California, the nation’s most populous state and a global economic powerhouse, is teetering on the edge of an energy crisis that threatens not only its own stability but the national security of the United States. The state’s skyrocketing gasoline and diesel prices, coupled with a shrinking fuel supply, are no accident—they are the predictable outcome of years of restrictive energy policies and overregulation. As detailed in recent analyses from OilPrice.com and Energy News Beat, this crisis was manufactured, and the state’s belated attempts to address it are little more than political theater. The implications of California’s energy missteps extend far beyond its borders, posing a major risk to the nation’s economic and security interests.
A Manufactured Crisis: Policies That Crippled California’s Fuel Supply
California’s gasoline prices, already the highest in the nation at an average of $4.85 per gallon in June 2025, are poised to climb even higher. The state’s Low Carbon Fuel Standard (LCFS) and aggressive environmental regulations have created a regulatory chokehold on the energy sector, driving refineries out of business and slashing fuel production capacity. Two major refineries—Phillips 66 in Los Angeles and Valero in Benicia—are set to close by the end of 2026, reducing California’s gasoline supply by nearly 300,000 barrels per day, or roughly 20% of its current capacity. These closures, as noted in OilPrice.com, are a direct result of “years of regulatory pressure” and significant fines, including an $82 million penalty levied against Valero in 2024 for air quality violations.
The state’s policies have systematically dismantled its refining infrastructure. In the late 1970s, California boasted as many as 50 refineries; today, only seven remain operational. The Phillips 66 Rodeo Refinery, for instance, has shifted to producing renewable diesel, abandoning traditional gasoline and diesel production. This transition, while aligned with California’s climate goals, has exacerbated the state’s reliance on imported fuel, which now accounts for 76% of its oil needs. As Energy News Beat points out, this dependency on foreign oil and refined products leaves California—and by extension, the U.S.—vulnerable to global supply chain disruptions and geopolitical instability.
The California Air Resources Board’s 2024 amendments to the LCFS, set to take effect on July 1, 2025, will further tighten the screws. These changes aim to incentivize lower-carbon fuels but are projected to add anywhere from 5 to 65 cents per gallon to gas prices in the near term, with estimates reaching $1.50 per gallon by 2035. Critics, including Chevron, which operates two of the state’s largest remaining refineries, have dismissed recent legislative efforts to mitigate price spikes as “window dressing.” The reality is that California’s regulatory framework has created a self-inflicted wound, and the state’s fuel supply is now on life support.
A National Security Threat: California’s Ripple Effect
California’s energy policies do not exist in a vacuum. As the world’s fifth-largest economy and a critical hub for U.S. trade, agriculture, and technology, the state’s stability is integral to the nation’s well-being. The Energy News Beat analysis underscores that California’s energy crisis poses a “major national risk” due to its potential to destabilize supply chains, inflate costs, and weaken the U.S. economy. A spike in gas prices to $8 or even $10 per gallon, as warned by California Assemblyman Carl DeMaio, could cripple transportation networks, drive up inflation, and strain working families across the state. These effects would reverberate nationwide, given California’s role in producing 11% of U.S. GDP and handling 40% of the nation’s containerized imports through the ports of Los Angeles and Long Beach.
Moreover, California’s reliance on imported oil and refined products heightens U.S. vulnerability to global energy shocks. Recent geopolitical tensions, including U.S.-Israeli airstrikes on Iranian facilities and Iran’s threats to close the Strait of Hormuz, highlight the fragility of global oil markets. With California importing the majority of its oil, any disruption in supply could trigger a cascading crisis, impacting fuel availability and prices across the western U.S. This dependency undermines America’s energy independence, a cornerstone of national security, and exposes the nation to risks that could have been mitigated through domestic production.
The closure of California’s refineries also threatens energy security by reducing the nation’s refining capacity. The U.S. Energy Information Administration has warned of potential disruptions to oil supplies due to global incidents, including wildfires in Canada, export challenges in Libya, and escalating tensions in the Middle East. California’s diminished refining capabilities exacerbate these risks, leaving the U.S. less equipped to respond to supply shocks. As Energy News Beat notes, the state’s policies are a “case study in how not to manage energy,” and their failure could set a dangerous precedent if adopted by other states.
Pretending to Fix It: Political Posturing Over Solutions
In response to mounting public outcry and warnings from industry experts, California’s lawmakers and regulators have begun to acknowledge the crisis—but their actions fall far short of addressing its root causes. The California Energy Commission recently issued recommendations to avert a gasoline supply crisis, but these have been criticized as inadequate. Governor Gavin Newsom’s plan to penalize oil companies for excessive profits has been paused, and his administration’s promises to ensure a “safe, affordable, and reliable supply of transportation fuels” ring hollow in the face of ongoing refinery closures and rising costs.
As OilPrice.com reports, California’s politicians are “scrambling to put a Band-Aid on a self-inflicted wound.” Legislative hearings, such as the May 28, 2025, session where regulators faced tough questions from lawmakers, have done little to reverse the damage. The state’s focus on transitioning to renewable energy, while laudable in theory, has outpaced its ability to maintain a stable fuel supply during the transition. The Union of Concerned Scientists has called for smarter policies to manage this shift, but the urgency of the situation demands immediate action rather than long-term planning.
A Path Forward: Pragmatism Over Ideology
To avert a full-blown energy crisis and mitigate its national security implications, California must rethink its approach to energy policy. First, the state should incentivize the continued operation of existing refineries by easing regulatory burdens and offering tax relief to offset compliance costs. Second, California must invest in domestic oil production and refining capacity to reduce its reliance on imports, thereby bolstering energy security for both the state and the nation. Finally, the transition to renewable energy must be managed pragmatically, ensuring that fuel supplies remain stable and affordable while new infrastructure is developed.
The federal government also has a role to play. The U.S. Supreme Court’s recent 7-2 decision granting fuel producers standing to challenge California’s emissions standards signals that the state’s regulatory autonomy may face greater scrutiny. The Trump administration’s efforts to roll back California’s Clean Air Act waiver could pave the way for a more balanced approach to energy policy, prioritizing affordability and security alongside environmental goals.
You also have to wonder about the increased production capabilities in China. As Mike Umbro noted on the Energy News Beat Podcast, it is almost as if contracts are already in place for purchasing more energy from China. California already imports the majority of its energy, as shown in the graphic above.
Conclusion: A Warning for the Nation
California’s gasoline and diesel crisis is a stark reminder of what happens when ideology trumps pragmatism. The state’s energy policies have not only driven up costs for its residents but also created a national security risk by undermining America’s energy independence and economic stability. As other states look to California’s Low Carbon Fuel Standard and gas tax model as a blueprint, the nation must heed this cautionary tale. The crisis was manufactured, and the solutions being offered are insufficient. It’s time for California—and the U.S.—to prioritize energy security and affordability before the consequences become catastrophic.
Sources: OilPrice.com, “California’s Gasoline Crisis Was Manufactured—Now They’re Pretending to Fix It” (June 28, 2025); Energy News Beat, “California’s Energy Policies Are a Problem: A Major National Risk” (accessed June 29, 2025).
