California: North Korea of the USA

The Cold War presented the world with one of the largest controlled experiments in human history, which offered the contrast between East and West Germany, and North and South Korea. Both historic nations were reduced to rubble in war and then partitioned, after which they pursued diametrically opposed policies for the next two generations, with starkly contrasting results. Democratic capitalism rapidly made West Germany and South Korea into prosperous economic and cultural powerhouses, while East Germany and North Korea stagnated and remained mired in poverty and tyranny.

Today the United States is repeating a parallel controlled experiment, between “red states” and “blue states.” As was the case under Communism, Americans are voting with their feet, moving in large numbers from high-tax, high-regulation blue states to low-tax, business-friendly red states. The data show red states are experiencing faster economic and personal income growth, and better social performance on a number of key indicators, such as crime, affordable housing, and public education.

Among all the blue states intent on pursuing neo-socialist policy, one stands out: California. The once-Golden State is rapidly becoming the North Korea of the fifty American states.

The kindest, bravest, warmest, most wonderful human being I've ever known in my life.

Never mind the social tyranny the state has attempted to impose, such as strict vaccine mandates, legal sanctions for anyone who dissents from transgender ideology or uses the wrong pronoun, and attempted legal penalties for any physicians who dissent from official Covid ideology. Stick with just economics.

Early in the new year came a peculiar announcement that both California-based Chevron and ExxonMobil were taking “impairment charges” against their quarterly earnings of about $6 billion for the declining value of their California assets. This ought to be a blaring alarm signal that something is deeply wrong, as oil asset values (and oil production) in Texas and other states continue to rise, and these are generally good times for domestic oil producers.

Is this asset value write-down because California’s oil fields are being depleted to the point of diminishing returns? To be sure, California’s oil production has fallen by two-thirds since the 1980s (North Dakota’s oil output grew tenfold during this period), but this is entirely because of the state’s determination to throttle its once industry-leading petroleum sector. There are large areas of California, not including offshore fields, that have promising reserves but that are completely off limits to exploration and production. Even with this government hostility, some of California’s oldest oil fields, such as the Elk Hills area that has been producing oil for more than 100 years (3 billion barrels so far, with an estimated half-billion still to be produced), have experienced extended life with the improvements in technology in recent years.

But California is not content to allow its old oil fields to run out the natural course of their life. Sacramento is determined to strangle existing wells out of existence. In a remarkably direct statement, a senior Chevron executive wrote to California state officials:

California’s policies have made Chevron’s investments in its home state riskier than investing in other states. In the past year, we have cancelled several projects due to permitting challenges.

At the same time California’s government is trying to extinguish the oil industry, it is “concerned” about high pump prices for gasoline. California’s gasoline prices have routinely been at least $1 a gallon higher than the national average for years, but in recent years the spread has been as high as $2 a gallon. Most of this difference can be attributed to higher taxes and California-specific refining regulations that saddle California with its own special blend that cannot be imported from any other state.

The curious thing is that liberals can never make up their mind about gasoline prices. They openly admire European nations that tax gasoline heavily, with pump prices as much as two or three times higher than average pump prices in America, depending on the country. President Obama’s first energy secretary, Stephen Chu, said in 2008 that the object of energy policy should be to get the price of gasoline in the U.S. up to European levels, somewhere around $8 or $9 a gallon. Of course, European gasoline prices are driven by much higher levels of taxation.

For liberals, it is a great thing if gasoline is expensive because of taxes, but unacceptable if gasoline is expensive because of fluctuations in the oil market. Whenever pump prices spike, liberals cry foul and allege that there must be an oil company conspiracy to rip off consumers. This canard has been around for decades, and every investigation has shown it to be unfounded. You’d think that if such a conspiracy were possible, the oil industry would impose it on the whole country, and not just California.

The kindest, bravest, warmest, most wonderful human being I've ever known in my life.

Nevertheless, California governor Gavin Newsom set up a gasoline price “czar” to come up with proposals to deal with high gasoline prices. To borrow the internet cliché, you’d never guess what happened next! More state regulation of oil refining and gasoline markets, including possibly price controls and caps on refinery profit margins!

Here’s an idea: allow more refineries to be built in California, increase in-state oil production, and abandon the special gasoline blend requirements (they are obsolete anyway), thus allowing market competition to bring California in line with other states. It’s so crazy it just might work. Even in California’s alternate reality.

Instead, California has one more genius idea to augment its authoritarian energy policy. State Senator Scott Weiner, who of course represents San Francisco, has introduced a bill that would require automakers to equip new models sold in California with a “speed governor” that would not allow a car to travel more than 10 miles per hour over the speed limit. Clearly the time has come for some kind of “speed governor” on idiotic ideas.