Crude oil prices are driven by global supply and demand, and economic growth is one of the main factors influencing petroleum products and, consequently, the demand for crude oil. When economies expand, it leads to an increased need for energy, particularly for transporting goods from producers to consumers. The global transportation sector is almost entirely dependent on petroleum products such as gasoline and diesel. Many countries also rely heavily on petroleum-based fuels for heating, cooking, or electricity generation.
Products derived from crude oil and other liquid hydrocarbons account for around one third of the world's total energy consumption. In California, more than 90 percent of the gasoline consumed comes from state refineries, so major unplanned refinery disruptions can cause gas station prices to rise. Midway-Sunset oil is heavy and complex, requiring a lot of energy to extract and refine it into final products such as gasoline and diesel. California is a leader in electric vehicles, solar energy, and other clean energy technologies, but it is also one of the top oil producers in the United States and home to some of the world's dirtiest oil operations.
Developing and maintaining excess production capacity is often not profitable for international oil companies (IOCs) because their business model maximizes revenues through oil production, provided that the selling price of oil is higher than the cost of supplying an additional barrel of oil to the market. Southwest of Bakersfield in California's San Joaquin Valley lies the Midway-Sunset oilfield which has produced billions of barrels of oil since it was first exploited in the late 19th century. Alternatively, if consumers need to buy crude oil in the future, they can guarantee the price they will pay by purchasing a futures contract. The prices of crude oil and petroleum products are determined by thousands of transactions taking place simultaneously around the world at every point in the supply chain, from crude oil producers to individual consumers. Surplus capacity is the difference between a country's current oil production and its maximum oil production capacity. Oil refineries and fuel distribution centers are isolated by time and distance from alternative sources to be replenished during unforeseen refinery disruptions. They support safe and responsible local oil and natural gas production at the state level which protects public health, safety, and the environment. Regionally, about three-quarters of California's oil and gas production is produced in the Central Valley where unemployment is already 2.1 percentage points higher than the rest of the state.
These policies would disproportionately affect this area as well since most of the oil and gas industry resides there and average salaries are more than a third lower than the state average. In addition to oil producers and consumers, futures contracts are also bought and sold by market participants or speculators who do not produce or consume crude oil. Crude oil can also be sold in cash transactions through the purchase of a single shipment for immediate delivery at the current market price. Today, Russia's invasion of Ukraine is causing crude oil prices to rise and remain volatile. According to OCI+, refining a single barrel of Midway-Sunset crude emits as much greenhouse gas pollution as refining about three barrels of crude oil from Alberta's oil sands.