Idea in Simple, Easy to Understand Language – Cashing In on California’s Oil Revival
A simple look at how a surprising catalyst adds tailwinds to an already high-upside, insider-backed oil & gas stock.
As Bison Insights’ readership grows, an increasing number of subscribers are new to learning about oil and gas investing ideas. To make my analysis more accessible, I’m re-releasing select past ideas in simplified form, with updated financials and clear and straightforward explanations that capture my thesis without the jargon.
Below is a simplified version of one of my ideas from mid-September about the company I believe stands to benefit most from California’s recent shift toward more favorable oil and gas drilling policies: Cashing In on Gavin Newsom’s Presidential Ambitions – The Biggest Winner from California Energy Policy Moderation.
Since the original write-up was published, the stock has performed better than the broader energy market, as measured by the XOP oil and gas ETF. I still see lots of upside to the stock, as I highlight below.
California was once a major U.S. oil producer. In the 1980s and 1990s, the state briefly produced more than a million barrels per day and supplied over 12% of the nation’s crude. Today, that share has fallen to around 2%.
Aging oil fields and some of the toughest regulations in the country have made it very difficult for oil and gas producers to make money in California. As a result, local production has declined, and the state now imports most of its crude oil.
This has hurt California’s refineries, the facilities that turn crude oil into gasoline, diesel, and jet fuel. Refineries make money by buying crude oil, processing it, and selling the refined fuels for more than their total costs. When they have to import crude from far away, shipping costs rise and profit margins shrink. Onerous taxes and regulations add to costs and reduce end market demand as well.
Two major California refineries are now shutting down because of these higher costs, and fewer operating refineries mean California now has to import more gasoline. Imported gasoline is more expensive than gasoline made locally, which pushes pump prices even higher.
Gas prices are a politically sensitive issue, and with Governor Gavin Newsom widely expected to run for president in 2028, rising fuel costs have become a key concern. His administration has recently started moving to make it easier to produce oil within the state in an effort to lower gasoline prices.
This shift is great news for one of my favorite stocks, a company that was already undervalued and now stands to benefit directly from California’s push to revive local oil production. Please remember that while I am talking about companies, stocks and markets, this is exclusively for educational purposes. Please consult an advisor before making any investment decisions, and do not rely on this.