What California’s Oil Supply Means for America’s Future | Michael Mische & James Rector

We are importing much more of our oil right now in California. With the current tensions and geopolitical problems across the globe, is this going to be a big issue for us going forward? Efforts to shut down the oil industry are hurting California economically, they're hurting California environmentally, they're hurting our national defense. Today we sit down with Professor James Rector from Berkeley and USC Professor Michael Michet. To discuss what challenges we could face if we continue on this path, and they have some solutions. Every day that goes by, we are sending anywhere from $100 to $150 million of California money offshore to pay for oil that we're importing. James, Michael, it's great to have you back on. Welcome back. Thank you. It's great to be here, Sia. Terrific to see you again. Thank you. We want to talk to you about a phenomenon that's happening in California. We've been vocal about it. There are some vulnerabilities when it comes to energy, oil and gas specifically. And you guys recently have done a study that there are circumstances geopolitically that could put this state and the whole country in danger because of our fuel supply here in California. Can you tell us a little bit more about your study? Sure. We decided to take a look to California production and refinery capability and relate that to United States national security. In particular, emphasis on Taiwan, the Strait of Taiwan, and any particular military action that would be required in the far distance of the Pacific. And then relate that to the state's ability to supply fuel for United States forces over there. And so we looked at it from a strategic perspective, and then also from a production and refining perspective. What did you guys find? Well, we essentially found that we cannot provide a credible defense to Taiwan because we don't have the secure fuel supplies, most of which must come from California. And Michael can go into the details of that. And how does that work? So if there is a conflict, which there is a lot of talk about potential conflict with Taiwan, and there is no secret, Chinese Communist Party has been trying to take over Taiwan. And recently, Xi Jinping said that they want to reunify. Reunification? Yeah, they want reunification. And the question is, is it going to be with military, or are they going to be able to do it politically like how it happened in Hong Kong? One would think they would prefer to have it. Happened politically, but it's the stated ambition of the Chinese Communist Party to have reunification of Taiwan basically at any cost So when you look at China's military, it's it's largely defensive. However, they are building offensive capabilities now with aircraft carriers But, you know, it's a fairly significant defensive capability. They have nuclear weapons, of course, and they have delivery systems for those, and they're building aircraft carriers. The issue you have with China and Taiwan is the Chinese missile defense systems. They are all configured to go out as far as 1,800, 1,900 miles offshore, and they are designed to attack specifically American aircraft carriers. So. Our platform for prosecuting any war or any defensive action on Taiwan would be predicated on aircraft carriers and air defense systems. So we can't bring those carriers within 1,000 or almost 2,000 miles of China, which means they're going to stay far off in the Pacific. There's no refueling there. All right. The refueling depots that exist are in Guam. That's within range. And then you have Philippines. That's within range. You can't rely on South Korea. That's within range. You can't rely on Japan. That's within range. So you have to keep the carriers at bay, which means you have to have a constant stream. The carriers are nuclear powered, but the airplanes on them require jet fuel and a specific type of jet fuel. And so you have to have a constant stream, an armada, literally, of tankers going out to fuel the fleet to prosecute war operations in those areas. Because if there is a conflict militarily, you certainly don't want it to escalate into South Korea or to Japan and certainly not infantry action. So it would be largely aircraft action. How do you see the vulnerabilities when it comes to us in terms of the fuel supplies? Historically, California was the big supplier of fuel in the Pacific, and there was also a huge fuel depot in Hawaii, which has been shut down. And this has been going on since the Vietnam War. Essentially, back then, California was a huge producer of oil, and the fleet relied on fuel supplies from California. Now California is not a huge producer of oil, and if you're going to supply that fuel, remember it's got to be refined fuel, jet fuel, it's going to have to come from somewhere else in the United States or some other refinery distant from China. And the only other possibilities are places like the Gulf Coast and things like that. And that's a much further haul to get that fuel to those aircraft carriers than it is from California, somewhere in the range of 12 days, I guess. That's correct. Not to mention that if you want to bring fuel from the Gulf of America coast, you have to go through the Panama Canal. And we all know China has the ambitions of the Panama Canal directly in sync. So that can easily be shut down, you know, militarily or through terrorism or through economic sanctions and things like that. So that's that's a very difficult route. Back in the day, as Jamie mentioned, California was was at one time the. The world's leading producer, right, Jamie? A hundred years ago. A hundred years ago of petroleum. And we had as many as 43 refineries. And so that was certainly during World War II, Korean War, Vietnam. We were fueling the military operations without having a significantly negative corresponding impact on commercial and private, the private sector of the economy here. Now we're down to a trickle. Of of in-state production, we import 63 percent of our oil from foreign countries, and now we're importing a significant, you know, 250,000, 275,000 barrels a day of fuel from foreign countries, including South Korea. Right. So these create just natural vulnerabilities that they can easily that supply chain can be easily disrupted in any way, shape or form. So even cyber disruptions can cause delays in that supply chain in terms of maritime shipping and scheduling a transit and things like that. So we've gone from 43 refineries down to six. We've lost 22% of our refinery production just in the last five years under Gavin Newsom's administration. Thank you. And so how are you going to really fuel the fleet? And maintain continuity of the private sector economy simultaneously. Something has to suffer. And in our paper, we identified those. Your research has gotten some attention now. Can you tell us more? Yeah, we've gotten quite a bit of attention. We've certainly got a lot of questions coming at us, particularly how we did the research. Where did we find the data? Did we have access to classified data? And the answer to those is that all the data is public. We just did a lot of digging. And so if two professors, a Berkeley professor, an AVOC professor, and Joseph, our graduate student, if we can find it, our adversaries can find it also. And they can do the same calculations and build the same models that we can build and probably come to the same conclusions. So I think that was a revelation among some policymakers and certainly some folks in defense and logistics and things like that. And so we've gotten... A lot of proper questions, I would say. Appropriate questions from people. And James, how did you join on this? You're more on the exploration... And the supply side, yeah. After our meeting last year, we just started discussing these issues, and I realized that there just wasn't a coherent... voice that anybody in state government or in the private sector or in the federal government could listen to. And Mike and I, I think through our work over time, have just kind of become a Kind of a common sense voice and we're not, I mean I don't think I'm political about it at all, I just think we look at the data and what the data says, we interpret and make recommendations but there's no ulterior motive, we just want the best for the country and for the state. You guys did this research. You got a lot of attention from the right people, and then you got some attention from questionable people. Can you tell us about that? Yeah, we did. Certainly I did, and I think Jamie had a few, but I've gotten quite a bit. I've gotten emails from people, generally people with foreign names coming from foreign sources, been approached in public places such as restaurants or in gathering places like that by people who you would never expect to approach you. And they would come up and they would begin to engage you in a conversation. And the most interesting aspect of that is they knew a lot about me. Never seen them, never met them. They knew a lot about what I like to do. Sort of, you know, I enjoy, I'm a. Passionate college football fan. Now everybody will know that. But, you know, little things about your life and your personality and the things you like and you dislike would suddenly be coming out of these strangers that you've never seen before in your life. And that was really interesting, not to mention the email saying, gee, I'm moving to Beverly Hills. You know, I know you live there. Would it be nice to get together? And it... Very interesting amount of attention has been brought on what I'd say on both sides, right? The positive side, people that legitimately have the interest of the United States at heart, and others that may have a more nefarious motive. So people in these positions, whenever you're doing important research, important work, you have to be very careful. Who to trust and who you communicate with because you easily can become a target. Yeah, I think you do. And certainly I've been cautioned by that, by members of the United States government to be careful now, to understand who you're talking to and just be more alert about your surroundings and some of the folks who may approach you. But that's all natural. That's just part of the political process and the economic process. Now, in terms of the state, We have decided to kind of shut down the oil production from what it looks like, you know, and for a variety of reasons. Some people are advocating for climate change and they're saying that we've got to shut down oil production and some people are saying we need to, because of the environmental impacts, we need to stop. doing this and the number of the wells that were approved in were very low during the last administration in California but at some point they've decided to allow 2,000 wells and I think it was 2,000 or 10,000. 2,000 but only in Kern County. It's almost like California said okay Kind of like 2012 and Arthur C. Clarke, you know, you can go anywhere but you must stay in Kern County if you want to produce oil and everywhere else is off limits. How did we get here? First of all, there's been an extensive environmental movement in California and historically the oil industry were not the best stewards of the environment. particularly back 50 or 100 years ago and so there were regulations that needed to be created to kind of clean up the California oil industry but unfortunately over the past 30 years maybe in the past 5 or 10 years they've gone from You know, beneficial to not beneficial for the environment, based on our research, and now you have a situation where the efforts to shut down the oil industry are hurting California. Or at least the oil industry outside of Kern County, they're hurting California economically, they're hurting California environmentally, they're hurting our national defense, and they've gone too far and they're a very bad idea, but people believe the stuff that they've heard for 40 or 50 years, and changing that mindset and bringing the facts to the table so that they can make a better... Decision today is going to take time and shows like this hopefully get the information out there. People could mow on it and over. Over the course of several years or maybe even decades, maybe California can right the ship a little bit. Tell us about your study. How did you find out that these policies are hurting the environment instead of helping? Somehow it's changed. Can you tell us about this? Yeah. So and I think we talked about this around a year ago. But, um... We did a study on Southern California oil fields, and we're looking at the impact of abandoned wells and the cost of... Cleaning up abandoned wells in California versus the amount of carbon emissions they might reduce. And out of that, we started learning that natural seeps, particularly in Ventura and Santa Barbara County and in the L.A. Basin, were significant. So we went in and we had a hypothesis that we wanted to test, which was how big are those compared to... the emissions from oil and gas operations today because we know early on there were some real real issues but carb has clamped down on a lot of the emissions in oil operations and we just wanted to compare because we didn't know what it was and nobody had looked at it so we looked at it And lo and behold, the natural seeps in at least L.A. and probably even more so in Ventura and Santa Barbara are around 100 times more than the emissions from oil operations. More importantly, is that one of the ways, probably the most obvious way to reduce natural seeps is to actually produce the oil underneath from which they came, reduce the pressure, reduce the hydrocarbons down there. And this has been proven in areas like offshore Santa Barbara to reduce emissions by 50%. Over time, you know, overproduction of 10 or 20 years. So the state has it all wrong. The city has it all wrong. They think it's bad for the environment. But today, it's actually good for the environment. Can you explain that more? So these seeps are coming to the surface? Yeah, so when a pool of oil, let's say, down a mile deep in the ground, In most of California that oil is not exactly Perfectly capped, okay. It actually is leaking up to the surface and back in 100 years ago That's how people found oil fields. They actually looked for surface indications of oil bubbling up and they drilled there to hit the pool, okay, and The same thing is happening today in some pools We have produced all the oil and the seeps have been reduced in other places. The seeps are going on Our work on this is now using satellites to estimate static seeps across the state and we're finding some remarkable results that suggest that the methane emitted from these seeps is bigger than any man-made source in the state. It is enormous. And that work will be coming out probably in the next six months or a year. But it's a huge issue for California. And you think about it, right now oil has value, right? So you can produce the oil and you can make money off it. And you can reduce the SEAPs. What happens in 50 years, hopefully, when we're less dependent on oil, oil is less valuable, and now we've still got the SEAPs. Now, we're not going to drill and reduce it, and we're going to still be stuck with this environmental nightmare. Fascinating. It's fascinating, if I could add. California, if you look at the totality of the emissions in California, it's less than 1% of global emissions. So if California just ceased to exist, you'd be reducing global emissions by less than 1%. But yet we have these extraordinarily, at this point, I think, unrealistic environmental doctrine. ideology and objectives in place, which are, as Jamie's pointing out and the research is pointing out, is actually harmful. It's contradictory to what California wants to achieve. Not to mention that every day that goes by, we are sending anywhere from $100 to $150 million of California money. Offshore to pay for oil that we're importing. And that oil, we now know from our work, is very, very bad for the environment and for the climate. There are flarings. Yeah, in California, when you produce oil, you also produce some amount of gas for the most part. And in California, that gas has to be pipelined. It cannot be flared. It's recaptured. Right. It's basically recaptured so you don't have any emissions from that gas. In other countries, and even in Texas, the gas that comes out with the oil gets flared. And what they've learned is that these flares are not nearly as efficient as they thought they were. In Texas, I think a recent University of Michigan study said they're 91% effective. Which means that there's a lot of methane which is 30 to 80 times more powerful than CO2 going up in the atmosphere and presumably adding to global warming. In other countries, like Iraq, I mean, the regulations are much less severe. Imagine what that percentage is over there. We're looking into exactly what those numbers are, but the argument that the state has made, and some of my colleagues at Berkeley, that the imported oil is cleaner, well, it depends on where it comes from. If it comes from pipeline oil, like in Saudi Arabia or Brazil, It might be cleaner than some of the worst California oil. It's definitely not cleaner than the oil that's produced down here or outside of the areas of heavy oil. And you look at the health effects of that in other countries, and we are simply exporting that environmental catastrophe to places like Ecuador and ruining the rainforests, Iraq. It's just a... A heinous act, what California has done through their policies is, it's neo-colonialism, I'll call it, okay? It's exploiting other countries. Because it's not visible. Probably the policymakers are not seeing that. It's far away. And they're thinking about their state, but they're not thinking holistically. Everyone is looking about their county and their city. Even then, they're wrong. They're wrong. Right? Oil production actually cleans the environment. Because natural, from what you're saying, these natural seeds are coming up. Correct. And where do we get our oil from? So traditionally, we've gotten most of our oil historically from the Middle East. Saudi Arabia was the number one producer in Iraq. In recent years, Iraq is the number one, number two producer. Brazil's number one. Ecuador. are sort of the top sources now. So the top three sources would be Ecuador, Brazil, and Iraq for 2025 California oil imports. Now, this is really interesting because Jamie brought this out, and this also needs to go into the equation, which unfortunately is not considered. When you look at Brazil and Ecuador, they've burned something like 24 million acres of rainforests. Wow. oil production and sugar cane production, which is used for ethanol, which is now somewhat legal in California and looking forward to being sold in California. The number one exporter for ethanol to California has been Brazil. And so the issue of looking at this holistically, it just really has not sort of existed in the minds of Sacramento. Or if it has, it's been resisted. For example, When you put oil on a tanker, wherever it's coming from, Saudi Arabia, Iraq, or fuel that we're importing from South Korea, The emissions coming across the Pacific on that tank, those emissions are not counted for California purposes. When they hit a 12-mile limit outside of California, then they're counted. But that's when the engines switch to a low-carbon fuel standard. And some of them are electrical-powered, right? So their emissions all of a sudden just drop magically. It's cheaper to do that. Of course. And they just change that. So that's not counted in it. And so, you know, what we're doing with our research is saying, well, why don't you just compare Macintosh apples with Macintosh apples? Make sure that you have good accounting in place and that you have the proper matching principles in place to really account for this properly. That's one of our messages. And we did it. And we did it. And when you do that, what you realize is that this move to import oil and product is damaging the environment and damaging California's fight against climate change. It's doing exactly the opposite of what California... It says its stated goal is. In terms of changing this, a lot of Californians believe this is probably the right way to go. And they don't like the oil companies. There was a potential law to hold oil companies liable for LA fires. People introduce this type of legislature because they get some support and they get the headlines in the media. So they kind of want to benefit from that. And there is a mindset in California that supports these. Policies that we're implementing now, some of it might be because of the past spills, disasters like these areas you're mentioning, like Santa Barbara and these areas. Do you have any thoughts on how can this be done without causing the damages that have been? Well, so first of all, you know, obviously global warming, which I believe that CO2 is a huge impact on our long term temperature. So I'm not a climate denier at all. Global warming, I also think, you know, reduces soil moisture, dries out plants, and increases the severity of wildfires. So I don't think there's any doubt about that. But our recent research, again, into these natural emissions is pointing out something very interesting. And that is that the paths that fires take in California seem to be along formations that have higher methane emissions. For example, the Thomas fire in Ventura and Santa Barbara back in 2018. Followed a path that is exactly where a huge seep emission and actually a very laterally extensive seep emission occurs. A lot of canyons in Southern California here, Laguna Beach, there's been a lot of fires that have run up that canyon, I believe, the Laguna Canyon. There's a huge seep there. Same thing with areas of Camarillo. I was talking to an expert on fire, and he said, boy, where those seeps are is right where the fire seems to go. We haven't looked that carefully at the Palisades fire yet, but I wouldn't be surprised if we found the same kind of phenomena going on there, that the hydrocarbon's either in the ground or the methane leaking out. So the gas is there. And the fluids are there. But there's anecdotal evidence that, in fact, It's much harder to put out a fire where there are seeps. much more difficult so this hasn't been factored into any risk assessment of fires in California and it yet I think it's a huge unrecognized factor that we want to understand and it's definitely not to the point where you can run out and do anything about it right now but we've really got to put this work you know I think front and center in not only in the environment but also in public safety. We are trying to be the voice for you Californians and if you like our content and what we're covering make sure to check out the newspaper Epoch Times. Epoch Times is a unique newspaper which tries to bring people together by providing content that covers all sides of the story with respect and with a lot of data and numbers. Our goal is to bring clarity to independent thinkers. There is a lot of social media hype and negativity and emotion in the media right now. When you read our paper, you get a different feeling. Make sure to check it out and let us know. Now let's go back to the rest of this interview. Now in terms of producing this oil, if you were to take the oil from the SIPs, does it have to be offshore drilling or is there any way to do it without doing offshore drilling? Well, I think you can't make a blanket statement about it because you really don't know what's underground. Maybe it's a diffuse pool that isn't economic and so, you know, can you do it for public safety and lose money on it? I don't know. But there are many places in California that we know, such as offshore Santa Barbara, where drilling and producing the oil reduces the seeps. And for example, the South Elwood field, which is off of Goleta, Thank that field probably has something like 600 million barrels of oil left to produce in it. Now, if California gets a tax of 12% on that, you can do the numbers. I mean, it's a decent $600 million at, you. what is it, let's say $60 a barrel. That's $36 billion, and then California gets 12% of that. That's $3 or $4 billion. That's not a bad chunk of change, and they could do that tomorrow. Instead, what they did was when we had the... Pipeline spill back in 2015, they shut down all of that production, right. Now that production was helping the environment. Because it was taking the seep. Taking the seep off. The amount of oil that they increased was huge. The pipeline spilled literally the equivalent of about five from that in the Santa Barbara channel through natural seeps. or six days oil. So five to six days of natural seeps is equivalent to all the pipeline spill oil. Five or six days. And this oil is coming to the surface? Yeah. Have you seen it? Yes. Oh yeah. Yes. And so five or six days, ten years at five or six days, how much is naturally seeped versus how much have we saved by shutting down everything? It's not even close. Correct me, Jamie, but I think in the last six weeks, two months, the Coast Guard even came out and said, these are natural seeds. Oh, yeah, there's no doubt about it. People were complaining about it. Any idiot that says that it isn't doesn't know what they're talking about. And the Coast Guard actually said, no, these are naturally occurring seeds that are occurring off the shore of Santa Barbara. But they're also occurring onshore. They're occurring all over the place. And like I said, they're probably the largest source of emissions. methane emissions in california so your thought is we should study these and figure out if if we can get them out figure out how to get them out right and there are men there are other different ways of doing that for example you might want to put seat tents which they did in um underwater you might want to put containment vessels over some of these seats to capture the gas and take it away You might, in some areas, maybe there is an oil pool that will reduce the pressure and you can produce there and reduce the seeps. You won't know that until you do the studies. So it won't happen everywhere, but it's definitely an area. If we want to clean up California and do it in an economic fashion, it's just a no-brainer. Yeah, often, you know, you'll see people will go down these welling... You know, boat watches and things like that, and they'll see these bubbles coming up, and it's, oh, there's wells. No, that's methane coming up. That's methane coming up to the surface, and it's going to be released into the surface. And we can't see it on shore. Right, and where there's methane, there's going to be oil. It's colorless and odorless on shore, so we have no idea whether there are seeps on shore. Sometimes you'll see an area of land that doesn't have any vegetation. And that may be, if it's in the right area, that might be a seep area. Where you want to grow something and you can't, maybe there is oil and gas is coming out. And it's not only methane, which is a relatively benign gas, but it's also volatile organics, and volatile organics cause smog. Mm-hmm. And so even if you get rid of all the cars and went all electric in L.A., you'd still have smog. So you think this is a bigger problem than all the cars in L.A.? No, not necessarily. But I think it's a very big problem. It's a significant problem. It's a significant issue. And we need more research to really understand the scale. So tell us about the offshore, so the offshore oil, right? The production. Yeah, I mean, we have something like 30 billion barrels of oil in place offshore of central California, all the way going down to Newport Beach. A lot of that oil has already been discovered. They've been test wells drilled. But of course, California doesn't want to produce the offshore oil because of the platforms. Well, today, a lot of that offshore oil can be accessed from land. Okay, you drill a well on land, you drill down, and then you go horizontally or at some angle and tap the oil, and you can drill horizontally now on the order of... three or four or five six miles. It's done fairly commonly in other places. Drilling technology and imaging technology have advanced through the roof since California made that moratorium and again it's no long not only is it no longer relevant it's anti-environmental because offshore there are plenty of seeps and actually the oil is coming it's coming up to the to the ocean floor and having huge effects on Overall marine life in that area. So why not produce the known oil there from land using and never even getting anywhere near the coastal environment. Your wells are going to be down at least a mile under solid rock and they're going to pull that oil out and again reduce. The seeps coming up and tarring the beaches and everything like that. Now, in terms of your research on the vulnerability side, did you guys come up with some recommendations? We did. We did. We, you know, they're quite simple, right, to enable U.S. force readiness. We increased California in-state production. Then we redesigned something that we call the rapid response, rapid fuels response. And so that would be both crude oil and finished fuel products stored in strategic locations around the state that could get to the fleet and to the Air Force in very, very quick timing. And then a recycling of that through increased production. So we actually put together a fairly comprehensive study and a fairly comprehensive strategy for allowing that to happen. But it is predicated on increasing in-state production and increasing refinery production. Either that refinery production has to be here in California, and of course we're losing refineries. We'd have to figure out a way of bringing one back or strategically place one in Nevada with a pipeline going to from Nevada. We'd send California oil to Nevada and then fuel back, or perhaps even both. But it's a relatively comprehensive plan. Nobody had done that type of plan before. As far as we know, it hadn't really been updated since literally the Vietnam War. And so, you know, we set about to do that. And then we came up with some estimates as the amount of fuel and barrels of oil that would be required and the amount of fuel that would be required. And as far as I know, it's under study in Washington at the Pentagon and things like that. How likely is it for somewhere like Nevada holding a refinery? Because I know they get the gasoline from Nevada and Arizona. Part of Arizona's fuel supply comes from... Well, Arizona gets about 38%, 35%, because they have a pipeline actually coming in from the east. Nevada gets 80-plus percent, like as much as 88% of their fuel from California. And so whatever happens here has a direct effect there. Whatever happens to our price here, our price goes up, their price goes up. So they're in a very, very precarious situation. They are completely dependent on California and California politicians. And is that feasible to put a refinery there? Is there any thoughts about that? There's been discussions about that. The issue on the refinery there is not so much can you put one there because you can. It's just refineries take a long time to produce, right? You need about seven to ten years to build a refinery. And you have to build a pipeline. You have to build a pipeline and you've got to build a refinery. These are very complex things. The refineries are some of the most Complex engineering things known on the planet Earth, believe it or not. And so it takes about 8 to 10 years, 7 to 10 years to build one from scratch. If you wanted to renovate a refinery here and rehabilitate it, for example, and I'm only using this as an example, Valero, Venencia that was shut down, that would probably take you two or three years. So there's always a time factor involved. And in this business, time is of the essence. Anything can happen, as we saw. You know, with the Iranian situation, anything can happen to disrupt these channels of supply and anything can happen to the world markets because crude's global. And then because of our reclining refinery capacity, California imports most of its jet fuel from South Korea. South Korea gets most of its oil from... The issue then becomes for us, and we identified this, is what's the equilibrium point, if you will? Between providing additional production and fuel and storage to support military operations and simultaneously maintain the continuity of the economy, because in California, if we lose oil and gas, oil and refinery capabilities, we could be looking at about $3 billion a week shortfall in GDP, not to mention agricultural production will fall significantly. And so... You know, this causes quite a bit of a disruption on the private sector side and the economic side for the citizens. So our objective was to figure out what would be the point of equilibrium between providing for national security purposes and continuity of the economy. Professor Miché and Professor Richter, thank you so much for coming on. It was great to talk to you about this topic. Please come back and update us where things are headed and we'll see you then. Thank you. Thank you. We'd love to. Thank you. Tell us what you think about importing oil. Do you think we should import more or do you think we should produce more here? Make sure to tell us in the comments and make sure to tell us why. I'm Siamak, this is California Insider, we'll see you next time.