With state policies resulting in plummeting oil production and the planned closure of two major refineries, last year Sacramento scrambled to avoid a self-inflicted fuel supply crisis.
As CalMatters reported in August:
“After years of cracking down on California’s oil industry, Gov. Gavin Newsom and legislative Democrats are moving to get Kern County wells pumping again to avoid soaring gasoline prices.”
The Los Angeles Times put it this way:
“It turns out, the price of California’s battle with oil – both politically and at the pump – may be too much for the governor and the state to bear.”
Politico traced the origins of California’s fuel supply crunch to Newsom, noting how he “took over from former Gov. Jerry Brown in 2019 and quickly went even further than his predecessor by not only pushing for policies that reduce demand for gas – like electric vehicle incentives – but also by attempting to reduce supply.”
But with no plan or mechanism to ensure supply fell in tandem with demand, California’s market for transportation fuels increasingly fell out of balance. [i] Demand for gasoline is falling by less than 1% per year, but statewide refining capacity will soon be down more than 30% under Newsom. [ii]
To address the growing supply shortfall, California Energy Commission Vice Chair Siva Gunda urged lawmakers to think holistically about the entire fuel supply ecosystem, warning that the “mismatch of in-state demand, and the in-state refining capacity, and in-state crude oil are all connected to the price at the pump.”
In particular, Gunda and other experts cautioned that additional refineries are at risk of shutting down if in-state oil production continues its rapid decline, as some are not set up to process foreign imports. [iii]
The threat of additional refinery closures led Newsom to propose fast-tracking new drilling in oil fields across the state and prompted the Energy Commission to halt plans for a penalty on refinery profits.
Ultimately, the legislature passed SB 237, a scaled-back version of Newsom’s proposal which aims to boost production in Kern County. Experts quickly questioned whether the bill went far enough.
“[W]hile [SB 237] is well-intentioned, it is likely not sufficient to stabilize the state’s pipeline and refining infrastructure.”
More needs to be done to truly stabilize fuel markets in California, but Sacramento’s pivot toward pragmatism is clear. Instead of blindly attacking Big Oil, policymakers are focused on ensuring affordable, reliable fuel supplies for families and businesses.
That’s a welcomed change.
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[i] In May 28, 2025, testimony to the Assembly Utilities & Energy Committee, California Air Resources Board Chair Lianne Randolph said: “When we adopted the Scoping Plan, we specifically stated in the plan that there we were making – we were analyzing what would happen if supply and demand went down together. But there were no specific mechanisms to ensure that happened.” In August 20, 2025, testimony to a joint hearing of the Assembly Utilities & Energy and Natural Resources & Transportation Committees, California Energy Commission Vice Chair Siva Gunda said: “So, as you will see in the next slide, the slide is looking at how the supply in California, in terms of refining capacity, is changing over time. And one of the key points … is: the supply of the refining capacity in California is going down faster than the demand for the fuels that we supply in the West.”
[ii] California Department of Tax and Fee Administration data show 13.82 billion gallons of motor vehicle fuel consumed in 2021 and 13.41 billion gallons consumed in 2024 for an average annual decline of 0.74%. According to Joseph B. Silvi (UC Berkeley), James W. Rector (UC Berkeley), and Michael A. Mische (USC), “A STUDY OF SB 237 TO STABILIZE OIL PRODUCTION IN CALIFORNIA” October 2025, gasoline consumption in California declined by less than 1% per year over the 2001 to 2024 period. According to California Energy Commission, “Transportation Fuels Assessment: Policy Options for a Reliable Supply of Affordable and Safe Transportation Fuels in California” August 2024, the state had an estimate of approximately 1,125,000 barrels per day of gasoline production capacity at the end of 2019 (see Figure ES-2). In August 2020, the Marathon Martinez refinery conversion resulted in a loss of 96,600 barrels per day of gasoline production (60% of total refining capacity of 161,000 barrels of crude oil). In 2023 and 2024, the Phillips 66 Rodeo refinery conversion resulted in a loss of 72,000 barrels per day of gasoline production (60% of total refining capacity of 120,000 barrels of crude oil). In October 2024, Phillips 66 announced the 2025 closure of its Wilmington refinery, resulting in a loss of 83,400 barrels per day of gasoline production (60% of total refining capacity of 139,000 barrels of crude oil). In April 2025, Valero announced the 2026 closure of its Benicia refinery, resulting in a loss of 102,000 barrels per day of gasoline production (60% of total refining capacity of 170,000 barrels of crude oil). In total, the state is set to lose 354,000 barrels per day of gasoline production from the closure and/or conversion of these four refineries, which is 31.5% of total 2019 gasoline production capacity.
[iii] In May 28, 2025, testimony to the Assembly Utilities & Energy Committee, California Energy Commission Vice Chair Siva Gunda said: “And as you reduce the overall crude oil production in California, which we showed on one of the slides, that will have a direct impact on the infrastructure, which is those crude oil pipelines will not be profitable to run. And then comes the dominoes of the connectedness of the infrastructure. You have the crude oil pipeline shut down. You will have the refineries having to procure that crude oil from elsewhere. And not all refineries are set up to receive crude oil through marine terminals, and hence it will be harder for them.” Turner, Mason & Company Comments on SB X1-2, “Transportation Energy Supply Chain Infrastructure and Investment Study (TESCII)” September 2024 found: “If pipelines close, refineries become more dependent on waterborne crude oil imports.”
