Can CA Survive Without Oil? Two Perspectives

Gas-Pump-blue-generic+flippedA week ago, Zocalo Public Square published an article, Imagining California Without Oil Refineries, by one of its editors, Lisa Margonelli, suggesting that Californians are embracing new technology that will lead to an oil free future. She wrote that not being gasoline consumers has become part of many Californians’ identities. Meanwhile, the California Resources Corporation (CRC), a publicly traded oil and natural gas exploration and production company, produced a website also asking Californians to imagine the state without oil. The two imaginings could not have been more apart.

The Zocalo piece spoke of the history of the environmental movement in the Golden State and the fact that younger generations are limiting consumerism and supporting a new way of living that reduces — and some day would eliminate — the need for oil. The CRC imagined a day without oil and offered a list of products that would disappear. Never mind the energy that is used to power products, petroleum is raw material used in refrigerators, dishes, smartphones, coffee makers, kayaks and more.

But it was the area of economic effects that made me take notice.

Margonelli wrote that, “Technologies as diverse as Facebook, compost bins, and electric vehicles have made many Californians see themselves as participants in building an oil-free future, without much fear of the potential downsides.”

And: “Rather than being afraid, a surprising number saw an economic upside in getting oil out: In polls, 43 percent of Californians said that cutting gasoline use would create jobs, while only 13 percent said it would kill them.”

(I might note that the PPIC poll respondents don’t always have the best information. Continually when asked, they describe prisons as getting the most money from the state budget and education near the bottom when the opposite is true.)

But accepting for the moment that there would be a rush of new jobs with technology and alternative energy what might be lost if we shut down the oil business?

The CRC made the following assertions:

The industry directly employs 184,100 Californians from diverse backgrounds and all levels of the socio-economic spectrum, which translates into $23.3 billion per year in wages and salaries for oil and natural gas jobs. It offers jobs to workers of all education levels, including truck drivers, geophysicists, chemists and machinists.

The oil and natural gas sector reflects California’s diversity. Over a quarter of the statewide industry workforce is Latino … In California, the average annual oil and natural gas industry salary of $118,032 is double the $56,590 average for other private industry jobs, according to a 2015 report by the Los Angeles Economic Development Corporation (LAEDC).

In total labor income alone, the oil industry injected $40 billion annually into the state’s economy, according to the LAEDC report. These salaries filter into the local economy through the vendors who work with the oil companies and the local businesses frequented by workers… The oil industry supported 456,000 jobs in the state, or 2.1 percent of California’s employment, and generated more than $204 billion in direct economic activity.

In addition, U.S. oil and natural gas companies pay considerably more in taxes than the average manufacturing company. According to Standard & Poor’s research, in 2013 the oil and natural gas industry paid an average effective tax rate of 40.2 percent versus 22.3 percent for other S&P 500 industries such as healthcare, retail, utilities, media and pharma.

In California, nearly $22 billion in state and local taxes collected in 2013 can be attributed to the oil industry, as well as $14.8 billion in sales and excise taxes, according to the LAEDC report, all of which help fund essential services and infrastructure that Californians rely on every day.

The issue of taxes paid by oil and gas companies plays against the future imagined in the Zocalo piece. Will the new alternative energy industries produce the same kind of revenue for the state?

The end-oil commentary concluded that a young woman was driving an electric vehicle – a Leaf—“with state and federal incentives.” (The family) “even installed solar panels that feed the Leaf, making them participants in generously funded state programs…”

You wonder if we cut out the traditional energy industries with all those jobs and the billions paid by the oil and gas industry in taxes if there will be revenue available to offer generous state funded incentives to buy solar panels and electric vehicles or pay for other budget items.

Originally published by Fox and Hounds Daily