The California Oil Spill and How It Could Affect You

On October 1, 2021, a significant oil spill was discovered off the coast of central California. The oil slick, seen here via NASA Earth satellite imagery, might be months old, or even years old. 126,000 gallons of oil couldn’t leak from a pipeline overnight. The California Department of Justice (CA DOJ) is still investigating the California oil spill. But CA Attorney General Rob Bonita said earlier this week: “The oil spill… is an environmental disaster with far-reaching consequences for our fish and wildlife, for our communities, and for our economy.”

We couldn’t agree more, and we’ll explore those possible consequences today, focusing on the environment and economy. We’ll also discuss the uses and value of crude oil, explain what it is, and explore how our economy relies on it.

One Quick Note Before We Begin

While this spill is undoubtedly a disaster and an awful waste, we must point out it isn’t as big as the news media seems to make it. It’s a mere fraction of the size of the Exxon Valdez Oil Spill, for instance. That one dumped more than 50 million gallons of oil into Alaskan waters.

Alternatively, maybe you remember the Torrey Canyon Oil Spill of 1967, which clocked in at 25–36 million gallons.

Then there’s the biggest (and only deliberate) oil spill of all, the Gulf War Oil Spill of 1991. That’s when Iraqi forces dumped as much as 520 million gallons into the Persian Gulf to discourage American troops from landing.

Going forward, keep those catastrophes in mind.

What We Know About the California Oil Spill

US Coast Guard investigators believe a large ship’s anchor or possibly several anchors struck the concrete outer casing of an underwater pipeline. That seems very likely, considering the shipping bottleneck the area has been experiencing. As many as 75 loaded shipping vessels have been milling about the place for months.

The anchor theory is supported by evidence that the huge and heavy pipeline was dragged more than 100 feet. No small boat anchor could drag a pipeline like that. And no tidal action could do it either.

Who Is Responsible?

Bonita’s office says Amplify Energy, which owns Beta Offshore, a subsidiary, is ultimately responsible for the pipeline leak.

What’s the Total Damage?

Martyn Willsher, chief executive of Amplify Energy, says the pipeline has been “suctioned” at both ends and caps the total spill at about 126,000 gallons. But it would be in Willsher’s best interest to downplay those numbers.

Wrapping Our Minds Around the Numbers

To wrap our minds around how much oil 126,000 gallons is, you can:

  • Imagine about 1/5th of an Olympic swimming pool (660,000 gallons total in the pool).
  • Or, line up 12 tanker trucks in your mind (11,000 gallons each, give or take).

Yes, that’s a lot of crude. But it’s a drop in the bucket when we think of the entire volume of the Pacific Ocean at 352 quintillion gallons (that’s 352^18, or 352,000,000,000,000,000,000 gallons of seawater).

It’s also a tiny amount of the gross crude oil extracted every day on a global scale. For instance, in 2020 — a slow pandemic year — 88.4 million barrels was the daily average. At 42 gallons each, that’s more than 3.7 billion gallons of oil every day. Suddenly 126,000 gallons doesn’t seem so scary.

So far, the Coast Guard has managed to reclaim several thousand gallons of the stuff.

But perhaps you’re wondering what, exactly, crude oil is. Why is a relatively small amount of it such a huge deal? Let’s find out. The following few paragraphs will introduce you to crude oil basics. If you’re already involved in the petroleum industry, you’ll find this part rudimentary. But remember, not everyone works in the oil business.

What Exactly Is Crude Oil?

When the uninitiated think about crude oil, they imagine foul, shining black filth that’s poisoning our environment with smoky emissions.

But here’s another way to see it: crude oil is earth’s natural product. It formed from the remains of plant and animal life, rotting away millions of years ago at the bottom of an enormous ocean. We’re talking about a time way before the dinosaurs, but that’s why we call it a fossil fuel.

Over millions of years, silt, sand, and rock layers cover that rotting organic material. Heat and pressure from these layers turned it into “petroleum” (a Latin and Greek mishmash formed of “petra” and “oleum.”)

Here in the US, crude can be extracted using massive drills and gathered from oily sand deposits. We usually imagine crude oil as black in our mind’s eye, but it can be brown, reddish, or green.

  • Crude oil has endless applications.
  • We refine it for motor oil, gasoline, and burner fuel.
  • When motor oil gets dirty, companies can clean and reuse or repurpose it into asphalt.
  • Petroleum is also a significant ingredient in plastics, cosmetics, and household goods.
  • The industrial and technological uses are endless!

However, not all crude is the same.

We won’t get too technical here, but to paraphrase the US Energy Information Administration (EIA), the physical characteristics of crude oil determine how refineries process it and who will buy it. High-quality, pure, low-sulfur crude will become fuel and jet fuel. Lower quality crude might become burner oil or asphalt.

Still, oil spills are utterly, terrifyingly unhealthy for living creatures near them. We aren’t making light of those adverse effects by cheering for crude.

Environmental Concerns: Consequences of the California Oil Spill for Fish and Wildlife

This pipeline bleed is the largest California has seen for years. So far, it’s mired a handful of birds in oil, killed hundreds of fish that continue to wash up on shore, and led to the euthanasia of one unlucky pelican.

But that’s what we can see above the water. Beneath the surface, untold numbers of fish, marine mammals, insect larvae, invertebrates, and precious flora have undoubtedly suffocated or succumbed to poisoning. (If you read our post about why oceans matter, you already know how vital undersea life is to human health today and in the future.)

Unfortunately, the oil spill has reached the sensitive coastal wetlands at Talbert Marsh, an important environment for wildlife, and Mother Nature’s own surface water filter.

The disaster has enraged environmental groups and some California lawmakers, who are now using the event to push for the retirement of offshore drilling. This leads us to our economic concerns.

Immediate and Long-Term Economic Concerns of the 2021 California Oil Spill

Container ship in export and import business and logistics.

The two significant sectors that the Amplify Energy spill will immediately harm are:

  • Oil (fuels or plastics) — we’re not sure what the leaked crude was intended for, but statistically speaking, it was probably meant for either fuel or plastics.
  • Shipping — the California freight bottleneck will get a little worse.

American consumers will feel the effects of this oil spill right away as increasing fuel prices. Then there will be increased costs for imported goods coming from Asia — you know, everything you buy at Walmart — and more empty shelves at grocery stores. It might lead to increased panic-buying. Black Friday 2021 is bound to be an interesting one this year.

“Wait. If the Oil Wasn’t Meant for Fuel, and the Spill Was Small(ish), Why Would It Cause a Spike in Fuel Prices?”

This blog always seems to revisit the laws of supply and demand. 126,000 gallons (if that’s indeed the actual size of it) is not a tremendous amount of crude, and the market could probably absorb that loss with a few groans.

But there’s more to the problem than lost oil. There’s lost infrastructure, unhappy customers, and compliance headaches in your future.

The Effects Cascade Through Many Sectors

Put yourself in Willsher’s shoes at Amplify Energy.

You’ve just shut down a damaged pipeline, and:

  • Your pipeline will need expensive underwater repairs.
  • We’re talking about a hazardous material under seawater. You’ll be spending an unknown amount (Many millions? Billions?) to clear that up.
  • But you still have customers that need oil, so you’ll need to develop ways to get it to them. (Rail car, pipeline, tanker truck investments?)
  • Meanwhile, regulatory agencies and environmental organizations are giving you the stink eye.
  • 2020 was a slow year for regulatory citations, and you’re in their sights now.
  • So you hire more compliance experts and do some proactive spill prevention.

But in the end, you’ll probably pay some whopping fines. Hopefully, the class action lawsuit reported by CNN falls apart. Better set a few bucks aside for that, just in case.

Moving Down the Supply Line

Now let’s leap out of Willsher’s shoes (thank God) and become a petroleum customer instead. Your business is manufacturing plastic bottles, and your biggest client is Fancy Ass Shampoo. Since you’re a smaller fish in the world of petroleum, you don’t get the bulk discounts or the high-esteem of the big players.

The increasing price of oil is going to impact your costs for manufacturing soap bottles directly. You now need to sell your bottles to Fancy Ass at a higher price to stay in business. Also, they’ll cost more to transport (thanks to those raising fuel costs).

For the sake of brevity, we’ll skip some warehousing, logistics, and retail links of the supply chain and head to the end of the line.

The Supply Chain Ends With You

You’re the end-user, a longtime customer of Fancy Ass Shampoo. But suddenly, $29.00 feels way too expensive for a bottle of shampoo. You just spent $85 on gas, for crying out loud! Clearly, it’s time to switch back to a Walmart brand.

And one by one, each link folds. Fancy Ass Shampoo closes its doors. The bottle manufacturer fails. Big Oil buys the smaller oil company. Eventually, there is a surplus of oil again because fewer customers are left who need it.

Final Thoughts

Ultimately, the California oil spill of 2021 was relatively small, as these things go. We don’t expect a whole supply chain to crumble because of it. But petroleum prices can affect almost every part of our daily lives, and they will continue to do so until we have a host of cleantech, clean energy, and material options at our fingertips.

Healthebay.org: What We Know (and Don’t) About the Oil Spill in Orange County

EIA.gov: Oil and Petroleum Products Explained

This article was originally published on KirkCoburn.com.

Kirk Coburn

I am an active investor into entrepreneurs solving the world's climate & energy problems, energy entrepreneur, start-up advocate, outside(r), surfer, and ordinary athlete.

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