Chevron can no longer remain profitable in California, where politicians fail to understand the impact of reducing fossil fuels without a reliable alternative. The company has already pulled back hundreds of millions in spending in California over the past two years. Chevron’s Q4 filings proclaimed it needed non-cash write-downs and is expected to report non-cash charges of up to $4 billion.
At this point one must wonder if Governor Gavin Newsom wakes up each day to plot the destruction of California. Newsom announced he was taking over “Big Oil” last year by implementing legislation aimed at price gouging.
Andy Walz, Chevron’s Americas products president, explained that California’s regulations have made it difficult to remain profitable. “A margin penalty can only serve to further deter investment in the state’s energy market,” Walz wrote. “This is not hyperbole, nor is it merely hypothetical. California’s policies have made Chevron’s investments in its home state riskier than investing in other states, with projects being lower in quality and higher in cost.”
Adding to the issue, Exxon Mobil also announced it may need to write down its California assets by up to $2.6 billion. “While the Corporation is progressing efforts to enable a restart of production, continuing challenges in the state regulatory environment have impeded progress in restoring operations,” said Exxon. The company expects Q4 earnings to decline by ~$800 million compared to Q3, along with a $1.7 billion drop in industry margins.
Companies as large as Chevron or Exxon Mobil cannot simply pack up and move to another state. Instead, companies are downsizing operations in California and rejecting new projects. California is operating at a $68 billion deficit and cannot afford to lose more business. This will impact gas prices throughout the nation, not just in California. It is not the oil companies but the GOVERNMENT that is price gouging the people through regulations and taxation.
