What's ahead for California crude oil prices?

Lifting Alaskan export ban to hike Southland prices

California's oil industry is split over whether a plan to lift a ban on exporting Alaska crude oil to other countries would be a boon or bane to the state and local economy.

Oil industry experts say the price of California crude will likely rise if Alaskan crude is allowed to be exported to other countries, reducing its availability for the California market.

Oil producers say this would spur the Southland economy because they will hire more oil field workers as prices rise. But oil refiners say higher California oil prices would lower their profit margins and they might have to institute layoffs.

Two bills which would lift the 23-year-old Alaskan oil export ban passed significant hurdles in Congress last month.

The Senate passed one bill, sponsored by Sen. Frank Murkowski, R-Alaska, and the House Resources Committee voted out another, sponsored by Rep. Don Young, R-Alaska.

The bills are likely to become law later this year and that means California crude oil prices are likely to increase, oil industry sources said.

Ban creates glut

Oil prices may increase because there has been a price-suppressing "glut" of Alaskan oil in California due to the export ban, said Albert Boyce Jr., president of the California Independent Petroleum Association.

If Alaskan oil producers export oil, there will be less sent to California and demand for California crude will rise, Boyce said. Some Alaskan oil producers which currently sell to West Coast refineries are expected to sell to refiners in the Far East if the ban is lifted, they say.

The state's independent refiners, such as Long Beach-based Ultramar Inc., say if oil prices rise, it could further squeeze refining profit margins.

That could mean job losses, said Ultramar spokeswoman Carolyn Green. The company employs 1,900 in California and 550 in L.A. County, she said.

But Boyce of the California Independent Petroleum Association said higher California oil prices will boost production and create new jobs because oil producers would expand output and drill more wells, Boyce said.

A U.S. Department of Energy study forecast that if the ban is lifted, as many as 16,000 jobs could be created in California immediately and 25,000 jobs could be created by the end of the century, Boyce noted.

Crude flows south

Boyce contended the law which prohibits the export of Alaskan crude has caused Alaskan crude to flood into California. That, in turn, has depressed the state's oil prices.

If the ban is lifted, oil experts say, the price of California crude could increase by $1 to $2 a barrel from today's approximately $15 a barrel. And then, said Boyce, who owns Taft-based Tannehill Oil Co., he and other oil producers would hire more workers to expand output.

"In my company, if I start getting an extra dollar or two a barrel, it will give me more money to drill more wells," Boyce said.

Alyda Raydon, secretary-treasurer of Torrance-based Geo Petroleum Inc., another crude producer, said that company is likely to hire more staff and drill more wells if the price of oil increases.

Beyenka said that because of low California oil prices, producers are not drilling or pumping at a lot of oil fields from Sacramento to southern L.A. County. An increase of $1 or more a barrel could make a big difference, he said.

"We'll definitely see more jobs in the oil fields and the state will get more tax revenue," Beyenka said.

Output may rise

Geo Petroleum may increase production at its fields in the City of Commerce and begin drilling again in its fields in Oxnard if prices rise $1 to $2 a barrel, she said.

But Green of Ultramar said some refiners disagree with the Department of Energy study and believe higher oil prices would result in job losses. Rising California crude prices - up from $9.50 a barrel a year ago to $15 now - already have sliced into refiners' profit margins and further reductions would force them into layoffs, she said.

Major oil companies, like L.A.-based Atlantic Richfield Co., would not be hurt because they have their own oil supplies.

But for independents like Ultramar, "whose crude supply comes from California and the Alaskan North Slope, we get squeezed both ways," said Green.

Rising crude prices already have slammed Ultramar earnings, Green said. First-quarter net income plunged to $1.1 million, or 3 cents a share, from the year-earlier $31 million, or 79 cents a share.

Lifting the Alaskan oil ban would likely increase the pressure on Ultramar margins, Green said. "If we continue to have quarters like we did this quarter, you will see job loss," she said.