Newsom embraces Big Oil — for now — to curb potential gas supply shortages

The expected closures of an oil refinery in the Bay Area and another in Southern California has Gov. Gavin Newsom, a global leader on climate action, acting uncharacteristically friendly with the fossil fuel industry.

Newsom, a Democrat, wants to prevent gasoline shortages and higher prices at the pump by extracting more oil and investing in infrastructure at ports to import more refined gasoline from abroad. If the plans come to fruition, more tankers would dock at Bay Area ports to unload fossil fuels, and the government may encourage the construction of more pipelines and storage tanks to bring gasoline to market.

Meanwhile, his administration may delay its splashy plans to strictly regulate refineries and limit the profits that they earn. The California Energy Commission, a key policy agency made up of Newsom’s appointees, will consider on August 13 pausing the implementation of a 2023 law that authorized it to set a cap on profits and penalize refiners for exceeding the limit. Newsom had championed that law.

The upshot? An about-face for Newsom. His office did not respond to a comment request.

Only months ago, the governor was pushing laws to rein in refineries, which are major sources of pollution and greenhouse gases. He has blamed fossil fuel firms for the state’s notoriously high gas prices and accused them of price gouging.

Gasoline prices cooled off this summer in California. The politics haven’t.

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“They’re screwing you,” Newsom said in October. “They’ve been screwing you for years and years and years. There’s no other way to put it.”

Then, two oil refineries announced plans to shutter, including the Valero plant in Benicia, citing the state’s environmental regulations and market uncertainty. The two refineries make up 17% of California’s refinery capacity. Even in the hotly debated realm of California climate politics, there’s broad agreement that the loss of these refineries will lead to shortages of gasoline and yet more pain at the pump. The exact impact on gas prices is unclear; a recent study by UC Davis economists estimated that gas could rise $1.21 per gallon by August 2026.

Newsom quickly changed his tune. In the spring, the governor asked the California Energy Commission, a board made up of his appointees, to consider how to prevent price shortages and keep refineries from closing. In response, the commission suggested more oil production and imports of refined gas. In an unusual move, Newsom’s administration is even searching for a buyer for the Valero plant, Reuters reported.

“We’ve got some challenges, and so just require some new considerations,” Newsom said earlier this summer.

All the while, the energy commission is adamant that a short-term embrace of fossil fuels will help bridge the decades-long transition toward electric vehicles.

The measures “will help stabilize supply, increase investor confidence and protect workers while simultaneously taking additional actions to transition to a decarbonized transportation sector that protects consumers, communities and the environment,” Sandy Louey, a spokesperson for the California Energy Commission, said in an email.

For the environmental cost, will it prevent gasoline shortages?

“This is quite reasonable,” said Severin Borenstein, public policy professor and director of the Energy Institute at the UC Berkeley Haas School of Business. “This is taking seriously the constraints we face and trying to navigate them.”

Even the Sierra Club, a leading environmental organization in California, is agnostic on the governor’s shift.

“I think it’s important for us to have an open mind,” said Gabriela Facio, a Sierra Club policy strategist.

Facio is opposed to some aspects of the plans, however. In June, the energy commission suggested boosting oil production in the state, particularly in Kern County in Southern California.

That’s an item on the oil industry’s “wish list,” Facio said, adding that it wouldn’t help solve the core problem, which is the shortage of refined gasoline.

Jamie Court, president of the influential nonprofit Consumer Watchdog, which has cheered Newsom’s aggressive moves to regulate the gas industry and curb price hikes, said the administration’s approach is rooted in politics and will not bring down gas prices. Newsom is beginning to speak openly about his ambitions to run for president in 2028. Even sooner, a spike in gas prices just before the 2026 midterm elections would likely reflect poorly on Democrats.

“Give the refineries and the drillers what they want,” Court said, “so that Newsom, if he runs for president, he won’t have as much opposition from the oil industry.”

The Western States Petroleum Association, which represents oil companies and refineries, declined to comment for this story.

Refineries are complex industrial sites that take components such as crude oil and produce various blends of fuels, including petroleum diesel and gasoline, jet fuel and diesel produced from oils and fats.

California is a massive market for gasoline, and transportation accounts for 40% of the state’s greenhouse gas emissions. As the clean energy transition matures and more Californians switch to electric vehicles, demand for gasoline is falling. But that’s playing out slower than the closures of oil refineries that supply the state.

The Bay Area is particularly vulnerable to shortages and price spikes as refineries close.

About 40% of the state’s gasoline consumption takes place on Northern California’s roads. But with the expected refinery closures, the region will have only 33% of the state’s refinery capacity, Louey said.

California is still the seventh-largest crude oil producer in the U.S., which is among the top-producing nations globally.

But California is also an energy island when it comes to gasoline. No pipelines transport crude oil or refined gasoline into the state, and most of California’s crude oil supply is shipped in from foreign nations and Alaska.

Plus, California regulators require a specific blend of gasoline to be sold in the state, which reduces air pollution. Few refineries outside the state can produce it.

In recent decades, the West Coast has leaned into imports of refined gasoline to fill gaps in local gas markets. Data specific to California isn’t available, Louey said.