Chevron threatens to leave California due to taxes, emission rules, other regulations — warning the state is playing ‘a dangerous game’

“They need to abandon the tax on refineries or they won’t have any refineries in 10 years,” Walz said in an interview with Bloomberg (1). “If it stays that way — Chevron will be gone in 10 years for sure. We won’t be able to make it.”

One reason this issue is so dire in California is its reliance on foreign imports, which Walz has called “a dangerous game.” Specifically, California and Chevron take in oil from Asian countries (2), most impacted by the Strait of Hormuz shutdown.

According to the nonprofit group Californians for Energy Independence (3), 70% of the state’s crude oil supplies are foreign imports. Since Chevron also sources its oil from regions now experiencing shortages, operating in California is increasingly unsustainable.

But beyond this supply shock, California’s regulatory climate isn’t all that kind to Big Oil. Policies that emphasize environmental regulations and taxes (4) on the fuel industry put further stress on Chevron’s costs.

In a recent letter (5) to California Gov. Gavin Newsom, Chevron explicitly criticized changes to the “Cap-and-Invest” program (6), which is a statewide policy that requires companies to pay permits for the carbon they produce.

In Chevron’s eyes, these tighter emissions caps and increased compliance costs translate to higher fuel prices and weaker energy reliability.

Chevron concluded that, “The California energy industry’s economic, industrial, environmental, and national security benefits have been the foundation of a healthy, prosperous state and nation. Adversarial policies at local, regional and state levels have eroded that foundation. These proposed regulatory changes threaten to destroy it.”

With two of the largest refineries in the state, a shutdown of Chevron’s operations would cut California’s capacity by 34% according to the California Energy Commission’s data (7).

An “energy island” with no easy escape

There are many reasons California is particularly vulnerable to gas price surges, but one of the biggest is its isolated infrastructure.

Unlike other regions that have well-connected pipeline networks, California is known as an “energy island” because it’s literally cut off from the rest of the U.S. gasoline supply (8).

The California Energy Commission (9) now reports that more than 90% of the gasoline used in the state is refined locally. In other words, California is incredibly dependent on its own refineries for fuel, so any local outage can mean serious supply shortages.

California’s oil industry has also been shrinking over the decades, with crude oil production in the state down 75% since the 1980s per a 2026 Stanford report (10).

Another factor fueling California’s woes is its requirement for a special cleaner-burning gasoline blend called “CARB” or “CaRFG” fuel (11). Although this fuel helps reduce pollution, it’s more expensive and harder to produce, with only a limited number of refineries that can make it.

Even before the Iran war, refinery operators have been struggling in the state, with companies like Phillips 66 (12) and Valero (13) halting operations.

Currently, the national average for a gallon of gas is just over $4, according to AAA estimates (14), but California is more than $5.80.

What to do if you’re caught in Cali’s energy crunch

So, what can average Californians do to get through this fuel scarcity scare?

The harsh reality is that everyone has to readjust their budgets to factor in rising fuel costs. But besides just preparing for higher gas prices, there may be more creative ways to reduce your fuel dependence.

And, no, that doesn’t mean having to run out and buy a trendy EV.