For years, energy policy in the Golden State has been marked by politicized chaos and willful ignorance, leading to recurring supply shortfalls, price spikes, and high costs for consumers and businesses.
To shift course in 2025, here are four key facts policymakers should know.
1) CALIFORNIA IS STILL OVERWHELMINGLY POWERED BY OIL AND GAS.
According to federal data, 76% of California’s total energy consumption in 2022 was derived from oil and gas, and 24% came from renewables and other sources. [i]
State data show that oil demands in the Golden State have remained stable over the past three years and are not yet in decline. California uses 1.45 million barrels of oil each day – or well over 500 million barrels per year – and remains the fourth largest consumer of gasoline in the world behind the United States, China, and Brazil. [ii]
While California’s electricity grid has achieved increased renewable penetration, it still relies on natural gas power to maintain reliability and avoid blackouts. In 2023, natural gas provided over 43% of California’s electricity generation – remaining the state’s largest single source of grid power by far. Solar and wind collectively provided 26% of the state’s electricity in 2023.
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2) CALIFORNIA DOES NOT HAVE ENOUGH REFINING CAPACITY TO MEET FUEL DEMANDS, LEADING TO RECURRING SUPPLY SHORTFALLS AND PRICE SPIKES.
“Although post-2020 maximum sustainable refinery production remains capable of meeting current demand, actual refinery production has lagged maximum levels due in part to planned and unplanned refinery outages.”
In October 2024, Phillips 66 announced that it would close its Wilmington-area refining complex this year, which will further reduce the state’s gasoline production capacity. The company’s Wilmington refinery produces about 14% of Southern California’s gasoline.
Experts agree the resulting gasoline supply shortfalls have led to higher costs and price spikes. As UC Berkeley energy expert Severin Borenstein puts it:
“When you restrict supply and prices go up, the people who are hurt the most are low-income. So, it’s really inequitable, and that’s something we have to take seriously.”
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3) STATE AND LOCAL TAXES AND FEES NOW MAKE UP MORE THAN ONE-THIRD OF THE COST OF GASOLINE, WHILE NET REFINERY PROFIT ADDS JUST 1.3 CENTS.
At the end of December 2024, a gallon of gas in California cost $4.35 on average. Of that total, Californians paid $1.20 (27.6%) in state and local taxes and fees while refinery operators made just 1.3 cents (0.3%) in net profit, according to data published by the California Energy Commission. [iii]
In 2025, amendments to the state’s Low Carbon Fuel Standard approved by the California Air Resources Board (CARB) come into effect. Assuming all else remains equal and CARB’s prediction last year that the LCFS amendments will increase gas prices $0.47 per gallon is accurate, Californians will pay $4.82 for a gallon of gas, and $1.67 (34.6%) – more than a third of the cost of each gallon – will go toward state and local taxes and fees.
This basic review of gas pricing data undercuts Newsom’s repeated claims of oil company price gouging. In fact, industry experts point to a lack of profitability as a key factor leading refiners to exit the California fuel market.
David Hackett, an industry expert who serves on the state’s Petroleum Market Advisory Committee, noted that Phillips 66’s West Coast refining operations have only broken even over the past eight years, telling the Los Angeles Times after the company’s Wilmington refinery closure announcement:
“They looked at the profitability of the place and compared it with the other businesses that they have, and it didn’t make the cut.”
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4) POLICIES ELIMINATING IN-STATE OIL PRODUCTION REQUIRE MORE FOREIGN TANKERS TO COME TO CALIFORNIA PORTS, BUT THE GOLDEN STATE MAY NOT HAVE THE INFRASTRUCTURE NECESSARY TO MEET GASOLINE DEMAND WITH IMPORTED CRUDE.
In his nearly six years in office, Governor Newsom has aggressively moved to shut down oil production in California. Statewide production has fallen by more than one-third under his watch.
Make no mistake – the declines are the direct result of state policies. On top of legislation restricting and shutting down existing production, Newsom’s government issued just 24 new drilling permits in 2023 – a 99% decline from the 1994 issued in 2020.
Because California is an isolated energy market with no incoming oil pipeline connections from other states, Newsom’s shutdown agenda has increased dependence on waterborne crude imports – sourced primarily from foreign countries like Saudi Arabia, Iraq, and Ecuador – for the state’s ongoing energy needs. In 2023, the state only covered 23.4% of its oil needs through in-state production – a record low – and instead relied on imports via oil tankers to meet the vast majority of demands.
Importantly, however, California may not have the necessary port capacity, coastal storage, pipelines, or refinery facilities to support a continued shift in the gasoline supply chain toward imports. And requiring more ships to dock in ports works against the goals of regulators aiming to improve air quality for frontline communities.
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The current administration’s policies and combative approach have led California to a precarious position: The world’s fifth largest economy now exists in a perpetual fuel supply crunch, leading to high costs, price volatility, and an increased risk of shortages. Policymakers must recognize California’s basic energy realities as the state continues to build out the infrastructure necessary for a lower carbon economy over the coming decades.
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[i] U.S. Energy Administration State Energy Data System, “California State Profile; Energy Consumption Estimates 2022” shows total California energy consumption of 7,105.3 trillion BTU in 2022, of which 5,398.6 trillion BTU (76%) was derived from oil and gas.
[ii] According to the U.S. Energy Information Administration, worldwide gasoline consumption in 2022 was led by the U.S. at 135.1 billion gallons, followed by China at 49.8 billion gallons, Brazil at 15.4 billion gallons, and Russia at 13.3 billion gallons. According to state government data, California consumed 13.6 billion gallons of gasoline in 2022.
[iii] According to California Energy Commission data (Net Gasoline Refining Margin), the average profit weighted by the amount of gasoline sold each month is $0.013 per gallon. The unweighted average profit is $0.01 per gallon. Calculations use all data made available as of January 2024 (June 2023 to April 2024).
