With the ongoing war in Iran and dwindling refinery production in-state, experts warn Californians should brace for impact
SACRAMENTO, Calif. — Rising tensions in the Middle East and ongoing refinery closures in California are fueling concerns about higher gas prices statewide.
Experts and advocates of the petroleum industry warn that a combination of foreign oil reliance, domestic shutdowns and regulatory changes could put upward pressure on pump prices.
University of Southern California associate professor Mike Mische said geopolitical disruptions outside the state’s control, such as the war in Iran, can create supply challenges for Californians.
“Now, you have a major geopolitical event. This is not a little event. This is a big event,” Mische said, noting that reliance on foreign imports is risky in a real-world scenario.
California has recently seen significant refinery losses. The Phillips 66 facility in Los Angeles has closed, and Valero in Benicia plans to cease operations by April, collectively accounting for about 20% of the state’s gasoline production.
Andy Walz, president of Chevron Global Refining, highlighted the economic risks.
“Price is already high in California because of taxes, but what if you can’t get the products that you need?” he said, emphasizing that Chevron’s Richmond refinery, for instance, supplies 60% of jet fuel to San Francisco Airport.
The California Energy Commission (CEC), the state’s primary energy policy and planning agency, acknowledged that refinery closures mean the state must rely more on imported fuel.
Mische noted an additional complication, a special California gasoline blend, which is more environmentally friendly, given a history of bad air quality in the state.
The professor explained only select countries in Asia, such as South Korea, Singapore, India, Saudi Arabia, and China, as well as California refineries can produce that specific blend.
Mische also pointed to global tensions affecting supply chains.
“There’s one eye on Asia and one eye on the Middle East right now,” he said, referencing both the potential China-Taiwan conflict and the war in Iran, which has closed the critical Strait of Hormuz oil route. Data shows the Middle East produces over a quarter of the global oil supply.
The seven remaining major refineries in California, including Chevron’s two facilities in southern and northern California, are warning that newly-proposed regulations from the California Air Resources Board (CARB) — aimed at meeting the state’s zero-emissions-by-2045 climate goals — could further threaten in-state production. The proposed amendments to the Cap-and-Invest program, which was just renamed and renewed until 2045, would impose fewer permits and higher fees on in-state refineries while allowing polluters to buy credits.
It offers consumer rebates. But Californians are typically charged at the pump for it, 23 cents per gallon, as of February 2025, according to the nonpartisan Legislative Analyst’s Office. But, the LAO predicts, if carbon allowance prices hit their maximum, that charge could surge up to 74 cents per gallon.
Walz, a big critique of the program, calls the program “cap and divest,” noting it’s an additional burden to refineries and other businesses that produce carbon emissions that already pay heavy costs to operate in California.
When asked ‘if Chevron is threatening to leave, should the amendments become reality,’ Walz answered, “Yes.”
He also expressed frustration over increased imports, noting other countries are not charged under the Cap-and-Invest program.
“That will not allow us to compete with anything coming from overseas because again, they’re only going to tax in-state production and are not going to tax imports,” Walz said, adding there’s less and less incentive for corporations to remain in California.
In addition to Chevron, PBF Energy, which also runs two California refiners, wrote a letter of opposition to state leaders over the CARB proposal.
A CARB spokesperson said the Cap-and-Invest Program remains “the most cost-effective way for California to achieve its statutorily mandated climate goals.” Walz added that discussions with the CEC over the amendments are ongoing.
On the state’s climate agenda, both Walz and Mische suggested the wisdom of the policy must be challenged.
“I do think it’s insensitive, and I also think it’s somewhat irresponsible,” Mische said of CARB’s proposal, adding that times are already hard for refineries.
The two experts said while California may be working to decrease emissions in the state, that impact will not be as drastic or impactful on the global front, especially with California continuing to source oil, just from refineries in other countries.
California Senate President Pro Tempore Monique Limón provided a statement on the ongoing debate: “An economy reliant on fossil fuels will always be subject to geopolitical tension and price spikes. The conflict in Iran has caused gas prices to rise 11 cents overnight — reaffirming that the state must move towards a transition to clean energy, a goal that Cap and Invest is designed to support.”
Walz pushed back, suggesting instead Governor Newsom and the Legislature should instead declare a state of emergency on energy, as California is “losing refineries too quickly.”
CARB says the board is accepting public comment until March 9 and will respond accordingly to concerns. There will also be a public board hearing at the end of May.
Experts warn uncertain future for CA oil as state relies more on foreign imports
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