Gas prices, Sacramento, CA, June 13, 2022. (Photo: Katy Grimes for California Globe)
USC Professor’s Response to Gov. Newsom’s Allegations, Claims and Assertions on Gas Price Escalations
Professor Mische received a very nasty smear from Governor Newsom
By Katy Grimes, May 20, 2025 4:43 pm
The Globe recently reported that California gas prices could escalate 75% to $8.43 per gallon in 2026 due to the pending shutdowns of two major in-state refineries, according to USC Professor Michael Mische.
“California can ill afford the loss of one refinery, let alone two,” said Professor Mische in a new report warning of an impending gas crisis this summer and into 2026.
“In 1982, California satisfied 62% of its petroleum needs from in-state oil producers,” says Professor Mische. “Since 1990, California’s imports of petroleum from non-U.S. producers have increased by a staggering 713%. While California was becoming more dependent on foreign sources, the overall U.S. became less dependent.”
For his warning, Professor Mische was rewarded with a very nasty smear from Governor Gavin Newsom, accusing the professor of being bankrolled by Saudi Arabia:
Senate Republican Leader Brian Jones responded to the governor’s “petty politics and slanderous attack:”
The governor’s so-called “Rapid Response” team has reached out to reporters with false and defamatory claims about Professor Mische and his motives. Professor Mische is a widely published and highly respected scholar who has published more than 150 papers, many focused on California’s oil and gas sector.
This is Professor Michael Mische’s response to Gov. Newsom, and his ‘Deputy Director of Rapid Response” Brandon Richards (He/Him):
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by
MICHAEL A. MISCHE
May 20, 2025
To the Media and All Interested Parties:
I appreciate your interest in my work and your questions related to the allegations and claims of Governor Newsom, and Deputy Director Richards in the national media regarding my paper, Ensuring California’s Gasoline Security For the 21st Century, dated May 5, 2025, (herein referred to as the “Study”). In response to numerous media inquiries and requests, I thought it appropriate to provide direct comment. The comments herein are specific to Governor Newsom’s assertions and allegations, as well as Mr. Richards email to members of the media. The allegations of Mr. Court are addressed separately.
Thank you, California Senator Brian Jones, for your press release of May 12, 2025, setting the record straight. As you indicated, with the closure of two refineries, California is confronting a potentially serious gasoline situation. As Senator Jones noted,
The Governor’s attacks, as well as those of Mr. Richards, and Mr. Court, are a poorly conceived political and legally risky attempt to discredit, censor, suppress, and disparage a routine academic paper, and the author’s independent and personal thoughts and opinions, simply because they disagree, or the results do not support their long-standing and preferred political narrative.
Specific Responses to Governor Newsom and Mr. Richards
Referring to this information repeatedly as “analysis” and connecting it to USC implies there are accurate sources and a methodology used to obtain the numbers you are sharing as “fact” – lending credibility to its findings and readers thinking it is a real possibility. Response. As is customary in academia, where we are afforded “academic freedom” to pursue our research interests and publish our thoughts, the Study represents my personal work and conclusions, and not those of the University. It is a well-known and widely accepted practice that had the Study represented the official opinions or position of the University or the Marshall School of Business, the Study would have been issued on USC letterhead coming from either the President’s, Provost’s or Dean’s offices and signed by a duly and legally authorized authority of the University. These are de rigueur.
Authors (Mische) have biased ties to the Kingdom of Saudi Arabia. Response. There are no conflicts, and there never were any conflicts. The public record is abundantly clear with respect to my disclosures to the California legislature and elected and non-elected officials regarding my work in Saudi Arabia. In the Senate Standing Committee Hearing held on February 23, 2023, the audio and video records will indisputably establish that my work in Saudi Arabia was disclosed to the California Senate Committee. By further example, Chair Senator Steven Bradford asked each industry witness to disclose any work for any foreign “petrostate.” The record will show that I disclosed in the affirmative. At no time in the Senate Hearing of 2/23/23 did anyone ask me what type of work I had performed, or what agency and what organization I or Synergy Consulting Group, Inc. had performed the work for. A minimal due diligence of the work cited on the old resume would have confirmed that the client was “100% PIF-owned company mandated to invest and commercialize the R&D output from various research institutions locally and globally.”
At no time have I or Synergy Consulting Group, Inc. ever provided consulting services to, or on behalf of, or ever worked for, in any capacity, including that as an employee, contractor, or management consultant for any Saudi Arabian oil, refinery, gasoline, or diesel fuel company. Neither Synergy Consulting Group, Inc., nor I have any current ties, financial interests, or any affiliation with any Saudi Arabian oil company.
Notably, if there are any possible conflicts of interest and contradictions in values, then they do not exist with me. According to CEC’s publicly available data, over the years, Saudi Arabia has been one of California’s primary sources of oil imports. The Kingdom was California’s second largest source, behind Iraq, for foreign oil in 2022/23. According to various estimates, California ranks #1 in payments to foreign sources of oil. Apparently, the California Public Employees Retirement System (CalPERS), the largest pension fund in the U.S. for state and local government employees, reportedly holds close to $1.0 billion in petroleum company equities.
Fearmongering. Response. I simply authored a routine paper typical of professors and practitioners. The May 5, 2025, Study follows three previous ones on oil and gas that I have issued in the past 36 months, as well as a few articles and postings. Regrettably, if there is fearmongering, then it comes from the Governor, Mr. Richards, and Mr. Court and their attempts to suppress the opinions and thoughts of an academic and individual, as well as intimidate my employer. The current reality is that California is losing two major refineries and the potential loss of as much as 10.5 million gallons of in-state gasoline production per day. Consequently, California will have to look, most likely, to foreign sources of gasoline, which, as PBF CEO Matt Lucey noted, are “higher cost.”
Personal and Professional Profits. Response. Nothing could be further from the truth than the Governor’s outrageous assertion that I am being “bankrolled” by the Saudis. I have received no compensation for the Study from any Saudi Arabian oil, gasoline, or refinery company for this work or from any other government or any company. This Study was almost entirely self-financed with personal funds. I did not and do not contemplate nor do I expect to receive any compensation for this Study. An examination of bank statements and tax returns will clearly establish that at no time have either I or Synergy Consulting Group, Inc. ever received compensation, monetary or otherwise, from any Saudi Arabian oil, refining, gasoline, or diesel fuels company. Furthermore, my travel to Sacramento in 2023 for the Senate Hearing was entirely paid for with personal funds.
Retraction. Response. I stand by my work. Other than editorial changes, which all authors engage in, I have nothing to retract. Notably, as conditions, inputs, assumptions, and data change, and more is learned, I will periodically adjust, modify, and update the Study, as well as the potential price ranges, to be more incorporative and reflective of new information and changing conditions.
Mr. Mische fails to provide evidence to support his main claim that gas prices could increase by 33.6% by the end of 2025 and 75% by the end of 2026. Instead, there are a few vague references to “models” but no details about the model structure, the data used, or how these numbers were estimated. Response. The Study is empathic in stating that prices could increase. On pages 7 and 8, the Study provides a cautionary statement: “There are many variables and assumptions that shape gasoline retail price modeling, and any change in the variables or assumptions will yield different results.” The Study, on page 7, incorporates commonly used language and phrases, such as those found in financial prospectuses and other forward- looking studies, which clearly state that prices “could potentially increase”. The Study makes no guarantees that prices will increase, only that prices could potentially increase.
- Response- Data. The data sources used in the Study are widely available in the public domain, and include but are not limited to the California Energy Commission CEC), California Department of Tax and Fee Administration (CDTFA), California Air Resources Board, (CARB), California Attorney General’s Office, California Legislative Analyst’s Office (LAO), California Department of Motor Vehicles, (DMV), U.S. Energy Information Agency (EIA), Bloomberg, U.S. Department of Energy, SEC filings, International Energy Agency (IEA), Oil & Gas Journal, American Petroleum Institute, the U.S. EPA, Statista, The Federal Reserve Bank, U.S. Department of Interior, Bureau of Labor Statistics, and the U.S. Oil and Gas Association.
- Response- Models. Models are commonly used to simulate or attempt to simulate the results of various inputs, assumptions, and multiple conditions using a combination of static and dynamic methods and data. If it makes the concept of a “model” more relatable, then perhaps think of the model(s) as simulations, what-if analysis, scenario plans, alternative outcome planning, or simply just spreadsheets.
- Response- Methodology. The Study incorporates practices and methods that are generally customary to this type of work. The methodology involved multiple models incorporating production, consumption, imports, the timing of refinery shutdowns, prices, capacities, maritime transportation, capital expenditures, costs, regulatory costs, etc. Over 25 different model sets were built using the data described above. Quantitative methods included, but were not limited to, simple math, regression analysis, z-scores, percentage change analysis, comparative analysis, ratio analysis, etc.
- Response- Evidence. The “evidence” in the Study includes the verifiable data from the CEC and other sources, as well as the math. Both the CEC and CARB have published data that the existing LCFS adds around $0.10 to a gallon of gasoline. The potential price increase, as indicated in the State’s SRIA, associated with the new CARB LCFS, which was published (but apparently retracted), estimated that the new standard would add about 10% or $0.47 to a gallon of gasoline, ceteris paribus. Using today’s average price in California, the simple math would indicate a price of $5.41 and $5.822 a gallon for regular and premium, respectively.
Incorrect assumptions about California’s market. Response. For this Study, reasonable and customary assumptions were made. The assumptions used in the Study are based on research spanning recent days to as far back as 50 years, as well as the results of quantitative analysis, and years of training and experience.
- ~20% decrease in in-state production from 2023 to 2025. How this percentage is used is misleading. The loss of capacity is not “permanently” 20 percent. Markets will respond, including via imports and closing refiners acting as marketers. Response. The percentage is accurate and correct based on CEC refinery data, refinery closure announcements, and the simple math (Exhibit 2.0 on page 2). On page 6, “At no time has California ever faced a permanent 20% reduction in gasoline production.” The sentence and point are clearly specific to production, not supplies. Mr. Richards does reinforce one of the main points of the Study that markets will respond. Notably, on pages 1, 2, 3, and 12, references are made to various market methods to compensate for the permanent loss in production.
- 36 million gallon-per-day in-state consumption (that Mr. Mische assumes will hold steady or increase). This is incorrect; demand is not static. Response. The Study contemplates static demand and decreasing demand. Specifically, on page 8, “Demand (consumption) was maintained at a static level, below the 10-year average, and reduced by 3% in one model.” Page 8 states, “No models contemplated increases in demand for gasoline.” Furthermore, the Study merely makes the point, on page 6, that it is unrealistic to assume that California production will decline by a comparable percentage to the loss in in-state refinery production by April 2026.
In Mr. Mische’s assessment of the in-state production-to-consumption deficit, he only assumes we import gasoline from Washington (2 million gallons per day), and holds that steady from 2023 onward (does not assume it will increase). This is incorrect. Response. Page 3 of the Study states, “California will most likely have to look to the Gulf Coast refiners, and to Asia, including refineries in South Korea and China, as possible sources to satisfy consumer demands and fuel its economic growth.” The models and Study recognize that California will have to source finished, CA compliant gasoline from Washington State, and other sources, most likely foreign. Washington State sources were held constant based on the data available. To my knowledge, Washington State is not planning on opening any new gasoline refineries specifically for California or expanding its existing capacity to meet California’s potential shortfall of upwards of 10.5 million gallons of gasoline a day (Lucey). Furthermore, it is doubtful that “gasoline destruction” occurring in the Pacific Northwest will be sufficient to compensate for the immediate loss in in-state gasoline production. Consequently, as noted on page 3, “California will be at the mercy of out of state and foreign, non-U.S. refiners.” Foreign sources could include Japan, India, South Korea, as well as China.
Additionally, Mr. Mische appears to only include production capacity in computing gasoline available for sale (does not account for existing storage and inventory). Response. The Study and models, as indicated in Exhibit 7.0, page 5, are inclusive of the estimated costs of both existing and various potential days’ supplies of finished gasoline stocks and are highly variable depending on the assumptions used regarding final regulatory requirements and various seasonal blend costs, as well as storage capacities. The Study is also incorporative of the potential costs associated with the recently passed bill requiring refiners to maintain extra inventories of finished gasoline stocks.
Mr. Mische incorrectly implies that increasing CA oil production will increase our in-state gasoline production capacity. Increasing CA oil production will not change gasoline production capacity and may only marginally change production costs. Response. Lowering the cost of production, even if “only marginally,” may only have a small favorable impact on gasoline prices, but even a marginal amount in savings can add up to a lot over the course of the coming years for the hard-working California consumer. The Study provides some suggestions on page 13 on how California can responsibly approach the increase in in-state oil production and incentivize the surviving refiners to defer exiting from the California market. The “spirit” of the action steps is consistent with Governor Newsom’s April 23, 2025, letter to the CEC instructing the agency to “redouble the state’s efforts to work closely with refiners on short- and long-term planning,…”
Logical inconsistencies and incorrect assumptions:
- Mr. Mische contradicts himself, emphasizing that an in-state production to consumption deficit will lead to these price increases, followed by another section on how we meet over 60% of our production needs from non-U.S. sources. Response. Mr. Richards confuses the production of gasoline with the importing of gasoline supplies. With over 61% of its petroleum needs being met by foreign sourced oil, including petroleum from Iraq and Saudi Arabia, California is highly dependent on non-U.S. oil for its gasoline production. With the closing of two refineries, it appears that California will be highly dependent on non-U.S. sources for its gasoline, perhaps even China, the largest consumer of Iranian oil. As indicated on page 7, the Study notes, “As California appears to be heading towards greater dependency on foreign sources, its vulnerability to disruptions, spot markets, and geopolitical events increases substantially.”
- PBF CEO Matt Lucey has commented on the loss of two in-state refineries, “(with)…the announced closures(refineries), by next year, we see the market short 250,000 barrels a day of gasoline or over 250,000 barrels a day of gasoline, which will force the market to attract higher cost imports.” To put the production loss in perspective, 250,000 barrels represents a potential shortfall of 10.5 million gallons of gasoline per day. The Study and the underlying models indicate a potential shortfall of 9.6 million gallons of gasoline a day, which is within 8% of Mr. Lucey’s estimate (Exhibit 8.0, page 6).
- Mr. Mische simultaneously says our environmental programs are to blame for high gas prices while making the point that we can’t rely on marine imports because of their GHG emissions. Response. The potential regulatory fees, costs, and taxes are provided in Exhibit 7.0, page 5. Notably, the estimated costs associated with Cap and Trade and the new LCFS vary considerably among modelers and researchers. As individual components, taxes, regulatory costs, and fees associated with environmental programs contribute to higher gasoline prices in California. The Study does not imply or state that California cannot rely on marine imports due to their GHG emissions. To the contrary, the Study concludes that to move such volumes of finished gasoline product, California will have little option other than to rely on marine transports. On page 10, the Study states, “To move gasoline at the potentially large volumes created by the exiting of two in-state refineries will require additional rail tankers and maritime vessel tankers delivering gasoline daily.”
On page 10, the Study further states that “…maritime is more efficient and less costly on a per gallon basis than rail, but it throws off considerably more GHG emissions, most likely negatively impacting the net global and the “well to wheel” GHG effect, and California’s GHG reduction ambitions.” On page 10, the Study suggests that given the potential increase in maritime GHG emissions, a “well to wheel” assessment might be beneficial to ascertain consistency with California’s overall GHG and air quality objectives.
Page 7 further provides a cautionary statement, “Any disruptions to maritime markets, routes, ports, operations, etc., will have a significant effect on California gasoline security and consumer prices, as well as prices in Nevada and Arizona.”
Mr. Mische compares gas prices at the dates of legislative actions and tries to make an association between these legislative actions and increased gas prices in California, but doesn’t control for anything, including inflation. Response. The prices are provided for comparative purposes only and are stated in “nominal” versus “real” terms, and therefore, are inclusive of inflation. The use of nominal prices is consistent with the Governor’s April 23, 2025, press release on California’s GDP announcing our 4th place ranking in terms of size.
- In addition, the dates of legislative actions are likely to come many months or years before actual regulatory requirements, if ever. Response. If one of the stated intentions of legislation is to help reduce consumer gasoline prices and provide for energy security, then the consequences should be lower consumer prices at the pump. Based on nominal terms, the data doesn’t indicate a price reduction. In fact, the data indicates that the cost of regulations, environmental programs, and taxes has contributed to higher prices. More alarmingly is “if ever,”…if that is the prevailing attitude, then the question is “to what purpose does the legislation serve?
Ignoring the basics:
- Mr. Mische fails to acknowledge the possibility that lost in-state production could be supplied through other means. Response. On page 1, the Study notes, “…the deficit in production and gasoline levels will be compensated by imports of finished fuels from Washington State and perhaps Gulf Coast refineries.” On page 3, the Study notes, “To make up for the shortfall of in-state gasoline production and to ensure consistent and relatively affordable prices for the consumer, California will most likely have to look to the Gulf Coast refiners, and to Asia, including refineries in South Korea and China…”
- Mr. Mische ignores the fact that markets respond to price. He says, “based on current demand,” but demand and supply do and will respond to price. Response. As discussed on pages 3 and 6, the Study and the related range in possible retail prices are predicated on steady consumption, declining demand (consumption), as well as a 3% to 10% increase in surviving refinery production of gasoline.
- Mr. Mische ignores that the current gasoline refining market is not competitive, and the exercise of market power likely drives price increases. Response. That is incorrect, and there is no economic evidence of refiners exercising undue pricing powers. Investigations dating back to 2000 by the California State Attorney General have failed to prove price manipulation and gouging by California refiners. The Federal Trade Commission and the Federal Reserve Bank of Dallas, as well as my work, have failed to discover or prove price manipulation, price gouging, supply manipulation, and excessive profiteering by California refiners. Both the State’s own California Energy Commission (CEC) and the California Attorney General have, at various times, concluded that California’s chronically high retail gasoline prices are a function of the high operating costs in California, tight in-state supply due to diminishing refineries, lower gasoline stocks, the lack of secondary supplies and sources, the absence of in-bound pipelines, and the high tax and regulatory cost environment imposed on oil producers, refiners, and gas station operators.
Some Additional Thoughts
Based on the conditions, and the data, and assumptions made as of May 5, 2025, the potential price of gasoline in the Golden State could possibly range between $6.04 and $8.43 a gallon, depending on grade, in late 2025 and into 2026. Irrespective of whether the retail price of gasoline in California increases to the “worst high-end” of $8.43 a gallon, what is certain is that refinery shutdowns, dependency on foreign sources of gasoline, new regulatory mandates in the form of costs, fees, and taxes, are all components which, when combined, contribute to increases in the price of gasoline at the pump. As noted on page 7, “…the only issue is the severity of the price increase.”
What is also certain is that California will be increasingly more vulnerable to the swings and emotions of the gasoline spot market and will be the most dependent state in the nation on non-U.S. sources for its gasoline. Because of California’s special blend requirements, not all refineries are configured for California compliant gasoline, which costs more to process and refine. Typically, when gasoline supplies are tight, California has sourced its needed deficit gasoline from Japan, South Korea, and as far away as India. But, as the EIA noted, “high shipping costs usually limit imports to periods of refinery outages or the summer driving season.”1 The shutdown of two in-state refineries is a high shipping costs usually limit permanent outage.
Senator Jones has long warned that Governor Newsom’s policies would lead to a self-inflicted gas price crisis. Sourcing finished gasoline from foreign sources creates a number of ethical, economic, and financial dilemmas. If sourced from China, which is adding to its 35 state-owned and quasi-state-owned refineries and a crude oil processing capacity in excess of 19.0 million barrels a day, could present potential national security, human rights, and GHG emissions concerns, as well as possibly placing California in a more vulnerable position. China is Iran’s largest consumer of Iranian oil production, so securing gasoline from China is, in a circuitous way, enriching and enabling the rogue regime of Iran. Likewise, China is the fourth largest customer of Venezuela’s oil production, and, like Russia, is an adamant supporter of its strongman president, Nicolás Maduro. South Korea and Japan are primarily supplied by Saudi Arabia, the U.A.E., and Kuwait. India, which is a potential source of California gasoline, receives the majority of its oil crude stock to make the gasoline from Russia, Iraq and Saudi Arabia. Irrespective of source, gasoline from these non-U.S. refineries will require ocean tanker transport, which, in turn contributes to port congestion and GHG emissions, as well as cost. Any significant disruption or existential event to the non-U.S. foreign gasoline source and supply chain could have a devastating effect on California’s economy and the everyday Californian.
Lastly, this response and the comments herein represent my personal statement. They are not related to, associated with, or representative of any policies, statements or positions of the University of Southern California. Thank you.
Michael A. Mische
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“The Governor’s attacks, as well as those of Mr. Richards, and Mr. Court, are a poorly conceived political and legally risky attempt to discredit, censor, suppress, and disparage a routine academic paper, and the author’s independent and personal thoughts and opinions, simply because they disagree, or the results do not support their long-standing and preferred political narrative.”
Prof. Mische has made a comprehensive and compelling response to his detractors – the governor et. al.. It seems to me that he may have grounds for a defamation lawsuit.
Prof. Mische’s numbers are “low”. The mathematical extensions suggest a CPG for gasoline could easily approach $10/gal.
The enormity of the pending castrophe mandates Trump immediately intervene and halt dismantling of the Phillips and Valero refineries as they are infrastructure critical to national security.
Professor Mische succeeded in calmly, reasonably, and intelligently responding to the outrageous charges and preposterous calls for “retraction” by shameless liar Gavin Newsom and his super-cooperative staff of trained seals. In doing so Prof Mische also poked holes in inconsistent, ineffective, and deceitful state policy, so it seems to me that more was accomplished in his response than simply defending himself and his work publicly. The response was so complete and damaging to the Gov and his office —- besides which readers here at The Globe are very familiar with the Gov & Staff of he/him tough guys, rashly demanding retractions in what they hope will be an intimidating manner from the Globe Editor, most especially when they don’t have a leg to stand on —- that Gavin Newsom et al might be kicking themselves that they made a stink about this in the first place and end up looking once again like the lying fools that they consistently are. I won’t even ask “who do YOU believe?” because the answer is so obvious.
The governor’s policy of lying, manipulation, gaslighting, and being completely irresponsible on Every Single Issue that California faces has consequences, and these consequences add up to having a horrible, not-fixable reputation where no sane person actually believes him — or his messengers — anymore. And they haven’t for a long, long, L-O-N-G time.
Tell me one thing Gov. Failure has been right about. Just one thing. A grade schooler has more wisdom about macro economics that this dimwit Gov. Failure Newscum. Gov. Failure literally has no common sense. What did we do to deserve to have the dumbest Governor in history?