California faces increasing dependence on high-priced oil imports

A modern-day oil boom in states like Texas and North Dakota has helped the U.S. reduce its dependency on foreign oil to the lowest levels in 12 years. Unfortunately, California isn’t benefitting, and steady declines in the state’s production will leave it increasingly dependent on expensive foreign crude in the future.

Of the nation’s five top oil-producing states, only two have seen steady drops since February 2006. They are California and Alaska, according to Energy Department statistics. In California, (counting onshore and offshore sources) the numbers have fallen from about 18.5 million barrels a month to about 17.5 million barrels a month currently.

And since California’s only other significant source of U.S. oil is Alaska, the news is doubly bad. Alaska’s onshore and offshore production decline has been precipitous, falling from more than 50 million barrels a month to about 39 million barrels a month during the same period.

California has depended on Alaska oil to fulfill some of its energy needs. It arrives in Southern California, for example, by tanker. But there are no pipelines from any other part of the U.S. that can supply California with more domestic oil.

This is one reason why the California figures to maintain its dubious distinction of having the highest retail gasoline prices in the 48 contiguous states. Oil imports already account for 48% of California’s crude needs, according to the most recent California Energy Commission figures, and that dependency will continue to grow.

Moreover, those imports are priced by the European commodities standard for oil, which is based on Brent North Sea crude. It consistently trades at a much more expensive level than the U.S. standard, West Texas Intermediate oil.

Today’s spread was typical of the difference. U.S. oil was trading at $103.46 a barrel on the New York Mercantile Exchange, but Brent was trading at $123.20 a barrel on the ICE Futures Europe Exchange.

Texas has seen its oil production climb from 31.1 million barrels a month in February 2006 to 49.2 million barrels a month. The boom in North Dakota’s Bakken oil field, however, outstrips every other domestic production gain. Oil production there has increased more than five-fold in the same period, to almost 16.6 million barrels a day.

North Dakota is expected to climb above California in oil production sometime this year, moving it into third place among the states.

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