Chevron sees California’s fuel inventory law raising prices for customers

Nov 26 (Reuters) - Chevron said on Tuesday that California's recently enacted legislation on oil refineries needing to maintain minimum fuel stocks was "flawed," according to a letter sent by the company to state Congress members.

California, the most populous U.S. state, consistently experiences some of the nation's highest average gas prices, leading to an often tense relationship between the state and oil companies.

It is geographically isolated from the U.S. Gulf Coast and Midwest refining centers, and must produce all its own motor fuels or import them from Asia.

In the letter from Andy Walz, president of Chevron's Downstream, Midstream and Chemicals business, he said increasing regulation on the justification of "price spikes are profit spikes" was "misleading."

On Oct. 14, California Governor Gavin Newsom signed into effect ABX2-1, a bill designed to prevent fuel supply shortages in the state and gives regulators at the California Energy Commission (CEC) greater control over oil refineries operating in the state.

It allows for the CEC to enforce refiners to maintain minimum levels of fuel inventories, and manage necessary refinery turnarounds and maintenance in consultation with labor and industry stakeholders, so as to minimize the impacts of maintenance-related production losses on fuel prices.

If refineries fail to comply with the requirements, they could be fined a minimum of $100,000 per day for each day that the noncompliance occurs.

"We contend that enforcing a mandatory minimum inventory requirement will likely result in two negative outcomes: an increased frequency and duration of supply shortages, and a permanent rise in gasoline prices for consumers," Chevron's Walz said in the letter.

"Both risks extend beyond California, which should create the need for the legislature to proceed with caution, as policies that raise prices for the state could also affect neighbors in Arizona and Nevada."

Governor Newsom's office did not immediately respond to a request for comment. (Reporting by Seher Dareen in Bengaluru)