At It Again: Flawed Oil Industry Study Undermines California's Efforts to Provide More Clean Fuel Choices and Cut Our Oil Dependence

The best way to create good American jobs, cut our energy costs, and protect our national security is to decrease our oil dependency. California’s Low Carbon Fuel Standard (LCFS) which requires the oil industry to start investing in cleaner, alternative fuels is doing just that. Unfortunately, the oil industry is persisting in its campaign to undercut the standard and jeopardize these benefits to Californians.

Firing its latest salvo to protect its status quo, the Western States Petroleum Association released yet another study yesterday purporting to reveal major flaws in California’s groundbreaking Global Warming Solutions Act (AB32), including the Low Carbon Fuel Standard (LCFS) that will introduce more fuel choices to the market than simply gasoline. 

WSPA’s report makes two fundamentally mistaken assumptions. Despite the LCFS being a standard that requires the oil industry to make investments in cleaner alternatives, WSPA assumes that oil companies don’t actually invest in clean alternative fuels and consequently, no to little low carbon alternatives are produced. Second, they appear to ignore the existence of hundreds of their competing companies from the advanced biofuels industry, electric utility industry, natural gas and hydrogen industries that are already supplying the market, and the ability for these industries’ market share to grow. Based on these two faulty assumptions, WSPA’s report is led to an unavoidable conclusion: refineries, rather than investing to comply with the standard, have no other option but to refuse to supply the United State’s largest transportation fuels market or to simply shut-down. My colleague David Pettit cross-examines more of the oil industry's assumptions here.

Strike Two

The oil industry report comes almost exactly six months after the release of information from another study commissioned by WSPA about the allegedly exorbitant costs of alternative fuels – additional industry analysis that didn’t hold up under close scrutiny.

By contrast, nearly every peer-reviewed, independent study shows that a wide number of alternative fuels can be cost-competitive -- or cheaper -- compared to gasoline or diesel when produced at commercial scale. These include source such as peer-reviewed academic reports, consultant reports, the International Energy Agency, the U.S. Department of Energy, the U.S. Environmental Protection Agency, and the clean, alternative fuel providers themselves. 

The Oil Industry Needs to Invest More in Our Future

The need for alternatives was underscored over the past year when turbulent events in the Middle East, growing demand in Asia, and refinery accidents and shutdowns created large oil and gas price spikes in California. Consumers and businesses ended up spending $70 billion at the pump -- with $40 billion of it shipped out of state to the oil industry at large, which took home record profits. That’s a leak in California’s economy three times the size of the state’s budget deficit.

Unfortunately, the oil industry overall has not invested significantly to provide us with cleaner, alternative fuels interest. In a study we conducted, for every dollar they spend to produce more oil, only a fraction of a penny has been devoted to substitute clean fuel technologies. By contrast, the oil industry spent $190 billion the past five years in producing even dirtier tar sands. If just a fraction of this were redirected and redeployed to scale-up advanced renewable fuels, it would be enough to meet and far exceed the LCFS standards.  The LCFS requires them to significantly invest in these alternatives, which will grow jobs in California and could make the state a net exporter of cleaner fuels and technologies.

AB32 Is Delivering Consumers Savings at the Gas Pump

Three AB 32 programs – the low carbon fuel standard, clean car standards, and SB375 (California’s Sustainable Communities Planning Act), together with the other smaller oil saving measures -- will collectively reduce our state’s fuel bills by $50 billion over the next 10 years, translating into household fuel savings averaging $800 to $1,100 by 2022. Without AB 32, much of those billions would be sent to the Middle East and other oil exporting countries, and the remainder on increasing industry revenues. In addition, numerous independent economic studies conclude AB 32 can help save consumers money at the pump.

Meanwhile, other California and U.S.-based companies are ready to produce clean fuels to meet the LCFS. These electricity, renewable biofuels, natural gas, and renewable hydrogen suppliers have the technologies now. However, they need regulatory certainty to ensure investment. For example, oil industry lobbying to remove critical policy drivers like the LCFS and national Renewable Fuels Standard are creating a destabilizing investment climate in an already tough economy for the advanced biofuels industry. It’s a self fulfilling prophesy – if enough uncertainty is created around these policies, then no investors will invest. If there are no investments, then the standards won’t – by definition - be reached.

Instead of trying to scare policymakers about the impacts of AB 32 with one-sided studies, we should all be working toward successful implementation that will result in oil companies investing more to provide us with homegrown, domestic fuels. We can work to upgrade California’s refineries to be more energy efficient and to also become fuel providers of the future by producing renewable-based fuels. Californian consumers and companies can all benefit by cutting our fuel costs, diversifying our supply, creating good jobs, and protecting our health and the environment.

About the Authors

Simon Mui

Director, California Vehicles and Fuels, Energy & Transportation program

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