Gavin Newsom Drives Jobs Out and Prices Up
Phillips 66 announced it will close its Los Angeles refinery by 2025, removing about 8% of California’s refining capacity. This move comes just after Governor Gavin Newsom signed a new law aimed at stabilizing gasoline prices, which mandates refineries to maintain higher inventory levels and submit resupply plans to the state.
Phillips 66 cited “long-term uncertainty” rather than the new regulations as the primary reason for the closure, but industry groups argue that the regulatory landscape makes California a challenging environment for oil companies. Chevron and Exxon are reportedly reevaluating their presence in California. Many companies have either reduced operations or redirected investments toward states with more favorable business environments.
Some of the hurdles for oil and gas companies operating in California include stringent emissions standards, financial liabilities related to environmental lawsuits, and a mandate for zero-emissions vehicle sales by 2035. Critics believe that California’s policies, intended to cut emissions, could paradoxically drive up fuel costs due to limited fuel supply as refineries leave or cut back.
These changes also raise broader questions about California’s energy future. The closures bring to light increased concerns about energy reliability and potential cost increases for residents reliant on gasoline and electricity.
An article by Robert Bryce, “Solar Costs Jump, More Offshore (And Onshore) Wind Woes,” highlights increasing costs and technical issues facing renewable energy projects, especially in solar and offshore wind. The Koshkonong solar project in Wisconsin, for example, saw costs jump by 42% due to tariffs and labor issues, putting further financial strain on utility customers. Offshore wind is also encountering challenges, as GE Vernova, a major wind turbine supplier, is contending with costly failures in both its offshore and onshore turbines.
Notably, these setbacks are occurring even as solar and wind capacity continues to grow, primarily driven by federal subsidies. Persistent issues like interconnection delays, regulatory complexities, inflation, and return on investment, are threatening the financial viability of large-scale renewables. Anecdotal evidence of environmental damage caused by wind and solar reflects on these projects as well.
This shift not only impacts oil and gas industry employees but also disrupts the network of small vendors, service providers, and contractors reliant on the facility for business. Approximately 366,000 jobs in California are directly or indirectly tied to the oil and gas industry. This figure includes around 59,000 direct jobs within the sector, particularly concentrated in Los Angeles, Kern, and a few other counties. These positions often pay higher-than-average wages, making them important for local economies and communities across the state.
The National Association of Royalty Owners estimates that there are more than 500,000 oil & gas royalty owners in California. These owners cannot simply move their assets to realize the value. This action by the Newsom administration renders these mineral rights worthless, thereby taking their asset from them without compensation.
Resources
– “Phillips 66 to close California refinery days after Newsom signed oil law” – POLITICO
– Southern California Record article on Phillips 66 refinery closure concerns
– The Gender Equity Policy Institute report detailing employment and demographics in California’s oil and gas sector
– American Petroleum Institute report on job multipliers and the economic impact of the oil and gas industry in California
– Western States Petroleum Association (WSPA) report highlighting the job and economic contributions of California’s oil and gas industry
– Robert Bryce’s article, “Solar Costs Jump, More Offshore (And Onshore) Wind Woes,” detailing cost increases in renewables, reliability issues, and their impact on energy economics
– World Resources Institute article on employment and community effects of refinery closures and related concerns
