I never suggested that oil production will decrease. Production of existing fields will continue to be constrained by geology and infrastructure. The global price of WTI, or any local CA crudes, has no affect on production at this point.
Your challenge is specious reasoning. I cannot list any projects that will receive reduced investment as a result of prop 87, but you cannot list any projects that won’t receive reduced funding. I am not on the BOD of any major oil companies so I have no idea how they will allocate their production budgets. Furthermore, we don’t know the results yet from prop 87 so oil companies don’t know either.
As to points #2 and #3, I don’t think you read the essay I posted, so I’ll quote from Robert Rapier on The Oil Drum:
Each year, oil companies decide where they will allocate capital based on expected returns for various projects. After the initiative passes, it will be less profitable to extract oil in California. The expected returns for some capital projects in California will decrease. California will get just a bit smaller capital allocation from corporate budgets, which over time will squeeze supplies. Not only will the returns from California be lower, but initiatives such as this are viewed as hostile toward the industry, providing another disincentive for investing capital in California. As investment slows and gasoline capacity fails to keep up with demand, higher prices will result.
Some proponents have declared this scenario unrealistic, because oil and gas prices are set on the global market. For example, in a recent report, ABC news reporter Mark Matthews asked the following question: “But will 87 raise the price of gas?” He then answered the question with “The price of oil is set on a world market, not state by state.” What many people don’t seem to understand is that there isn’t a single price for oil. Oil prices vary greatly in different locations based on a number of factors, as Ana rightly pointed out in her previous essay. Prop 87 will improve the economics for importing oil into California, simply because it will increase the operating costs for California oil producers. So, even though West Texas Intermediate, for example, is set on the world market, the price for crudes produced in California will reflect California’s specific circumstances. And those specific circumstances are set to change with passage of this proposition.
I suggest that the report you showed indicates that while we are not wholly dependent on CA crudes, we still get a large enough chunk (37% in 2005) to affect gasoline prices here. Additionally there is a cost basis for higher gasoline taxes here in CA since we pay some of the highest taxes in the nation when considering the complete gasoline taxation picture. When taxes on 37% of our crude input goes up, that can only make matters worse. For reasons of infrastructure, we cannot simply whisk cheaper crudes from all over the world to compensate and expect to receive it for the spot price of WTI. There is time, infrastructure, tanker royalties, pipeline royalties, etc. that dictate the reasons why we acquire 37% of our crude from in-state. I suppose we could eventaully readjust our fuel portfolio but…that’s will cost money :).
Finally, as this assertion: In fact, fuel costs go down with prop 87 because alternative energy research funded by prop 87 brings new cheaper technology.
This statement is too vague. There is no guarantee that prop 87 will bring any new technology. Some research efforts succeed, some fail. When one looks at progress in the energy industry, you can see that research has been going on for decades in all sorts of niche sources. Yet we still use ever-increasing amounts of oil in the world. There are no alternatives currently in place, or none of the drawing board, that will make us less dependent on oil. Only conservation will.
