California gasoline averaged about $6.15 a gallon in mid-May, roughly 36 percent above the national average. At the same time, the state was facing a crude and gasoline supply squeeze tied to the Iran war, refinery closures, and ever-rising dependence on imports. On May 5, California Energy Commission (CEC) Vice Chair Siva Gunda told an Assembly oversight hearing that supply looked stable for roughly six weeks based on confirmed inbound shipments, but beyond that forecasting window the picture was uncertain. “The pricing will move molecules to California,” Gunda said, “but it will come at a price.”
California refineries had been sourcing 25 to 30% of their crude from the Middle East. That supply line is now disrupted. Asian refiners in South Korea and India, which provide most of the state’s finished gasoline imports, curtailed exports in March as global markets tightened. And all of this is hitting a state that lost 17% of its refining capacity in the preceding 12 months, after Phillips 66 closed its 139,000 barrel-per-day (bpd) Wilmington refinery at the end of 2025 and Valero idled its 145,000 bpd Benicia facility this spring.
Managing the Gap
The Iran war did not create California’s gasoline supply problem. It exposed a problem that was already there. Gasoline supply is disappearing in large blocks before demand has fallen enough to absorb the loss. That is the part of the transition California is now being forced to confront. The data below make the problem clear: California is still a gasoline-dependent market, but the supply system is shrinking faster than demand is disappearing.
That is the gap California has to manage.
California’s major transportation fuel and vehicle policies were built to improve air quality, reduce greenhouse gas emissions and move the state away from petroleum. Lower gasoline demand was not the only goal, but it was a central expected result. The problem is that California planned more carefully for reducing demand than for managing the gasoline system that millions of consumers would still need along the way.
The implicit assumption was that the gasoline supply system would contract behind that decline. Refineries would close when they were no longer needed, imports would fill temporary gaps and the market would manage the glide path. That’s not what is happening. The regulatory environment, thin refining margins and difficult California business economics have pushed supply out faster than demand has fallen.
The Real Work
California’s legislature recognized this issue clearly enough to require a Transportation Fuels Transition Plan in SB X1-2, signed in March 2023. The plan was supposed to address how the state would ensure reliable and affordable fuel supply during the shift away from petroleum. It was due by Dec. 31, 2024. A draft was released on May 1, 2026, more than 16 months late. It appears to acknowledge the core problem: vehicle turnover is gradual, while refinery closures can create abrupt supply losses. It also points to many of the right issues that need deep consideration, including imports, inventories, resupply planning, regional fuel specifications and demand reduction.
California is now trying to build the transition-management framework after major refinery closures, rising import dependence and a live gasoline supply crisis have already forced the issue. This is the real work: Building a functioning mechanism that connects refinery exits, import readiness, inventory needs and remaining gasoline demand in real time. For years, the politics of California’s transition have made gasoline supply a difficult subject. Any focus on refining, imports or fuel-system reliability could be cast as a distraction from climate goals or a concession to the oil industry. But the current supply crisis shows why that framing does not work. Managing the gasoline system that remains is not a retreat from the transition. It is part of making the transition durable.
Policymakers Own the Gap
At this point, it is not enough for policymakers, including the governor, to respond to high prices by blaming refiners and fuel retailers. Of course, market behavior matters and oversight has a role. But policymakers also own the gap between the supply curve and the demand curve because state policy helped create the conditions in which that gap now matters so much.
This is not a niche problem. Roughly 6 million California renter households may not control whether they have reliable home charging. About half of California households have income below $100,000. Rural residents, long-distance commuters and small businesses remain directly exposed to fuel prices. These groups overlap, but that is the point: the population still dependent on a stable gasoline system is not marginal. It is large, practical and politically important.
The question is not whether California should decarbonize. Policymakers want it, and many Californians support it. The question is whether California can manage the gasoline system responsibly while it replaces it. That means acknowledging that supply reliability, import readiness, inventories and infrastructure are not side issues. They are the practical conditions that determine whether the transition is manageable for consumers.
This is the lesson we should take from California, and the supply crisis should be a wake up call that decarbonization needs to be balanced with energy security and a real transition plan developed in concert with the affected stakeholders. Setting the target is easy, and so is blaming industry when it doesn’t go well. The real work is where we are right now: managing the middle period when the old system is shrinking and the new system is not yet ready to carry the full load.
