California Greenlights New Oil Drilling to Offset Refinery Closures

California has approved new legislation aimed at strengthening the state's fuel supply as refining capacity continues to decline. Governor Gavin Newsom signed Senate Bill 237, authorizing up to 2,000 new oil well permits each year in Kern County starting in January 2026.

The bill seeks to increase local crude output and reduce reliance on out-of-state sources. California currently produces about 119,000 barrels of crude oil per day, which accounts for roughly 23% of the feedstock used in its refineries. The remaining supply, nearly three-quarters, comes from other states and countries, making the state increasingly vulnerable to external disruptions and price fluctuations.

The push for greater in-state production comes as California faces multiple refinery closures. Two major refineries are expected to shut down by late 2025 or early 2026, cutting gasoline production capacity by an estimated 17%. These closures are expected to heighten dependence on imported fuels and add pressure to the state's already strained fuel market.

Supporters of SB 237 view it as a necessary step to stabilize fuel availability and protect consumers from price spikes. They argue that without additional production, refinery shutdowns and shrinking local output could lead to supply shortfalls.

Critics, however, warn that the legislation undermines environmental goals and could worsen pollution in oil-producing regions. They note that refinery challenges stem from multiple factors, including regulatory requirements and market conditions, meaning increased crude output may not directly translate to lower pump prices.

Once the new permitting process begins in 2026, Kern County will become the center of oil activity in California. The impact of the law will depend on how quickly permits are approved, how much crude production can be ramped up, and whether remaining refineries can maintain operations amid shifting supply dynamics.