Oil prices are skyrocketing, but this is why companies won't rush to drill in California

"Nobody expects today's high prices to last and we could very likely get back to the low $60 [per barrel] environment we faced just a few weeks ago. Experts say the unique geology of California's fields, and the nature of its heavy crude, make new projects, and efforts to pump more oil out of existing ones, costlier and more energy-intensive than drilling in other parts of the country."

"Operators are wary of adjusting plans to spend more drilling capital if prices come back down after the conflict ends, which is currently suggested by the oil price curve. Instead, companies will enjoy the added cash flow buffer of higher prices and boost cash on their balance sheets and pay out shareholders."

California oil producers face significant barriers to increasing drilling despite recent oil price spikes above $100 per barrel. The state's aging oil fields and heavy crude require costlier, more energy-intensive extraction compared to other U.S. regions like the Permian Basin. Industry experts indicate that sustained prices above $80 per barrel for at least one year would be necessary to justify new drilling investments. Companies remain cautious about committing capital to new projects given the unpredictability of global oil markets and the likelihood of price declines once geopolitical tensions ease. Instead of expanding drilling, producers are expected to use higher revenues to strengthen balance sheets and increase shareholder payouts. California's oil production has declined since the 1980s as existing fields deplete.

Read at Los Angeles Times