California Ponders Takeover of Oil Refineries as Facilities Shut Down

Energy experts say state-run facilities would not reduce the risk of spiking gas prices.

The Phillips 66 refinery near the Port of Los Angeles on March 28, 2025. John Fredricks/The Epoch Times

Analysts say Californians could be paying significantly more for gasoline with the impending closure of two Phillips 66 refineries in Los Angeles, which account for about 8 percent of the state’s oil refining capacity, by the end of 2025.

Valero Energy Corporation on April 16 also announced it will shut down or restructure its Benicia refinery in the San Francisco Bay area—which accounts for about 9 percent of state refining capacity—by April 2026, increasing concerns over gas prices and supply.

Before the refiners made their announcements, the California Energy Commission had proposed that the state take over oil refineries to try to mitigate price hikes.

The California Energy Commission released a report in August 2024 on transportation fuels that suggested the state takeover “could range from one refinery to all refineries in the state” as one of 12 ways to manage the supply and price of gasoline.

However, industry experts have pushed back on the idea, saying it would be risky and impractical.

Valero’s closure would leave California with seven refineries. Combined, the Valero and Phillips 66 refineries account for nearly one-fifth of the state’s gasoline supply.

Phillips 66 announced in October 2024 its plan to shut down its century-old refinery facilities in Carson and Wilmington, two days after California Gov. Gavin Newsom signed legislation giving the state the authority to require refineries to store extra gasoline to prevent supply shortages and gas price spikes. The company said at the time that the decision to close was not related to the new law.

California Versus ‘Big Oil’

Since 1995, Californians have typically paid around 13 percent more on average for gasoline than the rest of the nation, according to a March 16 University of Southern California study on gas prices by Michael Mische with the USC Marshall School of Business.

However, in recent years, the difference has increased dramatically. Gas prices in the state are currently $1.68 per gallon above the U.S. average of $3.16. According to the USC study, on a recent day in March, many California locations ranged from more than 50 percent to nearly 90 percent above the national average.

Newsom and other Democratic state leaders have blamed Big Oil for the high gas prices, accusing the industry of gouging consumers at the pump. In March 20203, Newsom signed legislation to penalize oil companies for earning profits beyond state-imposed limits.

“For decades, oil companies have gotten away with ripping off California families while making record profits and hiding their books from public view,” Newsom said at a press conference at the time. “California leaders are ending the era of oil’s outsized influence and holding them accountable.”

However, the University of Southern California study found that state policies, not oil and gas companies, have caused high gas prices. “California refiners have not engaged in widespread price gouging, profiteering, price manipulation, ‘unexplained residual prices’ or surcharges, magical or otherwise,” said the study.

Oil workers keep pumps in operation at the Poso Creek oil fields near Bakersfield, Calif., on March 21, 2025. John Fredricks/The Epoch Times

Researchers also predicted gas prices will rise when the Phillips 66 refineries close and that it’s “doubtful that demand will drop.”

“To compensate for the closure of the Phillips 66 refinery, California will most likely have to increase its imports of California-compliant gasoline, which is costly, and surviving refineries may have to increase capacity utilization,” the study found.

In conclusion, researchers said aggressive environmental policies, regulatory compliance and reporting costs, high operating costs, increased taxes, and declining in-state oil production and increased reliance on foreign sources have all contributed toward higher gas prices in California.

Oil Industry Responds

California’s proposal for a takeover of oil refineries stated: “The State would operate a market independent source of production which would eliminate potential market manipulation.”

Catherine Reheis-Boyd, CEO of the Western States Petroleum Association (WSPA), told The Epoch Times the idea that the state could run a complex refinery system in a better or more cost-effective way is “completely unrealistic” and “shouldn’t even be an option on the table.”

The California Energy Commission has held hearings to explore this proposal and others, and officials who are learning how complex the oil refinery industry is now have more questions than answers, Reheis-Boyd said.

The state will need to decide whether its refineries would operate based on profit margins or absorb losses to store more gas in tanks at oil refineries so that when gas prices spike, the state could release more fuel on the market, she said.

An oil refinery near the Port of Long Beach, Calif., on Feb. 26, 2025. John Fredricks/The Epoch Times

The number of refineries in California has dropped from 40 in 1980 to nine, not including the impending Phillips 66 closure, Reheis-Boyd said.

There are no refineries for sale in California, and “no one is going to build another one,” Reheis-Boyd said. “They’re not selling the refinery; they are closing it.”

California is considered an “energy island” with no pipelines crossing the Sierra Nevada, she said.

Despite a state push for more electric vehicles on the road, demand for gasoline has remained steady in recent years, with retail sales in California averaging about 12.7 billion gallons annually from 2010 to 2023.

Another proposed state solution is to import more finished gasoline and diesel engine fuels instead of refining crude oil in California, which would result in the loss of more than 150,000 jobs at refineries and supporting industries, Reheis-Boyd said.

‘Expensive Lesson’

Skip York, chief energy strategist at energy consultant Turner Mason & Co., told The Epoch Times the state is considering owning refineries and other proposals as a way to guarantee a stable supply of gasoline.

Neither the state nor consumers can afford to lose any refineries, which would cause a supply crunch and a spike in gas prices, York said.

“Demand isn’t going to drop ... so you’re going to have to supply that demand another way,” he said.

He said he hasn’t ruled out the idea that if the state owned refineries, officials could decrease gas supplies and raise prices to compel more people to move into electric vehicles.

“You can’t dismiss that possibility,” he said. “There is nothing that says the state couldn’t do that.”

Traffic in Los Angeles on Aug. 7, 2024. John Fredricks/The Epoch Times

Lindsay Buckley, a spokeswoman for the California Air Resources Board, denied the state has plans to deliberately drive up the cost of gasoline so that more people buy electric vehicles.

“This is unequivocally false,” she said in an email to The Epoch Times. “California is dedicated to ensuring a reliable supply of affordable and safe transportation fuels during the transition to zero-emission vehicles.”

Buckley said the electric vehicle market remains strong, with one in four Californians choosing to buy zero-emission models over gas-powered cars for the last two years, she said.

From 2021 to 2023, the market saw more than 40 percent year-over-year growth, and while growth remained relatively unchanged in 2024 compared to 2023, sales for gas-powered vehicles declined by 1 percent at the same time, she said.

California plans to phase out the sale of all new gasoline-powered cars by 2035.

In 2022, Newsom signed a slate of bills promising to usher in a “new era of world-leading climate action,” carbon neutrality no later than 2045, and 90 percent clean energy by 2035.

Price Blame

Mike Umbro, an energy consultant who owns Premier Resource Management and runs a nonprofit organization called Californians for Energy and Science, which studies energy, environment, and economics, told The Epoch Times that the state takes in more revenue from gas sales than oil companies make in profit.

As of March, the state and federal governments collected about $1.26 per gallon in taxes and fees, according to WSPA. Of that amount, the state collected $1.08 per gallon and the remaining 18 cents per gallon went to the federal government.

Mike Umbro stands near oil valves in Bakersfield, Calif., on March 21, 2025. John Fredricks/The Epoch Times

In 2024, 13.4 billion gallons of gasoline were sold, reported the California Department of Tax and Fee Administration. Based on those rates and the 13.4 billion gallons of gas sold in California last year, annual revenue is about $14.5 billion for the state and about $2.4 billion for the federal government.

Umbro said Newsom and some Democratic lawmakers are “ripping off” people at the pump while blaming Big Oil for gouging consumers.

Umbro believes reopening California’s oil fields and cutting imports could save $30 billion and save good-paying American jobs.

Daniel Villasenor, a spokesman for the governor, said in an April 14 email to The Epoch Times that in the two years since Newsom signed “California’s gas price gouging law,” the state has avoided severe gasoline price spikes, “saving Californians billions of dollars at the pump.”

The law established a state-level independent petroleum watchdog to hold Big Oil accountable, Villasenor said in the email.

“Governor Newsom has done more than any other Governor in recent history to tackle the challenge of rising gas prices—despite what the oil industry and its allies say,” he said.