A Socialist Proposal Disguised as A Solution in California

A Socialist Proposal Disguised as A Solution in California

Published: February 21, 2025

The California Energy Commission (CEC) has proposed state ownership of oil refineries in an attempt to address gasoline supply and pricing concerns. This idea emerged as part of a broader discussion on how to manage the state's transportation fuel market amid declining refinery capacity while pursuing the Net Zero fantasy.

California has seen a reduction in refining capacity in recent years. For instance, Phillips 66 announced the closure of its Wilmington refinery near Los Angeles in 2025, which accounts for about 8% of the state's crude oil processing capacity. Other refineries have shifted to producing biofuels, driven by state incentives and strict environmental regulations. Concerns of supply shortages and price spikes prompted the CEC to explore the option of state intervention.

The CEC's frames this suggestion as a way to ensure a "reliable supply of affordable and safe transportation fuels", mitigating the risk of California's gasoline supply dropping faster than the demand (which would result in higher prices) as private oil companies scale back operations. California is isolated from other U.S. refining regions due to its fuel standards and regulations. The CEC has discussed a range of possibilities, from the state acquiring a single refinery to purchasing all existing refineries in California in an effort to manage gasoline production and pricing directly. California’s refinery woes stem from its own doing—decades of stringent environmental rules, carbon taxes, and low-carbon fuel standards have made refining unprofitable. The CEC’s proposal is a Band-Aid for a self-inflicted wound, not a solution.

Governments are notoriously incompetent when it comes to running businesses. California’s struggles with projects like the high-speed rail, (billions over budget and years behind schedule) is evidence that the state lacks the ability to operate complex projects including oil refineries. The eight remaining gasoline-producing refineries in California (handling 1.7–2 million barrels daily) are currently managed by private companies with expertise and market incentives. State ownership would balloon costs, requiring taxpayer bailouts or higher gas prices to sustain operations.

The CEC's proposed solution (state ownership) is socialism. Socialism is defined as an economic/political system where the means of production, distribution and exchange are owned and managed collectively by the government, rather than by private individuals or corporations (which is precisely what the CEC is proposing). History has shown the failure of socialist policies in countries like Venezuela where economic collapse ensued once the state took control of the oil industry.

No legislation has been passed and no refineries have been acquired by the state as of now. This fact may lead one to wonder if this is just another virtue signal by Governor Gavin Newsom and progressive lawmakers to appease voters who are angry with high gas prices as they continue to double down on their green agenda/Net Zero policies.