SACRAMENTO — Three years ago, a series of political advertisements in Florida kicked off a war between Gov. Gavin Newsom and oil companies over blame for California’s highest-in-the-nation gas prices.

In a jab at Republican Florida Gov. Ron DeSantis, Newsom ran ads contrasting Florida’s conservative policies with California’s liberal stances on abortion, education and LGBTQ+ rights.

The Western States Petroleum Assn., a trade group that represents the industry, responded with a warning for Floridians about the cost of gas and electricity in Newsom’s Golden State.

“Gavin Newsom is banning gas cars and shutting down California oil production,” the association’s ad stated. “California can’t afford Gavin Newsom’s ambition. Can Florida?”

It turns out, the price of California’s battle with oil — both politically and at the pump — may be too much for the governor and the state to bear.

Now with two oil refineries expected to shut down over the next year, the Democratic governor has halted his fight with the industry he accused of price gouging and targeted in two special legislative sessions.

A Phillips 66 refinery in Wilmington is slated to close by the end of the year and a Valero facility in Benicia announced plans to shut down in April. The closures could reduce California’s in-state oil refining capacity by 20%, setting off alarm bells for the Newsom administration.

Having fewer California refineries would increase reliance on foreign oil and drive up gasoline prices once again — a financial jolt for consumers that the governor wants to avoid.

Instead of lambasting the industry, Newsom is now directing his administration and asking lawmakers to try to help refineries remain open.

“My optimism now is that this is a pivot,” said Catherine Reheis-Boyd, president and chief executive of the association. “This is a turn.”

The turn

In April, Newsom sent a letter to Siva Gunda, the vice chair of the California Energy Commission, requesting that he “redouble the state’s efforts to work closely with refiners” to ensure access to reliable transportation fuels and “that refiners continue to see the value in serving the California market” even as the state transitions away from fossil fuels.

Newsom included a request for Gunda to recommend changes by July 1 to the state’s approach to maintain adequate oil supply. The letter was sent days after Valero notified the Energy Commission of its intent to close the Benicia refinery.

Gunda responded in late June with a warning that the state “faces the prospect of continued reduction in in-state petroleum refining capacity that outpaces demand decline for petroleum-based fuels” and offered industry-friendly suggestions to boost supply.

In short, California’s efforts to reduce consumption of gasoline have gotten ahead of consumer demand for zero-emission vehicles. Gunda said the state needs to increase investor confidence in refineries to enable them to maintain operations and meet demand.

Newsom has downplayed the change in approach.

“It’s completely consistent,” he said at a recent news conference. He’s also not naive, he said.

“We are all the beneficiaries of oil and gas,” he said.

“So it’s always been about finding a just transition of pragmatism in terms of that process.”

His comments this summer have marked a noticeable change in tone from a Democratic governor whose climate change advocacy became synonymous with attacking the oil industry.

Although now in limbo due to actions taken by the Trump administration, Newsom set a goal for 100% of in-state sales of new passenger cars and trucks to be zero-emission by 2035.

In 2022, Newsom also pushed legislation at the statehouse that banned new oil wells within 3,200 feet of homes and schools.

In a special session months later, Newsom urged lawmakers to place monetary penalties on excessive oil company profits. Newsom accused the oil industry of intentionally driving up the cost of gasoline as retribution for the state’s policies to phase out dependence on fossil fuels in an effort to curb climate change.

Lawmakers balked and Newsom backed off his initial request for them to pass an oil profits penalty. Instead, lawmakers gave state regulators more authority to investigate gasoline price surges and potentially place a cap on profits and penalize oil companies through a public hearing process.

The governor called a special session redux in 2024 after Democrats pushed back on his request to approve new requirements on oil refineries in the final days of the regular legislative session. Lawmakers ultimately approved a state law that could lower gasoline price spikes by giving regulators the authority to require that California oil refiners store more inventory.

Reheis-Boyd said the change reflects that the governor is realizing that reducing supply without reducing demand only increases costs.

The “truckloads of data” required from the industry through the special sessions also showed that refineries weren’t gouging customers, she said, and gave state officials insight into why refineries struggle to maintain their operations in California.

“When Valero announced they were leaving California, the next day, their stock price went up. And that just says everything you need to know, right?” Reheis-Boyd said. “You have to send a market signal that says, ‘We’re open for business here. We need you. We want to collaborate with you as we all plan for this lower-carbon economy in the future, but that pace and skill has got to match up.”’

What’s to come

When California lawmakers return to the state Capitol next week to begin the monthlong slog until they adjourn for the year, industry-friendly bills await them.

Among the considerations is Newsom’s proposal to make it easier to drill new wells in oil fields in Kern County. His plan also would streamline new wells in existing oil fields across the state if companies permanently plug two old wells.

Later this week, the Energy Commission is expected to consider pausing a possible cap on oil industry profits and suspending potential new state oversight of the timing of refinery maintenance. The state is also reportedly attempting to intervene to find a buyer for the Valero plant in Benicia.

While the oil industry is hopeful, environmentalists are dismayed.

California is at a crucial inflection point in its transition to clean energy, said Mary Creasman, chief executive of California Environmental Voters. With federal climate rollbacks, the world is watching the state.

“Now is not the time to retreat,” she said. “Now is the time to double down and innovate the way through this. That’s what this moment calls for. That’s the leadership we need nationally and the leadership we need globally.”

What else you should be reading

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