California’s Silent Energy Crisis: The Collapse of the San Pablo Bay Pipeline and What Comes Next

Eight days ago, California’s energy infrastructure experienced a catastrophic event that sent shockwaves through the state’s economy, with consequences that are only just beginning to be understood.

On December 15th, 2020, Oracle Corporation shocked the tech world with its decision to relocate its headquarters, signaling a broader exodus of businesses from California.

But it’s not just Silicon Valley feeling the strain.

California’s energy sector, which has long served as the lifeblood of the state, has now faced a devastating blow with the permanent shutdown of the San Pablo Bay pipeline, a critical artery for the state’s oil supply.

For nearly 70 years, the San Pablo Bay pipeline had delivered crude oil from the oil fields of Bakersfield to Northern California’s refineries, supporting everything from the gasoline in your car to the jet fuel at San Francisco International Airport.

But after years of declining volume and mounting operating losses, the pipeline’s owner, Crimson Midstream, was forced to shut it down.

The company had been hemorrhaging money at an unsustainable rate, losing $2 million a month, and simply could not continue to operate at a loss.

When the decision came to halt operations on that fateful December day, no one anticipated the immediate ripple effects it would have across the state’s economy.

This wasn’t just a technical issue for Crimson Midstream.

It was the first domino in a far-reaching collapse of California’s energy infrastructure.

The closure of the pipeline has created a perfect storm of complications for the state’s already strained energy market.

Northern California refineries, which had relied on the San Pablo Bay pipeline as their primary source of crude oil, were now left scrambling for alternatives.

The pipeline transported 100,000 barrels of crude oil daily, and without it, refineries had no immediate viable source for their crude oil supply.

The losses are staggering.

And the worst part? There was no warning to consumers.

No emergency plan in place to prevent this crisis from unfolding.

The shutdown was quiet, hidden away in a regulatory filing submitted after hours on December 15th.

The CEO of Core Energy Infrastructure Trust, Robert Waldron, wrote a desperate letter to Governor Gavin Newsom, outlining the severe financial distress his company had been in and how they could no longer sustain the losses.

It was a letter that underscored the gravity of California’s situation and the complete breakdown of its once-reliable energy infrastructure.

The implications of this shutdown were immediate and harsh.

Refineries such as Marathon’s Martinez facility, Philip 66’s Rodeo plant, and Valero’s Benicia refinery had relied on this pipeline for their daily operations.

Now, with no replacement crude source in sight, Valero announced it would close its Benicia facility in April.

Philip 66 had already converted its Rodeo plant to renewable diesel production.

Marathon is struggling with profitability, while smaller refineries face an even bleaker future.

San Francisco’s once-thriving commercial real estate market, fueled by the constant demand for energy and the services of these refineries, is now facing a sharp decline in both office demand and property values.

The shutdown of the San Pablo Bay pipeline doesn’t just affect the oil companies—it affects every Californian.

The state’s dependency on this pipeline for gasoline, diesel fuel, and jet fuel meant that refineries in Northern California now face a desperate search for replacement crude.

However, the alternatives to pipeline-delivered oil are both limited and costly.

Trucking crude oil from Bakersfield to the Bay Area would require thousands of truck trips, wreaking havoc on California’s already congested roads.

Rail transport would require hundreds of tank cars, an infrastructure that simply doesn’t exist at the scale needed to meet the demand.

Marine terminals are another option, but their capacity is already stretched thin.

The economic implications are even more severe.

The Kern County oil fields, which produce roughly 280,000 barrels of crude every day, now have nowhere to send that oil.

Small oil producers who relied on the pipeline to get their crude to market are now facing the painful reality of either finding expensive alternatives or shutting down their operations entirely.

California’s oil sector—one of the largest economic drivers for the state—is facing collapse.

Kern County, which generates $15 billion annually from oil production, could see its economy crater if the pipeline’s shutdown is permanent.

More than 20,000 jobs are directly tied to petroleum operations in the region.

If producers stop operating, those jobs will vanish.

What’s even more alarming is the broader pattern of failure in California’s energy sector.

The San Pablo Bay pipeline was not the only piece of infrastructure facing challenges.

Phillips 66 shut down its Los Angeles refinery earlier this month, and Valero plans to close its Benicia facility in April.

That’s 20% of the state’s refining capacity lost in a matter of months.

The state’s energy grid, which has struggled to keep up with demand, is now under immense strain.

With refineries closing or reducing output, and no viable backup plans in place, gas prices in the state have already started to spike.

Diesel and gasoline prices are climbing, and consumers are feeling the burden at the pump.

If these shortages continue, fuel rationing may not be far off.

The problem is not just the physical shutdown of pipelines or refineries.

California’s regulatory framework makes it nearly impossible to address these issues quickly.

Building new pipelines or expanding marine terminals takes years, and the political and environmental battles that would arise from such projects are insurmountable.

The state has put itself in a position where solutions to energy crises are either too slow or completely unworkable.

As Waldron’s letter to the governor made clear, the financial realities of running this pipeline simply became untenable.

With volumes declining year over year and the fixed costs of maintaining the pipeline remaining the same, the economics just didn’t add up anymore.

Even after investing millions in upgrades, the pipeline couldn’t generate enough revenue to cover costs.

And now, California is paying the price.

Gas prices are climbing, refineries are struggling, and the state’s oil production capacity is being severely limited.

What’s even more frightening is that California’s financial problems are now directly tied to its energy infrastructure.

According to recent reports, California lost $102 billion in adjusted gross income between 2020 and 2022, with high earners and business owners fleeing the state.

The energy crisis is only exacerbating these issues, with commercial real estate in San Francisco falling by more than $1 billion in value in just a year.

The state’s deficit is now larger than ever, with no clear path to recovery.

California faces a critical decision: will it continue to push forward with the same policies that have made it so difficult for companies to thrive, or will it recalibrate and take the necessary steps to ensure that its energy infrastructure can support future growth? The San Pablo Bay pipeline’s closure is just the latest symptom of a much larger problem: California’s reliance on outdated systems, coupled with a refusal to adapt to modern energy needs.

Governor Gavin Newsom’s office has yet to provide a public response to Waldron’s letter, and emergency meetings are likely taking place behind closed doors.

But with every passing day, the state’s energy crisis deepens.

The strategic petroleum reserve can’t help because it only contains light crude that isn’t suited to California’s refineries.

California’s options are running out, and the state’s economic future is on the line.

December 15th marked the official collapse of the San Pablo Bay pipeline.

California’s energy infrastructure is unraveling, and the state has yet to offer any real solutions.

The cost is already being felt at the gas pump, and the damage to California’s economy will continue to mount unless something drastic changes.

The question now is whether California will wake up before it’s too late, or whether the state will watch as its energy system collapses under the weight of its own policies.

The shutdown of the San Pablo Bay pipeline is just the beginning.

Gas prices are already rising, refineries are closing, and the state’s future as a global economic powerhouse is in jeopardy.

California built its economy on oil, but that foundation is crumbling.

The state must find a way to adapt, or risk losing even more of its economic dominance.

The stakes couldn’t be higher.