California Weighs Fuel Import Boost, Pauses Refinery Profit Cap to Curb Gas Prices

California's energy regulator is proposing key changes to prevent fuel price surges as two major refineries prepare to shut down. The California Energy Commission (CEC) on Friday recommended increasing private investment in fuel imports and temporarily suspending the state’s cap on refinery profits. These steps aim to stabilize gasoline prices, which could spike by 15 to 30 cents per gallon due to reduced refining capacity.

Phillips 66 and Valero Energy plan to close plants that account for roughly 20% of the state’s fuel production. The CEC is exploring options to keep current refineries running while enhancing capacity at third-party fuel import terminals to ensure a steady supply of gasoline and jet fuel.

California's average gas price was $4.61 per gallon on Friday—the highest in the U.S.—compared to the national average of $3.21, according to AAA data. The CEC said the refinery profit cap program needs further analysis to ensure it effectively protects consumers and should be paused for a “reasonable” but unspecified period.

The commission also urged Governor Gavin Newsom to take measures to stabilize California’s declining crude oil production, which has dropped from over 1 million barrels per day in the 1980s to below 300,000 bpd last year.

However, environmental and consumer advocacy groups criticized the recommendations, calling them a “refiner bailout.” In a letter to Newsom and state lawmakers, 51 groups demanded price gouging penalties and mandatory fuel inventory rules instead. Consumer Watchdog, which published the letter, warned the proposals favor oil companies over California consumers.

The CEC did not respond to the letter’s claims, but its recommendations underscore growing concerns about maintaining fuel supply and price stability during California’s energy transition.