Fact check: Does less oil drilling and more imports lead to higher gas prices in California?

Hector Amezcua/hamezcua@sacbee.com

California oil producers, fighting Democratic lawmakers’ efforts to limit drilling and cap gasoline profits, are running an advertising campaign that claims to lay out the “facts” about the state’s energy situation.

Californians for Energy Independence, an organization tied to the Western States Petroleum Association (WSPA) and the California Independent Petroleum Association (CIPA), is behind the digital and television spots.

Claim: Californians are paying higher gas prices because the state no longer produces most of its own oil and instead imports the majority of its supply.

Rating: Misleading

Details: The ad says California has “shut down about 25% of local oil production in the last four years” and says California imports 75% of its oil, resulting in an “unstable energy supply and even higher gas prices for working families.”

This is accurate only if you count Alaskan oil as “imported,” which the industry seems to do. California produced about 29% of its own crude in 2021, according to data from the California Energy Commission (CEC). Nearly 15% came from Alaska and the remaining 56% was imported from other countries.

The U.S. Energy Information Administration reported the state’s crude oil production did decline by about 25% from 2018 to 2022.

“It is generally understood that California oil fields are getting old and production has been declining since the mid-1980s,” said Lindsay Buckley, a CEC spokeswoman, in an email. “Regardless of permit activity, new wells aren’t being drilled at accelerated rates, and those new permits are tapping into fields that have little resources left to give under normal economic situations.”

Moreover, less California crude may be better for the environment. David Clegern, a California Air Resources Board spokesman, said state’s crude oil is “generally more carbon-intensive than imported crude.”

“The higher the carbon intensity generates more (greenhouse gases) and is worse for air quality because it requires more energy to refine,” Clegern said in an email.

Claim: An increase in imports drives up California gas prices.

Rating: Misleading

Details: Kevin Slagle, a WSPA spokesman, said rising gas prices are the result of basic supply and demand. If California produces less oil in state, it will place more demand on the global market.

More demand for that oil will increase costs, he said. Slagle compared it to September 2022, when President Joe Biden oversaw the largest sale of oil from the national Strategic Petroleum Reserve and gas prices across the country fell.

“The release helped to bring down costs, and conversely reducing supply on the global market, will have the opposite effect,” he said.

But California’s declining in-state oil production is foreseen and will make up such a small segment of the total global market, it will likely have little to no effect on prices at the pump, said Severin Borenstein, director of UC Berkeley’s Energy Institute.

Californians pay higher prices at the pump than the rest of the nation due, in part, to stringent environmental regulations and it’s a 54-cent gas excise tax, which is the second-highest in the nation.

Crude oil prices are not one of the factors that explain the gap between California gas prices and the national average, Borenstein said. Those prices are set by the global market, meaning that even if oil is slightly cheaper to produce in-state, the price is still set at a rate competitive with product from overseas.

“Consumers will not benefit from more oil production in the state and they will not be hurt by less oil production in California,” Borenstein said.

Instead of gas prices and stability of supply, Borenstein argues that the real trade-off of importing more oil from out of state is the loss of jobs and economic activity for the state and local communities that come from the industry.

“I’m not going to say that it would be costless to restrict (in-state) oil production, but the cost is not going to be borne by consumers,” he said. “It’s going to be borne by workers whose jobs are displaced, firms that are making profits on their operations... and the local areas that collect property taxes and other fees.”

Claim: Californians for Energy Independence’s website says the group is made up of “over 200,000 Californians.”

Rating: Can’t be verified

Details: The organization’s description of its membership is vague.

Its 2020 nonprofit tax filings list WSPA CEO Cathy Raheis-Boyd and CIPA CEO Rock Zierman as directors.

The California Secretary of State’s Office lists Californians for Energy Independence as a lobbying group that also previously served as a political action committee.

CIPA’s 2019 annual report provides the most comprehensive description of Californians for Energy Independence. It describes members as a “diverse coalition of community, labor, business, and education groups that support continued domestic energy production and the jobs and vital tax revenues it provides to California’s businesses, families and communities.”

The report said CIPA and WSPA had overseen Californians for Energy Independence for six years as a way to combat attacks from environmentalists.

“The threats against domestic energy production extend beyond the legislative, legal, and regulatory fronts with anti-fossil fuel activists attempting to pass far-reaching energy bans at the local level,” the report said.

Steven Lucas, a San Rafael-based attorney listed as the organization’s business agent, did not respond to multiple emails and phone calls from reporters. Lucas specializes in political campaign and lobbying law and also serves as an attorney for WSPA, according to the Secretary of State’s Office.