California, once the fourth-largest crude producer in the U.S., built its identity around the oil industry. A century ago, the state's oil output fueled the growth of iconic highways, drive-in theaters, banks, and restaurants, shaping its enduring car culture. However, this Friday marks the official end of this long-standing marriage, as Exxon Mobil and Chevron disclose a combined $5 billion writedown of California assets in their fourth-quarter reports.
Separation Long Overdue: Exxon Mobil's Exit and Chevron's Contention
Exxon Mobil took the first step in ending its relationship with California last year by exiting onshore production, concluding a 25-year partnership with Shell PLC. The regulatory hurdles in the state hindered offshore production, prompting Exxon's decision to finance a Texas company's purchase of its offshore properties. This move incurs a $2.5 billion asset writedown, marking the conclusion of five decades of oil production off Southern California.
Chevron, while remaining in California, contests state regulations on its oil-producing and refining operations. The company, born 145 years ago as Pacific Coast Oil Co., will also incur charges of about $2.5 billion related to its California assets. Despite staying, Chevron's discontent with the state's energy policies has led to significant spending cuts, sparking a bitter dispute.
Environmental Awakening: From Car Culture to Oil Spills
While oil companies once fueled California's car culture, their oil spills sparked the U.S. environmental movement. The devastating 1969 Santa Barbara oil well blowout led to the National Environmental Policy Act, the first federal requirement to consider environmental effects in permitting decisions. California implemented drilling curbs, air pollution regulations, and stringent environmental standards in subsequent decades.
Governor Gavin Newsom's administration has taken legal action against the oil industry, accusing it of deceiving consumers for over 50 years about climate change. A bill holding Chevron and other refiners liable for alleged price-gouging has been signed into law. The industry's trade association, the American Petroleum Institute, denounces these actions as detrimental to both the industry and its workers.
Industry in Decline: A Tragic Tale or Green Transition?
California's oil production has steadily declined for almost four decades, with crude output dropping by a third since its peak in 1985. New oil development projects have been scarce, and legacy fields producing heavy oil are incompatible with the state's high-quality gasoline mandates. Over 50% of oil drilling permits issued remain unused, contributing to a 7.8% unemployment rate in oil-producing Kern County, surpassing the state average.
Daniel Kammen, a professor of Energy at the University of California, sees this as a green transition. Kammen argues that oil companies must shift to clean energy to survive and warns that those who resist are like dinosaurs. With California boasting six times more clean-energy jobs than oil-related ones, the future seems to hold no room for oil and gas in the state.
