First, the World's new export king, China has planned to slow its country's economic growth by tightening its bank lending practices to curb inflation. While China's inflation problems have resulted in a stronger U.S. Dollar (proof that Congressman Ron Paul is consistently wrong in his criticism of U.S. economic stimulus spending), its causing a drop in crude oil futures. China is the largest consumer of crude oil, so this news will hurt that industry.
Add to that the near-recessionary U.S. Economy and you have a problem that spells lower oil consumption demand. That impacts Chevron's operations around the World, and it hurts Richmond. But to read East Bay news organs like The East Bay Express, you'd think a city and a region was tone deaf to international economics, even as its exposed to it. The East Bay Express writes:
Oil market analyst Allen Good of Morningstar market research firm noted that Chevron’s West Coast properties are among its most profitable. In addition, California refineries typically make more money because of the state requirements on blending gasoline. Also, if Chevron were to close its Richmond refinery, it would no longer have a presence in the Northern California market, thereby forcing the oil giant to ship gasoline blended at its Southern California refinery and adding to its costs.
There's no mention of the Worldwide economic problem and how that impacts Richmond at all. Instead...
Chevron has said that it plans to cut jobs and that its domestic refineries are losing up to $600,000 a day, but has not disclosed whether those losses apply to its California plants. The rumored Richmond closure also could be nothing more than saber-rattling in an effort to convince environmentalists to drop their lawsuit which blocked a massive expansion of the Richmond plant last year because of concerns over increased pollution.
Chevron considered selling the Richmond plant as recently as a year ago, according to Reuters. While Chevron's not happy that such information is out there in the public, it is. The reality is that no one can conduct business as usual in this economic climate, and that includes Richmond. This blogger tried to ask Richmond Mayor Gayle McLaughlin why she did not work in more of a deal-making fashion with Chevron Richmond, and what was recorded was a constant activist anger against Chevron.
With that, and the World's economic problems, why should Chevron remain in Richmond, California? From a very cold business perspective, it seems like a total waste of money, and Chevron could always structure a kind of sale-lease back deal so it continues to gain revenue from a scaled down Richmond refinery. If Richmond hates Chevron as much as the Mayor of Richmond seems to express, why not leave Richmond? That would solve the problem.
Here's where the emotions run deep at Chevron.
Chevron has not just had the refinery in operation for longer than the City of Richmond has been an incorporated city, it's still the remaining employer of note. At present, Chevron Richmond employs 1,200 employees on its refining side and another 1,200 employees at its Richmond Technology Center. There are an additional 500 contractors working at the plant at any given time. That's a total of 2,900 workers active at any one time in Richmond.
Moreover, Chevron reports that Chevron Richmond is a giant 30 percent of the City of Richmond's revenue base. That means one-third of Richmond's municipal services are already paid for by Chevron. With that, it's not a stretch to report that perhaps greater than one-third of Richmond's economy depends on Chevron Richmond Refinery operations.
All of that is good for Richmond, which has lost 70 percent of its job base in the last three years and who's projected job growth is already a negative 2.9 percent, but some in high-places in Richmond still think its all a big joke, so Chevron should leave Richmond. That would end all of the complaint about pollution in theory, because the plant would have been closed or downsized.
Right?
Well, Chevron says not so fast. It's reportedly concerned about many of the crime and social problems in Richmond and realizes that a departure would be the death of the City, literally and figuratively. Here, Chevron's ties to Richmond are emotional and they may very well be the reasons why Chevron remains in Richmond, even as all international market signs point to a swift exit from Richmond in some form as the right decision.
Stay tuned.
