The Federal Energy Administration yesterday proposed the discount equivalent of 54 cents a barrel to producers of California crude oil to encourage West Coast refiners to buy less imported oil.
In proposing the discount price to California crude producers, the FEA conceded the move might increase costs to West Coast consumers by $100 million to $200 million a year because it costs more to refine California crude into gasoline and low sulfur heavy oil for electric companies.
"FEA has serious reservations about adopting regulations which would result in higher costs to consumers," the notice is the proposal said, "without assurances that the regulatory changes would bring equivalent benefits to consumers in the long term."
Yesterday's move was the first time the FEA has acted to provide some kind of price relief to California crude oil producers, who have tried for almost three years to get price supports for their oil. So heavy and so laden with sulfur are most California crude oils that "old" California oil sells today for $3.79 a barrel. $1.46 less than the price Texas and Louisiana producers get for old oil.
In the two-tier price system set up by FEA, oil found and produced before 1972 is classified as old oil and is regulated at $5.25 a barrel.
The FEA proposes to grant what it calls a partial "entitlement" of 54 cents a barrel to California crude oil producers. The equivalent of a discount in price, a partial entitlement means that refiners would be paid out of a money pool 54 cents for every barrel of California crude oil they bought.
Crude oil is produced off the California coast at Ltng Beach and Santa Barbara and onshore in the San Joacquin Valley. Much of California's oil land is owned by the state, which gets royalties from the oil that is produced and which has pushed the FEA to grant price entitlement to California crude.