California is in a state of contradiction. We lead the nation in environmental regulations, proudly promote our clean energy goals, and move quickly from fossil fuels. But despite this green image, our economy and everyday life are still running so much with oil and gas.
Fossil fuels account for about 8% of California’s $3 trillion economy, but that’s the first 8%. “We have to get the first 8%,” I tell students. “You can’t get the rest of our economy.” Oil drives everything from trucks to tractors to construction equipment. Without it, we wouldn’t be able to build roads, bridges, or get goods from grocery stores. Without sophisticated petroleum products, electric vehicles don’t make cement, steel, plastic, or even lithium-ion batteries.
Despite these realities, California’s energy policy has led to the dismantling of the critical infrastructure that supports this critical system. Our state has lost more than 30 refineries in the last few decades. We are currently located in only nine major gas production facilities. Two more closures are scheduled for the coming months. This is Valero from the Bay Area, Phillips 66 in Los Angeles. These two plants represent daily production of 284,000 barrels, accounting for almost 18% of the state’s total refinery capacity.
California is located in one of the Monterey Shales, one of the world’s largest untapped reserves. However, they import most of the oil, including Iraq, Saudi Arabia, Brazil, Guyana and Ecuador, for policy and regulation. California also imports oil from Russia and Venezuela. Ironically, we have one of the cleanest refinement standards in the world, but we import fuel from places where environmental and labor protection is low.
All of this is enabled by supply chains that are more vulnerable than most people can achieve. There is no major pipeline that brings oil to California. We rely on ships that take 30-40 days to fuel. These foreign tankers contaminate at incredible speeds. Surprisingly, the pollution occurs in international waters and is not counted by the California Air Resources Commission. Closing refineries in California and importing more fuel will increase pollution net. And increasing dependence on foreign oil is dangerous when global instability is rising.
This is not just a self-harm energy crisis in production. It is also a national security issue.
Military bases in California, Nevada and Arizona rely heavily on in-state refineries for specialized aviation fuels and other petroleum products. When refineries close, supply chains become narrower and more dependent on imports from Asia and elsewhere. These gaps create unacceptable logistical and strategic risks to the preparation of US military in the Western states.
And don’t forget that it is estimated that there are hundreds of millions of barrels of accessible oil under our feet. However, we have built an energy model that relies on foreign oil imports. And now, foreign countries are becoming increasingly dependent on gasoline that has been supplied.
This is not simply unsustainable. Also, boundaries are irresponsible.
The California energy transition is inevitable, but the way we get there is important. You can’t pretend that fossil fuels are already gone. We still need them for the economy, mobility, national security, and workers who can’t afford $60,000 electric cars and solar roofs.
We have the tools, talent and resources to lead a responsible energy transition. It utilizes in-state production, balances environmental management with economic pragmatism, and protects the most vulnerable communities along the way.
But we have to be honest about where we are. And now, fossil fuels are still powering the Golden State.
In particular, Californians are expected to pay the highest gasoline price in the country due to refinery regulations and the new tax that will take effect in July. Our prices are inflated by a web of taxes, fees and boutique regulations. Even if oil drops to $0 per barrel and free refining, Californians will still pay around $1.82 per gallon at the pump. Of that, $1.64 is from state taxes and fees, plus 18 cents of federal gas tax.
According to Caltrans, Californians drive around 1,200 miles a month. If you’re a working-class Californian and you’re up 50 cents per gallon, your annual fuel cost will add around $500. You will also pay it in post-tax dollars, so you will need to add at least $750 just to cover it.
That’s important for construction workers who commute 60 miles a day in a pickup truck. It is important for single mothers who clean houses in the city, and for physical therapists who drive to make calls to the house. Most of these people can’t easily replace Teslas or Dodge petrol hikes and vehicles. Consumer analysis mentioned in Calmatters shows that the majority of EVs are purchased by high-income Californians living in areas such as Atherton, Palo Alto, Sunnyvale and Mountain View.
The rise in gasoline prices will hit people hardest. For most Californians, there is no mass transport available. People are spending more and more income on gas-powered vehicles that depend on their lives. Our state policies punish people for not being able to adapt quickly enough to a green future that has not yet been built. It is a regressive tax pose as environmental action.
Until California realistically bridges the gap between ambitious climate goals and equitable policy implementation, the state’s lofty environmental vision continues to feel anxious in its most vulnerable shoulders.
The new state excise tax, which adds about two cents to the gallon, comes into effect on July 1, with carbohydrates calling for a new low-carbon fuel standard that will add prices for gasoline and diesel fuel, potentially adding large costs. No one knows exactly how much – the board has not proposed rules.
During a recent Congressional Oversight hearing, CARB officials were asked if they had analyzed regulations regarding consumer impact. Their answer: We don’t calculate it. The room was silent. It was an incredible entrance – regulators are pushing policies without implementing mathematics.
It’s no wonder we are watching working families leave the country. By adding new and unclear costs to an already growing system, carbohydrates and other regulators are creating things that could lead to self-harm.
And for what? It’s not an environmental advancement. California is forced to source more and more fuel from overseas at more environmental and economic costs. By relying on sources of pollution and carbon-intensive shipping, we simply outsourced our emissions to other countries. California is not reducing emissions. We’re exporting them.
If this sounds reckless, then that’s right. But more than that, it is unfair.
These policies do not burden the wealthy. They are crushing the working class. They force families to choose between gas and groceries between access to work and stability in housing. They also outsource overseas work.
And they are being carried out by unelected bureaucrats who have admitted their testimony before California lawmakers and have not calculated real-world impacts.
Californians are worth more than this. They deserve integrity, transparency and policy based on economic realism, rather than ideological fantasy or environmental dogma. If recent changes are turning points, it’s not because of unpredictable global events. Because I chose not to watch before I jump.
The path ahead requires pause, readjustment and return to common sense. Otherwise, this summer we could not mark another price hike, but it was the day we began to lose control of our energy future.
Michael A. Mishe is an associate professor at Marshall School of Business at USC. The former KPMG principal is the author of eight books on business and strategy.
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