TO THE GOVERNOR FOR ACTING
TO PROTECT CALIFORNIANS AGAINST
THIS MARKET MANIPULATION BY BIG
OIL. WE'D LIKE TO ALIGN OUR
COMMENTS WITH THOSE MADE BY MISS
CHO FROM APN, AND LOOK FORWARD
TO FURTHER DISCUSSION TOMORROW.
THANK YOU. ALL RIGHT. SEEING AND
HEARING NO ONE ELSE IN THE ROOM
WISHING TO PROVIDE PUBLIC
COMMENT FOR REAL. THIS TIME WE
ARE ADJOURNED.