
Oil pumpjack, San Benito County. (Photo: Katy Grimes for California Globe)
Ringside: How to Save California’s Oil and Gas Industry
Petroleum still accounts for 50% of the energy consumed in the state, and natural gas accounts for another 30%
By Edward Ring, May 23, 2025 3:00 am
For anyone unconcerned about the state’s ongoing war against the oil and gas industry, or the impact it is going to have on California’s economic health and overall cost-of-living, a study released on May 5 should be required reading. With strong arguments and immutable data, USC Business Professor Michael Mische predicts that by sometime in 2026, we’ll be paying over $8.00 for a gallon for gasoline.
We’ve seen this coming. Last month, in California’s Refinery Capacity Stretched to the Limit, we quantify the impact of the planned shutdown of the Phillips 66 refinery in Long Beach. And in Can EVs Make Up for Gasoline Shortages, we add to that the impact of yet another just-announced shutdown, the Valero refinery in Benicia. Assuming there aren’t any more closures, in late 2026, based on current trends, supply will fall short of demand by about 4 percent. Prices will rise, and as Professor Mische warns us, they may soar.
But what would it take to lower prices for gasoline in California? How low could prices go, if policies were changed?
To fall back on an overused phrase, and to put it mildly, this is a thought experiment. The chances that California’s governor or state legislature would do everything necessary to bring retail gasoline prices down anywhere close to the national average are slim. But it is possible. Here is how it could happen.
To begin with, Governor Gavin Newsom could declare a state of emergency based on the imminent and near certainty of an energy crisis in the state. Using his executive authority, he could suspend enforcement of SBX1-2 and ABX2-1, recent laws that have imposed costly and unreasonable burdens on California’s refineries. He could then demand the state legislature work with refinery operators to reform the entire regulatory environment in exchange for these refineries not only choosing to remain in California, but enabled to invest in the maintenance and upgrades that excessive regulation has made impossible.
Even all this, however, will only stabilize the retail price of gasoline in California by preventing demand-driven price hikes driven by shortages. As of May 21, gasoline in California sold for $4.88 a gallon, compared to today’s national average of $3.18. Newsom will have to do much more.
The next thing Newsom can do is cancel the “environmental programs,” which according to the California Energy Commission add $.54 cents per gallon to the price of gasoline in California. Much of this cost is incurred as oil refineries make mandatory payments each year into California’s cap and trade program. The state redistributes this money to investments of dubious return – high speed rail, other transit projects that also fail to pass basic cost/benefit analysis, and heavily subsidized and overpriced “affordable housing.”
One of the biggest reasons oil companies have to pay billions into the cap and trade program is the continuously escalating requirements of California’s “Low Carbon Fuel Standard” (LCFS). In plain English, this primarily involves subsidizing midwestern corn farmers to grow and ship grain alcohol thousands of miles overland to California refineries because there is an allegedly lower greenhouse gas impact when you burn gasoline laced with ethanol. To put this in perspective, if you grew enough corn in California to replace the 13.6 billion gallons we consumed in 2023, we would need over 60,000 square miles of farmland and 120 million acre feet of irrigation water, along with stupefying quantities of fertilizer.
To the extent refineries cannot meet the LCFS, they must purchase “carbon credits” through the cap and trade program.
Newsom can issue an executive order suspending the LCFS, and direct the California Air Resources Board to redirect their priorities to regulating pollutants that are genuinely hazardous to human health. And to ensure they comply, Newsom may remind CARB that 12 of their 16 board members “serve at the pleasure of the governor.”
Also driving up the cost of gasoline in California are “refinery costs and profits.” This adds $.99 per gallon to the retail price of gasoline. But “profits” is a small slice of that pie. Between June 2023 through May 2024 refiners made net profit in only 6 of 11 months, and refinery profits remain thin or negative. To get an idea of what might be possible if refineries in California could invest in efficiency upgrades and didn’t have to spend extra to comply with the LCFS, look to other states. The national average refinery costs and profits amount to $.44 per gallon, less than half what they are in California.
Before getting to the elephant in the room, which is taxes, it’s important to note that gasoline cannot easily be imported to California from out-of-state refineries because of California’s reformulated blends. But reformulated gasoline, which requires expensive and specialized refining only found in California, only reduces the rate of evaporation of volatile organic compounds. While there is some benefit to this, it is largely controlled anyway now that automobile gas tanks are airtight and vapor locks are standard on gasoline pumps. The air pollution that mattered, that fouled California skies from the Los Angeles Basin to the Santa Clara Valley back in the 1960s, has been eliminated thanks to unleaded gas and the catalytic converter. The air quality benefits of reformulated gasoline are marginal.
To bring down refinery costs, the governor can issue an executive order eliminating the requirement for reformulated gasoline, he can suspend the LCFS, and as noted, he can suspend SBX1-2 and ABX2-1.
Which brings us to taxes. California’s state excise tax amounts to $.60 per gallon. The state uses this money for constructing and operating public streets and highways, but also for mass transit and to support the cap and trade program. Eliminating everything that isn’t directly related to streets and highways, while also streamlining and reforming the design and procurement apparatus known as CalTrans, could enable this excise tax to be cut by at least 50 percent.
Altogether, if Newsom was serious about providing Californians with abundant and affordable gasoline, his actions could lower the price per gallon as follows: Eliminate “environmental programs” and save $.54 per gallon, eliminate the LCFS, reformulation, and unnecessary regulations to lower refinery costs by perhaps $.40 per gallon, and cut $.30 per gallon out of the excise tax. California’s retail price per gallon would drop from $4.88 to $3.64.
Saving California’s oil and gas industry also requires ending the regulatory war on drilling and extraction. Doing that might even lower the refinery cost for crude oil. Newsom needs to suspend implementation of SB 1137, which creates unreasonable setbacks between oil wells and “inhabited dwellings.” On this one, however, the industry is fighting back, with two lawsuits already filed to challenge 1137.
Newsom might also instruct CalGEM to start issuing drilling permits, which have dropped from thousands to dozens per year. The head of CalGEM is appointed by the governor. CalGEM is part of the California Dept. of Conservation, also run by someone appointed by the governor. And CalGEM is a division of the California Natural Resources Agency, whose current head, Wade Crowfoot, “serves at the pleasure of the governor.”
The moral argument for a healthy oil and gas industry in California isn’t a stretch. Petroleum still accounts for 50 percent of the energy consumed in the state, and natural gas accounts for another 30 percent. We should produce it here, where even relaxed, more common sense regulations will nonetheless far exceed anything in place from anywhere we might otherwise import our oil and gas. The only way we can avoid impoverishing our citizens and evicting our businesses is by nurturing our energy industries instead of harassing them.
Eventually, new fuel will replace oil and gas. In the meantime, we can create thousands of good jobs, bring down the cost of living, and set an example of responsible use to the rest of the world.
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Even if Newsom does all those things suggested in your piece that still won’t bring back Chevron, Phillips 66 and Valero. The reason is simple, if Newsom were to take these actions they would only be temporary measures. The only possible way to entice these oil companies to return to California is to completely reverse everything they did to force them out in the first place and that’s something that Democrats in this state simply won’t do.
Here’s how : STOP VOTING FOR DEMOCRATS who are beholden to special interests, or corrupt foreign entities, or are “community organizers” with no real-world economic experience….
And OVERHAUL California voting systems, practices and procedures that enable Democrats to CHEAT their way into power…
Had a Newsom “trigger event” when I saw the word “pumpjack” and thought of Governor Hairgel’s winery, that we need to retire him to…
#NoMoreNewsom
Commonsense solutions to real California problems. This is what we need more of. I hear the skepticism in getting them from paper to implementation. I would encourage folks to stop take a deep breath and look at how the earth is crumbling under the feet of the establishment (both Dem & Repub). We are starting to see some get charged with crimes. Money has been cut off to the illegal alien invading armies which is going to boomerang on those that brought them here, Money has been cut off to quite a bit of the waste, fraud and abuse in government. I read where the City of Los Angeles within the last couple of weeks asked Newsom for 2 billion dollars because they are short and he turned them down. (Los Angeles and the State has a cash crisis). The pressure is being turned up on anti-American activities. Yes, California is lagging because we have been overrun by the establishment, and they have infected every level of government. The good news is that they are panicking, and they are seeing their power eroding. Hold on be of good cheer Newsom and the cabal will not last much long no matter what Brandom Richards (He/Him) puts out.
California’s oil and gas industry will be saved when Californians are finally free of “Hair-gel Hitler” Newsom, the criminal Democrat thug mafia that controls the state, and their appointed bureaucratic stooges on sketchy agencies like CARB.
Let the train wreck happen. Next year is an election year and Californians won’t be able to look past paying $3 to $4 a gallon more than the rest of the country. Add to that ridiculous increases in the cost of insurance and what has to be the end of high speed rail and you have the recipe for a revolution in California.
The photo above is of a pumpjack, a (once?)-common sight to Californians who have traveled the state, a state where oil extraction has been prominent and historically extremely important to its economic well being. It just occurred to me —- and it struck me as notable —- that oil-hating Gavin Newsom’s “small business” is named “PlumpJack.” Is that a reference to the Gettys storied wealth from oil? Or is it a slang brag reference to Gavin and his Getty and other one-percenter elitist backers having more money than God? (“jack” as slang for money?) Or is it some kind of a smart alecky sexual reference? I don’t know, I haven’t yet looked up where the PlumpJack name came from, but each of these possibilities works when you think about it.
The name of the company is inspired by “the roguish spirit of Shakespeare’s Sir John Falstaff (Henry IV), dubbed Plump Jack by Queen Elizabeth.”
Thank you, Ted, I should have known. Figures a drunken Shakespearean character would be the inspiration. The name combines a “high-minded” sensibility with a “living in the gutter” sensibility. Perfect.
I’m not sure if this would accomplish much beyond throwing snark, but the stickers featuring Biden pointing at the cost to fill up with a caption of “I did that” could be reworked to feature Newsom – along with providing the fact that gas prices are less once one passes the immediste eastern borders, and Nevada and Arizona have no refineries, no extactable crude, and are at least as far from those sources as they are from the California coast. It might wake some people up when the price of gas aproaches $7.00 a gallon while the rest of nation averages under $3.00. Might want to build some awareness that the price of groceries is directly relateable to the cost of energy as well. Cost of electricity, gasoline, diesel, natural gas…