The U.S. Department of Energy has identified California’s refinery capacity reduction as a national energy security vulnerability. California refineries supply not only the state’s 40 million residents but also more than one-third of Arizona’s gasoline and 86% of Nevada’s motor fuels.[1][2] The loss of 20% of in-state capacity means that California must import significantly more finished gasoline by tanker which is a more expensive, less reliable, and more carbon-intensive supply chain than in-state refining. Every barrel refined in California under the state’s strict environmental standards is a barrel that would otherwise be refined in a jurisdiction with fewer controls.

Gas price projections are alarming. UC Davis researchers project a baseline increase of $1.21 per gallon once both closures take full effect, and worst-case scenario analyses have projected prices exceeding $8 per gallon if closures coincide with supply disruptions or seasonal demand spikes.[3] As of late 2025, California drivers already pay approximately $4.34 per gallon which amounts to $1.40 above the national average. At projected post-closure levels, a typical two-vehicle household consuming 1,000 gallons annually would face $1,200 to $2,400 in additional fuel costs per year. These increases fall hardest on the working families and middle-class Californians who drive to work, haul goods, and run small businesses.

The regulatory environment is the proximate cause. Villaraigosa has noted: "We’ve made it so difficult for refineries to exist in this state."[4] Multiple layers of regulation including the state’s unique fuel blend specifications, the Low-Carbon Fuel Standard’s escalating compliance costs (projected to add $0.30 to $0.70 per gallon by 2030), cap-and-trade obligations, and aggressive emissions mandates imposed without corresponding support for compliance, have made California’s refineries among the most expensive to operate in the world.[5] This is not an argument against environmental standards; it is an argument for standards that are achievable, predictable, and paired with the regulatory certainty that industry needs to justify continued investment.

[1]Western States Petroleum Association, "California Fuel Facts," 2025. California refineries supply more than one-third of Arizona's gasoline and 86% of Nevada's motor fuels.

[2]U.S. Energy Information Administration, “Refinery closures and rising consumption will reduce U.S. petroleum inventories in 2026,” 2025; see also U.S. DOE and EIA analyses documenting that premature refinery closures without replacement infrastructure create fuel security vulnerabilities.

[3]California State Senate, Office of Senate Minority Leader Brian Jones, May 2025, citing analysis by USC Professor Michael Mische. Worst-case projections estimated prices reaching $8.43/gallon under combined refinery closures and supply disruption conditions. UC Davis CAES provides the more conservative baseline of $1.21/gallon increase (see note 2, supra).

[4] See note 3, supra. GVWire, “Antonio Villaraigosa lays out 2026 California governor campaign plan: lower costs, all-of-the-above energy,” September 29, 2025.

[5]California Budget and Policy Center. The LCFS credit price, if unconstrained, could add $0.30 to $0.70 per gallon to gasoline prices by 2030.

•     Governor’s Executive Authority: The Governor can issue an executive order directing all state agencies — including CARB, the CEC, and CalGEM — to conduct a comprehensive regulatory impact assessment of all rules and policies affecting petroleum refining operations in California, with the explicit goal of identifying and eliminating rules that impose excessive costs without commensurate environmental benefit. This is within the Governor’s general executive authority under Cal. Const., Art. V, § 1.

•     California Energy Commission (Pub. Resources Code §§ 25000 et seq.): The CEC has statutory responsibility for energy supply adequacy. The Governor can direct the CEC to treat in-state refining capacity as a critical energy security asset and to formally assess the supply and price impacts of any further refinery closure before it occurs.[1]

•     Division of Petroleum Market Oversight (Pub. Resources Code § 25354 et seq.): Created by ABX2-1 (2023 extraordinary session), this CEC division monitors petroleum markets. The Governor can direct the Division to expand its mandate to include regulatory burden analysis and to recommend regulatory reforms that reduce unnecessary costs on refinery operations.

•     CARB Regulatory Authority (Health & Safety Code §§ 38500–38599): CARB administers the cap-and-trade program and the LCFS. The Governor can direct CARB to adopt cost-containment mechanisms (credit price ceilings, compliance flexibility) that prevent these programs from imposing costs on refineries that exceed what is necessary to achieve California’s emissions targets. CARB has existing statutory authority to do so under Health & Safety Code § 38562(b).[2]

•     CalGEM (Pub. Resources Code §§ 3000 et seq.): CalGEM regulates all oil and gas operations. The Governor, through the Director of the Department of Conservation, can direct CalGEM to streamline permitting for operational modifications at existing refineries (e.g., efficiency upgrades, emissions reduction retrofits, CCUS installations) to reduce the regulatory friction that discourages capital investment.[3]

[1]Public Resources Code §§ 3000 et seq. (CalGEM); § 3106 (well permitting authority); §§ 25000 et seq. (CEC).

[2]AB 32, California Global Warming Solutions Act (2006), Health & Safety Code §§ 38500–38599.

[3] See note 13, supra. Public Resources Code §§ 3000 et seq. (CalGEM); § 3106 (well permitting authority).

•     Maximum Refining Margin Authority (Pub. Resources Code § 25355): ABX2-1 authorized the CEC to set a maximum gross gasoline refining margin during periods of market tightness. This authority should be used as a targeted backstop against price manipulation — not as a permanent price control that discourages investment. The key is calibrating the margin cap to prevent exploitation while preserving the profitability necessary for continued operations.

•     LCFS Cost Containment (17 CCR § 95480 et seq.): CARB has regulatory authority to adopt cost-containment mechanisms within the LCFS, including credit price ceilings. The Governor can direct CARB to implement a firm credit price ceiling that limits the pass-through of LCFS compliance costs to consumers.

•     Cap-and-Trade Cost Containment (17 CCR § 95911): The cap-and-trade regulation already includes a price containment mechanism (Allowance Price Containment Reserve). The Governor can direct CARB to ensure the APCR is adequately funded and that allowance prices do not spike in ways that increase fuel costs beyond what is necessary to meet emissions targets.

•     California Penal Code § 396 (Price Gouging): During declared emergencies (including supply disruptions from refinery closures), California’s anti-price gouging statute prohibits raising the price of consumer goods — including gasoline — by more than 10%. The Governor can ensure that any refinery closure that creates a supply emergency triggers these protections.

•    Appropriating Funds for Consumer Relief (CA Constitution, Art. IV, § 12): The Franchise Tax Board has proven capacity to administer income-verified direct payments (Middle Class Tax Refund, Golden State Stimulus). An automatic trigger can be codified in statute, with the Controller directed to certify the trigger condition based on CEC pricing data.

•   Enacting Targeted Tax Credits (Cal. Rev. & Tax Code §§ 17053, 23600 et seq. ). The Legislature has authority to enact targeted tax credits. Regulatory stability guarantees are within the Legislature’s police power, subject to the state’s reserved authority to address genuine public health and safety emergencies. Expedited permitting for facility improvements is achievable through CalGEM and local APCD regulatory coordination under existing statutory frameworks.