California Governor Gavin Newsom has announced his intention to completely ban oil production in the state by 2045, according to Hi-Tech+.
At the same time, the issuance of new permits for production by hydraulic fracturing will be terminated as early as January 2024. For the next 20 years, only those who have time to obtain a license will carry out production. However, given the forecasts of a fall in oil prices, it is highly likely that oil production will be stopped in many US states much earlier for economic reasons.
Newsom announced the state's intention to phase out oil as part of the Climate Change Assessment Plan, which aims to reduce greenhouse gas emissions and achieve state carbon neutrality by 2045. As a first step, the Governor ordered the California Department of Conservation to stop issuing new fracturing permits by January 2024.
Further, a phased plan will work to reduce oil production up to its complete stop in 21 years. The details of the plan are not yet available, it has yet to be developed. Apparently, proportional quotas will be introduced for all mining companies, which will be reduced every year.
Observers note that while 2045 is a long way off, the authorities are betting unequivocally that clean energy and transportation will grow over this time to the point where oil simply won't matter to the local economy.
Another question is whether other states will follow this example or not. California is the seventh-largest crude oil-producing state in the United States. In 2020, 145 million barrels of oil were produced on its territory. This corresponds to about 1.5 days of current world oil consumption. Texas produces much more - 1.8 billion barrels, North Dakota - 431 million barrels, New Mexico - 379 million barrels.
However, according to the forecast of experts Wood Mackenzie, the demand for oil under the pressure of electrification of energy and transport will begin to decline from 2023 and will rapidly decline by about 2 million barrels of daily consumption annually. That is, in 5 years the daily world oil consumption will decrease from 100 to 90 million barrels, in 10 years - to 80 million barrels, and so on. All this will lead to the fact that in 2030 the price of the benchmark Brent oil will fall to $37-42 per barrel, which is the limit of profitability for many oil producers. And then it will only get worse - by 2050 Wood Mackenzie predicts a drop in oil prices to $10 per barrel.