Legal Insurrection readers may recall a post I did in September, reporting that California Governor Gavin Newsom was forcing the California Assembly into a special session to push through legislation requiring oil companies to amass stockpiles of gasoline and other fuels to prevent supply shortages and price spikes during refinery outages.
The proposed measure has now become law.
The new legislation was inspired by findings from the state’s Division of Petroleum Market Oversight that showed that gas price spikes are largely caused by increases in global crude oil prices and unplanned refinery outages.The law gives energy regulators the authority to require that refineries keep a certain amount of fuel on hand. The goal is to try to keep prices from increasing suddenly when refineries go offline for maintenance. Proponents say it would save Californians billions of dollars at the pump.Newsom joined lawmakers at the state Capitol to sign the law and criticized the oil industry for its efforts to keep the legislation from passing.
The legislation gives another state bureaucracy enormous power over our energy producers.
When the bill takes effect in 90 days, a state regulatory agency, the California Energy Commission, will have the authority to set constraints on storage levels for each refiner, each fuel and each blending component, per the bill. The agency will also be able to adjust inventory minimums, as well as establish conditions under which refiners can draw down or rebuild reserves.The legislation will also allow the regulator to ensure that refiners have resupply plans in place ahead of maintenance outages and to set criteria that must be met before such events occur.
I am sure Newsom plans to tout this law as some big victory over Big Oil. What is missing in the reports is the fact that one of our major petroleum companies moved its headquarters to Texas…due, in large part, to bureaucratic strangulation and excessive regulations.
As a reminder, it was no small move. Chevron has been in California for over a century, opening in 1879 near Pico Canyon. The official announcement came in August 2024, declaring a move from the balmy San Ramon to the heart of oil country, Houston, Texas. The move was attributed directly to California’s high operating costs and regulatory environment.
The constant attacks on the petroleum industry as “price gougers” and “environmental destroyers” from the political class in this state probably also inspired Chevron’s decision.
Thanks to the new rules, oil companies are now tasked with maintaining reserves, which involve space, security, and maintenance costs. The logistical challenge is not just about having the space but ensuring these stockpiles don’t degrade over time (the shelf-life of stored gasoline is about 6 months), and setting aside the monies to support these facilities.
Furthermore, as Chevron shows, there are 49 other states in this union. Refiners can consider operations elsewhere, where they’re not subject to stockpile mandates.
In fact, the unintended consequences are at the beginning. Phillips 66 says it plans to stop operations at its Los Angeles-area refinery in the fourth quarter of 2025.
The stoppage will affect the 600 employees and 300 contractors who operate the refinery.The exit follows California Governor Gavin Newsom’s signing of a bill on Monday requiring oil refiners to maintain a minimum fuel inventory and authorized the state’s Energy Commission to ensure refiners plan for resupply during maintenance outages to prevent supply shortages.”With the long-term sustainability of our Los Angeles Refinery uncertain and affected by market dynamics,” the company is working with land development firms to evaluate the future use of its properties near the Port of Los Angeles, said CEO Mark Lashier.
I suspect the new rules are going to make a trip to the pump even more painful for Californians.
If Newsom plans to tout this misadventure as a “win” in 2028 and a model for the country, I don’t think it is going to work out well for him.
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