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Chevron (CVX) at Odds With California Goals, Cuts Investment
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U.S. supermajor Chevron Corporation (CVX - Free Report) is making significant cutbacks in its oil-refinery investments in California, citing what it deems as "adversarial" policies toward fossil fuels in the state. The San Francisco Bay area-based oil giant has cut spending in California by "hundreds of millions of dollars since 2022," according to comments submitted to the California Energy Commission.
Chevron, a major supplier of jet fuel to airports in San Francisco and Los Angeles, says it's doing this because of the tough business environment and not making enough profit due to California's strict fuel standards and carbon cap-and-trade program.
Chevron Blames California Policies
Chevron's decision to cut spending comes amid California lawmakers' considerations to limit profits for refiners within the state. This move could affect the already high prices at gas pumps in California. Governor Gavin Newsom has ambitious environmental goals, aiming for an 85% reduction in climate-damaging emissions by 2045.
Despite these goals, Chevron argues that California's policies, including a recent law allowing the California Energy Commission to set a maximum gasoline refining margin, have made it difficult for them to invest in the state. Chevron's president, Andy Walz, says that strict rules on investment have severely limited refiners' ability to respond to higher prices.
Impact on Renewable Fuels
Chevron is not only worried about traditional refining but also about the renewable fuels sector. The company believes that the state's proposed profit margin cap will limit investments in renewable fuels. While other refiners in California are spending a lot on converting to renewable diesel, Chevron sees the margin cap as something that might discourage overall investment by energy companies in the state. In a letter to the California Energy Commission, Walz warns that a margin penalty will not only reduce investment in gasoline but also slow down the growth of renewable energy investments in California.
California's Energy Landscape
California's ambitious climate targets, such as a 94% reduction in gasoline demand by 2045, have encouraged investments in eco-friendly options like renewable diesel and biodiesel. However, Chevron's recent reduction in spending underscores the difficulties faced by companies in a state with stringent environmental rules. Despite progress in adopting electric vehicles and decreasing traditional diesel use, California still leads in jet fuel consumption and ranks second in gasoline usage in the United States. The state's pump prices, usually the highest nationwide, have been 35% above average this year.
Zacks Rank & Stock Picks
Chevron is one of the largest publicly traded oil and gas companies in the world, with operations that span almost every corner of the globe. The company carries a Zacks Rank #3 (Hold) at present.
Murphy USA: Murphy USA beat the Zacks Consensus Estimate for earnings in two of the trailing four quarters and missed in the other two. It has a trailing four-quarter earnings surprise of 7%, on average.
Murphy USA is valued at around $7.7 billion. The company has seen its shares gain 25.1% in a year.
EOG Resources: EOG Resources beat the Zacks Consensus Estimate for earnings in three of the last four quarters and missed in the other. EOG has a trailing four-quarter earnings surprise of 9.2%, on average.
EOG is valued at around $69.1 billion. The company has seen its shares drop 4.1% in a year.
Liberty Energy: The 2023 Zacks Consensus Estimate for LBRT indicates 52.1% year-over-year earnings per share growth.
Liberty Energy is valued at around $3 billion. LBRT has seen its shares rise 18.8% in a year.
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Chevron (CVX) at Odds With California Goals, Cuts Investment
U.S. supermajor Chevron Corporation (CVX - Free Report) is making significant cutbacks in its oil-refinery investments in California, citing what it deems as "adversarial" policies toward fossil fuels in the state. The San Francisco Bay area-based oil giant has cut spending in California by "hundreds of millions of dollars since 2022," according to comments submitted to the California Energy Commission.
Chevron, a major supplier of jet fuel to airports in San Francisco and Los Angeles, says it's doing this because of the tough business environment and not making enough profit due to California's strict fuel standards and carbon cap-and-trade program.
Chevron Blames California Policies
Chevron's decision to cut spending comes amid California lawmakers' considerations to limit profits for refiners within the state. This move could affect the already high prices at gas pumps in California. Governor Gavin Newsom has ambitious environmental goals, aiming for an 85% reduction in climate-damaging emissions by 2045.
Despite these goals, Chevron argues that California's policies, including a recent law allowing the California Energy Commission to set a maximum gasoline refining margin, have made it difficult for them to invest in the state. Chevron's president, Andy Walz, says that strict rules on investment have severely limited refiners' ability to respond to higher prices.
Impact on Renewable Fuels
Chevron is not only worried about traditional refining but also about the renewable fuels sector. The company believes that the state's proposed profit margin cap will limit investments in renewable fuels. While other refiners in California are spending a lot on converting to renewable diesel, Chevron sees the margin cap as something that might discourage overall investment by energy companies in the state. In a letter to the California Energy Commission, Walz warns that a margin penalty will not only reduce investment in gasoline but also slow down the growth of renewable energy investments in California.
California's Energy Landscape
California's ambitious climate targets, such as a 94% reduction in gasoline demand by 2045, have encouraged investments in eco-friendly options like renewable diesel and biodiesel. However, Chevron's recent reduction in spending underscores the difficulties faced by companies in a state with stringent environmental rules. Despite progress in adopting electric vehicles and decreasing traditional diesel use, California still leads in jet fuel consumption and ranks second in gasoline usage in the United States. The state's pump prices, usually the highest nationwide, have been 35% above average this year.
Zacks Rank & Stock Picks
Chevron is one of the largest publicly traded oil and gas companies in the world, with operations that span almost every corner of the globe. The company carries a Zacks Rank #3 (Hold) at present.
Meanwhile, investors interested in the energy sector might look at operators like Murphy USA (MUSA - Free Report) , EOG Resources (EOG - Free Report) and Liberty Energy (LBRT - Free Report) , each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Murphy USA: Murphy USA beat the Zacks Consensus Estimate for earnings in two of the trailing four quarters and missed in the other two. It has a trailing four-quarter earnings surprise of 7%, on average.
Murphy USA is valued at around $7.7 billion. The company has seen its shares gain 25.1% in a year.
EOG Resources: EOG Resources beat the Zacks Consensus Estimate for earnings in three of the last four quarters and missed in the other. EOG has a trailing four-quarter earnings surprise of 9.2%, on average.
EOG is valued at around $69.1 billion. The company has seen its shares drop 4.1% in a year.
Liberty Energy: The 2023 Zacks Consensus Estimate for LBRT indicates 52.1% year-over-year earnings per share growth.
Liberty Energy is valued at around $3 billion. LBRT has seen its shares rise 18.8% in a year.