CALIFORNIA – California lawmakers have passed Senate Bill 237, a measure aimed at expanding in-state oil production to help stabilize fuel prices. The approval comes amid multiple refinery closures in the state and a push toward electric vehicles.

The bill now heads to governor Gavin Newsom’s desk, where he must decide whether to sign it into law or issue a veto.

The legislation authorizes up to 2,000 new drilling permits annually in Kern County beginning in 2026, with the goal of raising California’s share of in-state crude production to roughly 25% of refinery demand, up from about 23%. 

The measure is intended to offset supply losses from two upcoming refinery shutdowns. 

According to the U.S. Energy Information Administration, California is set to lose 17% of its oil refinery capacity over the next 12 months with the closure of Phillips 66’s Los Angeles-area refinery and Valero’s Benicia facility.

If realized, the shutdowns are likely to contribute to greater fuel price volatility on the West Coast.

SB 237 also allows the governor to temporarily suspend California’s summer-blend gasoline requirement – a cleaner but costlier fuel that typically adds 20 to 30 cents per gallon because it is harder to refine and produced in limited supply.

Transition to clean energy

While California has set some of the nation’s most aggressive climate policies—including a mandate that all new passenger vehicle sales be zero-emission by 2035, lawmakers emphasized that gasoline will remain essential for years.

The state has nearly 30 million gas-powered vehicles on the road. 

They argued that failing to secure local oil supplies to stabilize prices could risk a political backlash that could undermine public support for EV adoption and clean-energy policies.

“If a lack of proactive management during this phase of the transition leads to rising energy prices and less reliable fuel supplies, that instability could erode support for continued decarbonization,” said California Energy Commission vice chair Siva Gunda.

Supporters framed the measure as a bridge policy—a short-term safeguard to maintain fuel stability while EV infrastructure, grid capacity, and renewable energy sources expand.

The Environmental Defense Center argues that parts of the bill “will weaken the state’s clean fuel standards.”

“California must move away from fossil fuel development and consumption to combat climate change – which is already causing devastating impacts in the state – and ensure clean air and water and a healthy environment. Fortunately, oil demand in California continues to decline,” said the group.

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