Californians and policymakers alike are confronting an uncomfortable reality: without massive changes to state regulations, the state – where gas prices average $4.66 a gallon – could soon face a self-inflicted gas supply crisis.

While Gov. Gavin Newsom has long blamed “Big Oil” for alleged price gouging, there are increasing signs that members of both parties in Sacramento are coming to grips with the true cost of the state’s onerous environmental regulatory regime.

A Wave of Refinery Closures

Experts, including USC Professor Michael Mische, are now forecasting $8-per-gallon gas without massive changes.

The closures have sparked outrage and increasing bipartisan concern in Sacramento. Democrats who once championed aggressive environmental reforms are now questioning the costs, as Assemblyman David Alvarez (D-San Diego) acknowledged in a recent hearing with energy regulators:

“We have a crisis on our hands that may have been self created, by the actions that perhaps have been taken by the state, by regulators.”

UC Berkeley Professor Severin Borenstein echoed those sentiments earlier this spring, saying Californians should be “seriously concerned” about the impact of looming refinery closures.

Newsom and CA AG Rob Bonta have toned down their attacks on big oil as of late. However, the state is still pursuing a variety of anti-energy policies and frivolous lawsuits against energy producers, making it an open question whether the state leadership has the will to make significant changes.

Imports Rise to Fill the Gap

With in-state refining capacity shrinking faster than fuel demand, California is increasingly reliant on fuel imports. In May 2025, petroleum product imports rose to 279,000 barrels per day – the highest since June 2021. Nearly 70% of these imports came from South Korea and other Asian exporters, along with suppliers as far away as the Bahamas. As of 2024, California already imported almost 61% of the crude oil it refined from foreign sources, and a significant portion of that came from OPEC members, primarily Iraq, Saudi Arabia, and the United Arab Emirates (UAE).

Higher imports may temporarily shield consumers from extreme spikes, but they will also raise baseline gas costs due to shipping constraints, compliance burdens at California ports, and global freight volatility, all while increasing emissions.

Where Does California Go From Here?

If it weren’t obvious already, refiners are exiting California not because there isn’t demand for fuels, but because the regulatory environment makes it nearly impossible to operate.

According to a recent analysis published by the Breakthrough Institute, California faces only two choices if the state wishes to truly address this impending crisis: dramatically reduce gasoline demand or increase supply. California’s attempts to regulate consumer choice have failed, dramatically. Despite years of subsidies, mandates, and marketing campaigns, electric vehicle adoption has stalled. In 2024, EVs made up just 25.3% of new car sales, a marginal increase from 25% the year before. And in early 2025, sales of EVs actually declined year over year.

The Biden EPA tried to prop up California’s top-down approach by granting a waiver for the state’s Clean Car Act, allowing it to sidestep federal vehicle emissions standards and mandate 100% zero-emission vehicle sales by 2035. But in May 2025, federal lawmakers used the Congressional Review Act to revoke the waiver, and President Trump signed the repeal.

But here’s the reality the Newsom administration doesn’t want to confront: when given the freedom to choose, most Californians – and particularly working families – aren’t choosing pricey EVs over gas-powered cars.

Faced with the facts on the demand side, California should focus on boosting gasoline supply to avoid an affordability crisis. The state could:

• Roll back or reform the Low Carbon Fuel Standard to keep refineries open
• Loosen CARBOB – the state’s unique fuel blend – requirements to reduce market isolation
• Pause or delay upcoming regulatory mandates that deter investment

Each of these would require compromising on a variety of different environmental goals and regulations. However, without action, the state may soon find itself importing massive volumes of fuel through congested ports, further inflating prices and jacking up emissions.

Bottom Line: For years, Gov. Newsom and his predecessors pursued a partisan, one-sided environmental agenda while insisting that affordability and supply would not suffer. That illusion is collapsing. Without a course correction, Newsom risks not only punishing consumers, but also increasing emissions by relying on ever more imported fuel.

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