“If the crude oil production in California drops precipitously before the overall demand … there are parts of the [fuel supply] ecosystem that will not be financially viable, and that will have consequences.”
Unfortunately for policymakers, Gunda’s hypothetical is already reality: statewide oil production has fallen by more than a third under Governor Newsom, even as the state continues to demand more than 1 billion gallons of gasoline each month.
Make no mistake: California’s decline in oil production is no accident. The Newsom administration has withheld drilling permits in recent years in an effort to shut down production.
The data tell the story. From 2018-2020, state regulators approved more than 6,000 permits for new drilling. But by 2023, the state approved just 24 such permits. In 2024, the total was 84.
Less in-state production has forced refineries to turn to more expensive marine imports of crude oil, putting upward pressure on gas prices.
But now, as Gunda warned last month, production is declining to the point that intra-state crude pipelines may be forced to shut down due to lack of product, which would have alarming domino effects on California’s fuel supply chain.
“[If] 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.”
A recent analysis confirms that this scenario is not an abstraction. It noted that “California crude oil pipelines are nearing critical minimum throughput levels” and cautioned that some refineries “lack sufficient marine capacity to fully compensate.”
Notably, Gunda’s warnings come as the state’s fuel supply ecosystem is already under strain. California refineries regularly lack the capacity necessary to meet demand, resulting in supply shortfalls and price spikes. Making matters worse, nearly 20% of California’s refining capacity is set to close over the next 12 months, which analysts say could raise gas prices “many dollars per gallon.”
If the Newsom administration is serious about addressing California’s fuel supply crisis, it must support the entire gasoline supply chain.
That simply isn’t possible without new drilling permits.
