California’s Energy Crisis: The Consequences of Unchecked Policy Failures

Eight days ago, California’s energy infrastructure, already under strain, was hit with an unexpected and catastrophic blow.

On September 10th, 2024, a letter from Arizona Governor Katie Hobbs and Nevada Governor Joe Lombardo, two leaders from opposite sides of the political spectrum, landed on Governor Gavin Newsom’s desk.

This wasn’t a typical partisan squabble.

It was a dire warning.

The letter highlighted the severe consequences of California’s new refinery regulations—changes that would trigger fuel shortages and skyrocket gas prices, not just for Californians, but for Arizona and Nevada as well.

At the heart of the matter were the state’s new regulatory measures designed to tackle the oil industry’s profit margins and tighten the control on fuel supplies.

These regulations would not just impact California’s economy but ripple outwards to neighboring states heavily reliant on California’s refineries.

Arizona, which gets 60% of its gasoline from California, and Nevada, which gets 70%, both warned that these new policies would cripple their fuel supply chains and raise prices for consumers.

But Governor Gavin Newsom wasn’t having it.

He fired back immediately, using his Twitter platform to accuse refineries of deliberately manipulating fuel prices, a narrative he pushed as justification for the stringent new regulations.

Newsom’s stance was clear: the problem wasn’t the regulations—it was the refusal of refineries to maintain supply during maintenance periods, which, according to him, caused unnecessary price hikes.

He dismissed the concerns of Hobbs and Lombardo, labeling them as parroting the talking points of the oil industry.

In a sharply worded letter to both governors, Newsom further doubled down, accusing them of parroting corporate interests rather than genuinely looking out for their constituents.

Just days after the showdown between the governors, on October 14th, 2024, Newsom signed the new refinery regulations into law.

These regulations, which included provisions requiring refineries to maintain higher inventory levels and enabling the state to regulate refinery profit margins, were framed as victories against corporate greed and manipulation.

However, what came next could only be described as a disaster in the making.

Only days after the regulations were signed, the first domino fell: Phillips 66, one of California’s largest refinery operators, announced that it would close its Los Angeles refinery, which had a daily production capacity of 139,000 barrels.

The official reason? The new regulatory environment had made it impossible to operate profitably.

Phillips 66’s decision was a clear signal to the industry: California’s regulatory climate had made it untenable for companies to continue refining oil at a reasonable profit.

But this was only the beginning.

By April 2025, Valero Energy followed suit, announcing that its Benicia refinery would close by April 2026, taking another 145,000 barrels per day offline.

Together, these closures would account for 20% of California’s total refining capacity, a devastating blow to a state already grappling with rising gas prices and an uncertain energy future.

For Arizona and Nevada, this was exactly the nightmare scenario they had warned about.

These two states rely heavily on California refineries to supply their gasoline, and now, with the closures of these refineries, they were left with few options for securing the fuel they needed.

Prices began to soar in both states.

In Arizona, the price per gallon jumped by 50 cents overnight, while in Nevada, it increased by 40 cents.

The warnings of Hobbs and Lombardo were coming true.

What was once a strategic dependency on California’s refineries had now turned into a crisis that was out of control.

As Phillips 66 and Valero made their announcements, Newsom’s office remained eerily silent.

Only after weeks of pressure did the governor’s office finally release a statement, which accused Phillips 66 of trying to dodge regulations.

The statement failed to address the real issue: California’s new refinery regulations had created the very conditions that made continued refinery operations economically unfeasible.

Despite the mounting evidence that the new regulations were forcing refineries out of the state, Newsom continued to deflect responsibility.

When State Senator Brian Jones sent a May 6th, 2025 letter warning of gas prices reaching $8.

43 per gallon, Newsom ignored it.

When the California Energy Commission (CEC)—a body within Newsom’s own administration—began to raise alarms about the deteriorating situation, it became clear that the governor’s office was refusing to accept responsibility for the mess they had created.

Newsom called for collective efforts to address what he termed “market disruptions,” but deflected any talk of changing the very regulations that were responsible for the crisis.

As the 2025 summer drew near, things continued to spiral.

In July, reports emerged that the California Energy Commission was in secret negotiations to find a buyer for Valero’s Benicia refinery.

This was a desperate attempt to salvage what remained of California’s refining capacity.

California officials were now willing to throw hundreds of millions of dollars in subsidies to keep the refinery operational, despite the fact that these very regulations had made the refinery unprofitable to begin with.

The irony of this situation was not lost on anyone.

Environmental groups that had supported the regulations were now furious.

They had pushed for tougher regulations to combat climate change, but now, they were seeing their policies backfire.

They had fought for these regulations, only to see them fail spectacularly—and worse, they were now witnessing the state prepare to use taxpayer money to bail out the very refineries they had tried to shut down.

As gas prices continued to climb and the supply chain started to crack, the California Energy Commission acknowledged that the state’s refining capacity was now insufficient to meet demand.

This, despite the fact that the same commission had been part of the process that imposed these disastrous regulations.

By September 2025, California was paying the price for its green ambitions—literally.

The state began importing gasoline from South Korea, a stark contradiction to its environmental goals.

The environmental impact of importing gasoline from across the Pacific was far worse than refining it domestically, but Newsom continued to defend his policies.

The Oracle story wasn’t the only one where California saw its corporate giants slip away quietly.

The San Pablo Bay pipeline’s closure, which served as a critical part of the state’s oil transportation network, was part of a broader pattern: California’s energy policies were driving companies out of the state, and the effects were now visible to everyone.

Fuel prices were up, refineries were closing, and the state’s energy crisis was spiraling out of control.

The economic devastation extends beyond just higher gas prices.

California’s oil workers, especially in Kern County, are losing jobs as small operators close up shop.

Kern County, which generates $15 billion annually from oil production, is now in crisis.

20,000 jobs are at risk.

These are high-paying jobs that cannot be easily replaced.

The solution isn’t just more regulations or subsidies—it’s a reevaluation of California’s energy strategy.

The state must find a way to balance its climate goals with the economic reality of its energy needs.

If California continues to drive out its refineries, it will lose not only energy production but also critical jobs and tax revenue.

California has always prided itself on being the leader in technology, innovation, and climate policy, but its energy policies have now reached a breaking point.

The San Pablo Bay pipeline’s closure, the refinery shutdowns, and the fuel price hikes are not isolated incidents—they are signs of systemic failure.

The state’s energy infrastructure, once the envy of the world, is now crumbling under the weight of overregulation and misguided policies.

Arizona and Nevada are already feeling the impact.

They warned Governor Newsom, but their concerns were dismissed.

Now, California’s fuel crisis is their crisis too.

The ripple effects are spreading across the Southwest, and the question remains: can California reverse course before it’s too late? Will the state finally acknowledge that its regulatory approach has backfired, or will it continue to double down on policies that are leaving its energy future in jeopardy?

As gas prices climb and the state’s economy takes a hit, it’s clear that the consequences of California’s energy failure will be felt for years to come.

The state’s green ambition has become a cautionary tale, and the next steps California takes will determine whether it can recover or whether it will watch more industries and jobs flee to states that offer a more business-friendly environment.

This crisis is only just beginning, and the story is far from over.

Let me know your thoughts in the comments below.

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