Reducing California's Petroleum Dependency: Towards a Clean and Reliable Fuel Supply

Abstract

Facing pressures of a growing population, the state's refineries are already running at full capacity— yet they still cannot keep up with growing demand. As a result, there is a greater likelihood of future supply disruptions due to refinery breakdowns and increased reliance on out-of-state refiners, especially foreign, to make up the shortfall. Since 1998, to make up for the shortfall and refinery outages and breakdowns, California has been importing significant amounts of finished gasoline. Today, the state imports roughly 5 percent of its total gasoline demand; over the next several years, we project the figure will grow to about 10 percent; by 2020, the state will be importing more than 20 percent of its gasoline supply. California has a number of options to address the state's gasoline shortfall, some of which are being studied by the California Energy Commission: (1) to rely increasingly on imports from the Gulf Coast and foreign countries, which are transported by marine tanker; (2) to rely on a new refinery, constructed in the Gulf Coast, with a pipeline to California; (3) to expand refinery capacity in California through capacity creep within existing facilities (gradual improvement of efficiency over time) and/or re-opening shut down refineries; and (4) to obviate new gasoline demand with programs promoting fuel efficiency, alternative fuels, public education, and smart growth. Continued and growing dependence on imports means more marine tanker traffic and makes California's economy vulnerable to foreign refiners. Building new refineries and pipelines means more air and water pollution, particularly in communities near refineries. Increased demand also creates constant pressure to drill for more oil off the California coast and in wilderness areas such as the Los Padres Forest and the Arctic Refuge. California is likely to see a substantial increase in marine tanker traffic to meet the growing demand. With refineries in the U.S. Gulf Coast having little spare production, California is likely to turn with increasing frequency to supplies imported from foreign countries, including those in the Middle East. The state will be sacrificing the reliability of its future gasoline supplies by turning to an undependable global market for refined oil products. In addition, the state will be importing more crude oil to keep its refineries running. In 2000, California refineries imported about 30 percent of their crude oil from foreign countries, including about 13 percent from the Middle East. NRDC projects that oil imports will to grow to 40 percent by 2010 and over 50 percent by 2020. The path is not inevitable; California can have a cleaner, more reliable fuel supply. Technologies and policies exist to substantially reduce petroleum demand. A recent NRDC report, Fueling the Future, A Plan to Reduce California's Oil Dependency , outlines a 4-step plan for California to reduce its gasoline demand by 490,000 barrels per day, saving drivers approximately $28 billion by 2020 while protecting public health, the economy, and environment. The study finds if steps are taken now, California can reduce gasoline demand to 15 percent below today's levels by 2020 through fuel-efficient vehicles, advanced technology vehicles powered by clean fuels, enhanced transit services, and reduced sprawl. This plan would make California independent of imported gasoline by 2011. Besides reducing drivers' expenses at the gasoline pump, this plan also helps ensure that Californians will also breathe cleaner air and drink cleaner water. This approach will help protect California's coast by reducing tanker traffic and pressure to drill off the California coast.