Oil companies should call California’s bluff and announce their departure from the state at the end of this year.
Oil companies should call California’s bluff and announce their departure from the state at the end of this year.
T he state of California is the latest player to sue various oil companies for alleged damages from climate change, and the oil companies should call the state’s bluff.
Like the numerous cookie-cutter climate lawsuits filed by other states and municipalities against these same oil companies, the California lawsuit blames them for causing climate change and all manner of damages — drought, storms, heat, cold, wildfires, rising seas, and so on. And, like the other lawsuits, this one claims the oil companies knew about climate change as early as the 1960s and could have — should have — developed renewable-energy technologies to counteract it, but chose not to in favor of selling more profitable fossil fuels. Of course, it also claims the oil companies continue to damage California by supplying fossil-fuel products in the state.
The latter claim is a bluff that the oil companies should call. Currently, California has 14 operating oil refineries, down from 18 a decade ago. Of those 14, four are operated by two defendants in the suit: The Chevron refineries in El Segundo and Richmond, and the Phillips 66 refineries in Wilmington and San Francisco. Together, those four refineries account for about 45 percent of total refinery capacity in the state.
Because California has long mandated special fuel blends and restricted imports of refined-petroleum products, prices for gasoline and diesel fuel in the state have historically been the highest in the nation. Since January of this year, the average price of gasoline in the state has increased by 35 percent to $5.80 per gallon. By comparison, the average price nationwide is just under $4 per gallon. The average price of diesel fuel, critical for the trucking industry and the economy as a whole, has increased by 14 percent in California over the same period, to $6.21 per gallon or over $1.50 per gallon more than the nationwide average.
Like the multibillion-dollar litigation against tobacco companies that filled numerous state coffers starting in the 1990s, the California lawsuit seeks not to end fossil-fuel production and consumption, which is unrealistic, but instead to enrich the government’s political favorites by collecting money from oil companies for the foreseeable future. States can use tobacco-settlement funds for any purpose they wish. Presumably, states would be allowed to use settlement money collected from oil companies for any purpose, as well.
But what if, instead, the two companies called the state’s bluff and announced that their California refineries would close permanently at the end of this year? They would not need to admit any blame for causing climate change. Instead, they could rightfully cite the state’s adverse regulatory climate, the economic damage from which is far more easily quantifiable than the economic damage caused by climate change. The resulting rending of garments and gnashing of teeth would be heard nationwide, because the impact on gasoline and diesel prices, and on the entire California economy, would be quick and devastating.
How could California respond? The state could not force the companies to continue operating their refineries. Nor could it force the companies to sell their refineries to other companies or to the state itself. And even if the state could buy the refineries, the prospect of its operating them would be laughable. Although the state could threaten to levy massive penalties for environmental remediation at the sites of the refineries themselves, doing so would mean that any local environmental damage was viewed by the state as more important than the lawsuit’s claim that the companies are “destroying people’s lives.”
However serious a problem one believes climate change to be, California’s frivolous lawsuit is nothing more than a state-sponsored extortion attempt that will have no impact on the climate. The oil companies can fight back by forcing the state to live up to its claims.