Daily Energy Report
California oil production, Aramco asked to stop expanding capacity to 13 mb/d, Red Sea tankers, US LNG pause politics, LNG pause/Asia, India-Guyana ties, Maersk Methanol Vessel, and more.
Chart of the Day
California Policy Center: Reality Check: Half of California's Energy Comes from Crude Oil
Figure (1) above shows the continuous decline in California’s crude oil production. In about 25 years it lost more than 700 kb/d of crude production.
EOA’s Main Takeaway
California climate policy did not only lead to declining crude oil production but also increased oil imports and increased prices. In fact, in case of global oil shortages, California will suffer the most among all developed regions in the world. Because of its war against the oil business, California oil reserves declined from about 5 billion barrels in the early 1980s to about 1.7 billion barrels last year. But the potential for increasing reserves and production with proper policies and investment remain huge.
One of the results of California’s climate policies are the high cost of gasoline, in addition to all other energy sources. Figure (2) below shows average retail gasoline prices in California vs the average price in the US. Gasoline prices in California were once only a few cents higher than the national average. Now gasoline is more than $2/gallon higher. This happened as government became more aggressive in implementing climate change policies. Please note that the US average includes California prices, which means the difference between prices in California and the rest of the nation is larger than what is shown in the chart. As a final note: what we see in California we also see in Europe. The more politicians push for stricter climate change policies, the higher energy prices climb.
Story of the Day
Saudi Arabia has halted its plan to increase oil production capacity by 1 mb/d in 2027, raising speculation about the future oil demand. With the country already not utilizing a quarter of its capacity due to OPEC+ cutbacks, the decision might reflect doubts about the necessity for further expansion amid the global shift to renewables and electric vehicles. This contrasts with OPEC's outlook, which sees oil demand rising until the mid-century. Aramco's move also suggests a continued commitment to the OPEC+ production cap to support oil markets.