California Energy Commission Delays Profit Cap on Refineries Amid Shift in Stance on Oil Industry

California's Energy Commission has delayed implementing a profit cap on refineries, marking the latest move in the state's softening stance towards the oil and gas industry. The decision comes after the commission's vice chair recommended working with the industry to ensure fuel supply after several refineries announced shutdowns. The vote is part of a series of policy proposals that ease regulatory scrutiny on California's oil and gas industry.

California's Energy Commission has delayed the implementation of a profit cap on refineries, marking the latest move in the state's softening stance towards the oil and gas industry. The decision, announced on August 29, 2025, follows a unanimous vote by the commission to postpone the cap by five years [1].

The delay comes after the commission's vice chair, Siva Gunda, recommended working with the industry to ensure a stable fuel supply following announcements by several refiners of planned shutdowns. The vote is part of a series of policy proposals that have eased regulatory scrutiny on California's oil and gas industry [1].

Governor Gavin Newsom signed State Bill X1-2, known as the refiner margin cap bill, into law in March 2023. The legislation aimed to mitigate price spikes for California drivers by setting an acceptable profit margin for fuel makers and penalizing those who exceed it [1]. However, no penalties were ever levied.

The delay in implementing the profit cap is a significant victory for the oil industry, which has been facing increased regulatory pressure in the state. While the commission could still implement the cap during the five-year pause, doing so would require another vote and about 1.5 years of additional analysis [1].

The decision follows recent closures of major refineries in the state. Valero Energy Corp. plans to shutter its 145,000 barrel-a-day Benicia refinery in April 2026, and Phillips 66 is closing its 139,000 barrel-a-day plant in Los Angeles later this year [2]. Phillips 66 cited market uncertainties and increased regulatory scrutiny as reasons for the closure [3].

The closures of these refineries could strain gasoline production in California, potentially leading to higher prices or supply disruptions. As the state continues to transition from fossil fuels, balancing energy supply and environmental goals remains a significant challenge [3].

References:
[1] https://www.bloomberg.com/news/articles/2025-08-29/newsom-plan-to-prevent-pump-price-spikes-delayed-by-5-years
[2] https://www.bloomberg.com/news/articles/2025-08-28/california-agency-moves-to-delay-refiner-profit-cap-by-5-years
[3] https://www.ainvest.com/news/phillips-66-refinery-shutdown-week-sources-2508/