According to the Los Angeles Times, the Newsom administration is considering a proposal to “purchase and own refineries … to manage the supply and price of gasoline.”
That’s right: California’s blunder-prone state government may soon decide to operate highly technical refining facilities despite having zero relevant experience.
As the San Diego Union-Tribune Editorial Board puts it:
“… some energy officials think the answer to [the problem of gasoline cost and supply reliability] is for the state government to run its own refinery or refineries – even though it utterly lacks expertise, and audits show terrible state management of everything from DMV to computer systems to unemployment insurance to the bullet train.”
Given this, the notion that Sacramento might take over oil refineries should send a chill down the spine of everyday Californians already struggling under high gas prices. But we also wonder if this terrible idea might still have a silver lining.
After all, if the state government owned and operated refineries, would policymakers finally be forced to acknowledge their role in driving fuel costs higher?
For example:
- Upstream in the fuel supply chain, the state has pursued policies shutting down in-state production of crude oil. Statewide oil production has fallen by more than one-third since Governor Newsom took office. When refineries can’t get oil from California producers, they turn to waterborne imports often from foreign countries halfway around the world. Analysts say oil imports are more expensive, driving fuel costs higher.
- Meanwhile, refinery operators are exiting the California market, citing a lack of profitability. Following an October 2024 announcement that Phillips 66 would close its Wilmington refinery this year, one industry expert pointed to the state’s “onerous” and high-cost regulatory environment as a key factor in the decision. Declining in-state fuel production forces suppliers to import gasoline by tanker, increasing fuel costs and leaving the state vulnerable to price spikes at the pump.
- Separately, state and local taxes and fees add a nation-high $1.20 to each gallon of gasoline sold in the Golden State. A California Air Resources Board analysis found that new Low Carbon Fuel Standard policies approved late last year could add an additional $0.47 per gallon in fees.
The causes of California’s perpetually high gas prices are no secret. If Sacramento puts itself in charge of fuel production, the governor and state legislature would have to face the reality that their policies are largely to blame.
