California’s leaders spent years promising an expedited break from fossil fuels, but the state is discovering a hard truth: gasoline and diesel still underpin day-to-day life, and California will keep relying on oil even as it builds out alternatives.

Thirteen refineries remain in operation today, with only a shrinking subset still making California-specific gasoline, and policymakers are now quietly adjusting to keep fuel flowing and prices from spiking further.

The politics may be loud, but the math is louder. California cannot phase out refineries faster than it can replace their output without triggering volatility at the pump, supply risks, and serious economic fallout.

For decades, refinery capacity has consolidated while demand shocks and environmental requirements have intensified California’s vulnerability to price spikes. The state had roughly 50 refineries in 1980; today, there are 13 operating refineries as of January 1, 2025, according to federal data, reflecting a structural decline even as California’s unique fuel standards keep supply tight and imports complicated.

This consolidation means outages or conversions at a few large facilities can ripple through the market immediately, and it’s a major reason regulators and lawmakers are recalibrating their approach in 2025.

A turning point came as several Bay Area and Southern California plants exited petroleum gasoline production to focus on renewable fuels, led by the full conversion of Phillips 66’s Rodeo complex and the Marathon Martinez transition to renewable diesel.

These moves were celebrated as climate wins, but they also reduced in-state gasoline production and increased dependence on gasoline imports tailored to California’s boutique blend.

The net effect is a tighter market with less buffer, especially during maintenance or unexpected outages, and that raised alarm inside Sacramento about supply security.

By mid-to-late 2025, the state’s own energy officials acknowledged the risk of rapid refinery exits.

A joint legislative oversight analysis documented conversions and announced closures, warning of near-term supply constraints and likely price increases as California imports more finished fuel and stabilizes in-state production to bridge the transition.

Policymakers began to favor measures that keep existing refineries operating and maintain minimum inventories, not because the state is abandoning climate goals, but because it needs a managed glide path rather than a cliff.

The most visible policy reversal was the pause on implementing a refinery “excess profit” penalty. Initially touted as a landmark accountability tool, regulators delayed enforcement until 2030 after two large facilities representing a substantial share of capacity signaled shutdown plans.

The California Energy Commission explicitly linked the pause to fuel reliability and consumer protection, underlining that a rushed punitive regime could accelerate exits and worsen price shocks before alternatives are ready at scale. It was a victory for practical reliability over rhetoric—and a recognition of how sensitive the fuel market has become.

Governor Gavin Newsom’s administration has also shifted posture toward industry engagement as gasoline prices remain a political and economic pressure point.

Internal guidance and public remarks emphasized stabilizing the state’s gasoline supply, increasing fuel imports to make up for refinery closures, and supporting in-state production in legacy basins like Kern County to reduce volatility.

The message to refiners has been blunt: California believes they can profitably operate here because demand will persist for years, even as the state accelerates clean energy buildout. That practical stance is now informing legislation and regulatory guidance.

Legislative action has followed the same arc. Lawmakers advanced measures to expand oil production approvals in the San Joaquin Valley and bolster fuel supply resilience to counter planned refinery closures.

This is not a U-turn on climate policy; it’s an admission that an orderly transition requires reliable supply and an industrial base capable of meeting residual demand while alternative fuels and infrastructure scale. Without that bridge, California risks importing more fuel from jurisdictions with weaker standards and losing high-wage industrial jobs and local tax revenue before replacement industries are ready.

California must have base load energy and gas or risk continuous rolling brown and black outs. They can’t rely on solar and wind as it can only support 18% of the state needs. Let’s hope other states are watching and not follow California’s lead.

Even as petroleum production declines, refiners are not exiting energy altogether. Rodeo’s renewable conversion is now producing around 50,000 barrels per day of renewable fuels, including sustainable aviation fuel capability, while being partially powered by solar and using waste-based recycling.

Marathon Martinez’s conversion followed a similar path after navigating lawsuits and environmental approvals, illustrating the complex, costly, and time-consuming reality of repurposing production. These projects prove transition is possible—but they also underscore why the state cannot afford supply holes while conversions come online.

Analysts warn of broader economic stakes in refinery reduction transition. The Bay Area’s refinery belt impacts thousands of jobs, municipal tax bases, and supply chain, and closures trigger cascading problems —from worker displacement to cleanup liabilities.

Those risks explain why policymakers are now threading a needle: encouraging conversions and emissions reductions while maintaining enough petroleum capacity to prevent costly disruptions for consumers and businesses.

That is the shape of California’s “managed transition” in 2025, and it’s more cautious than activists expected. The result could be disastrous if they follow the original plan.

So where does that leave the state and the 13 refineries? Regulators are easing off financial penalties that could cause abrupt shutdowns, expanding fuel options like higher-ethanol blends to cut prices, and coordinating with industry to ensure minimum inventories and smoother maintenance schedules.

At the same time, California is approving conversions, enabling renewable diesel and oil production, and moving ahead on clean energy buildout. The signal is clear: keep the fossil backbone steady while the next-generation system ramps.

The political narrative—“battling Big Oil”—has met the operational reality of keeping 40 million residents and the world’s fifth-largest economy moving. California is not abandoning its climate trajectory, but it is recognizing the cost of moving faster than infrastructure, supply chains, and consumer adoption can support.

The result is a wake up call: partner with refineries to ensure stability, support conversions where feasible, and avoid creating a supply crunch that forces more expensive imports and higher costs to drivers. That is why California will keep fossil fuels for the foreseeable future.

The bottom line is Governor Gavin Newson is on his way out along with his bad ideas and policies that cripple Californians. California’s energy system is evolving, and the EV mandate is gone. Gasoline and diesel remain essential, and refineries—whether petroleum or renewable—are the industrial spine of that system across the USA. Managing that reality means fewer price shocks, stronger reliability, and lower gas prices.

Video Link: https://youtu.be/fbXiqYXuwV0

You can support me by buying me a cup of coffee. Thanks for subscribing and your support! https://www.buymeacoffee.com/laurenfix

Looking for more automotive news? https://www.CarCoachReports.com

Listen to The Drive Car Show - https://www.youtube.com/@thedrivecarshow

_______________

Lauren Fix is an automotive expert and journalist covering industry trends, policy changes, and their impact on drivers nationwide. Follow her on X @LaurenFix for the latest car news and insights.