CA4ES Energy Brief — The Refining Loophole

California shut down two major refineries in the past six months. Phillips 66 in Wilmington closed in October. Valero in Benicia idled this month. Combined, the state lost nearly 20% of its refining capacity — roughly 285,000 barrels per day of crude processing that is never coming back.

So where is California's gasoline coming from now?

Some of it is coming from Russia.

Not directly. U.S. sanctions prohibit purchasing Russian crude oil. But there is a loophole. Russian crude gets shipped to refineries in India — principally the Jamnagar complex operated by Reliance Industries — where it is refined into gasoline and blendstocks that meet California's CARB specifications. Those refined products are then loaded onto tankers and shipped across the Pacific to California ports. The crude is Russian. The refining is Indian. The gasoline is Californian. And the sanctions do not apply.

In 2025, more than 9 million barrels of gasoline and blendstocks arrived in California through this route, according to shipping data analyzed by Capital & Main. Through March of this year, six additional shipments totaling 149,916 barrels have arrived. The importers are not obscure middlemen. They include Glencore, Phillips 66, Gunvor Group, Chevron, and Plains All American Pipeline — some of the largest names in the global energy trade.

The timeline makes the mechanism visible. In February 2025, eleven sanctioned Russian tankers delivered crude oil to Indian ports. By late March, three tankers carrying finished gasoline from that same refinery complex reached California. Russian crude in, California fuel out. The refining loophole launders the origin.

Here is where it gets worse. The California Energy Commission — the state agency responsible for tracking petroleum supply — told Capital & Main that it "does not have legal authority to restrict imported fuels by source of origin, nor does it track crude oil origins." The agency charged with ensuring California's fuel supply has no idea — and no mandate to find out — whether the gasoline Californians are putting in their cars funded Russia's war in Ukraine.

The U.S. Treasury is aware. In March, it waived sanctions on Russian oil already at sea, in an effort to bring more supply to market and lower global prices. Energy Secretary Chris Wright called the decision "pragmatic." On April 17, the Treasury extended the waiver for another month.

This is the supply chain that three decades of California energy policy produced. The state that shut down its own wells — where the USGS has identified 5.6 billion barrels of recoverable reserves — because of environmental concerns. The state that closed its refineries because operators could not justify the capital investment under the regulatory burden. The state that blocked its own pipelines because of permitting paralysis.

That state is now importing fuel refined from Russian crude oil, processed in Indian refineries with no CEQA oversight, shipped 10,000 miles across the Pacific on tankers burning heavy fuel oil, and sold to Californians at nearly $6 a gallon.

California's oil was too dirty to extract. Russia's oil, apparently, is clean enough to buy.

Sources: Capital & Main / Times of San Diego, CEC, U.S. Treasury

Trump extends Jones Act waiver by 90 days to ease oil prices — Al Jazeera
President Trump extended the Jones Act shipping waiver through August, allowing foreign-flagged vessels to transport fuel between U.S. ports. Nine shipments of gasoline and petroleum products have already reached California — five to Los Angeles and four to Martinez — with the next arriving April 29. Analysts remain skeptical: the Center for American Progress estimates the waiver reduces prices by roughly 3 cents per gallon. It addresses logistics, not supply.

California's fight over pipeline tests state's right to push back against Washington during war — AP / U.S. News
A Santa Barbara County judge refused to lift the injunction blocking Sable Offshore from restarting its pipeline — even as crude oil continues flowing through it under a federal Defense Production Act order. The court rejected Sable's argument that a federal emergency order overrides state law. A May 22 show-cause hearing will determine whether Sable should be held in contempt. The case is now a test of whether wartime federal authority can override California's permitting power.

Fuel shortages from the Iran war have spread to California, and help is years away — Fortune
Fortune frames what CA4ES readers already know: California operates as an "energy island" with no inbound fuel pipelines, Pacific Ocean and mountain barriers, and a refining capacity that just shrank by 20%. The only pipeline solution — the Western Gateway system proposed by Phillips 66 and Kinder Morgan — has a completion target of 2029. In the meantime, Norse Atlantic has canceled all summer LAX flights, United is raising fares up to 20%, and jet fuel supplies are tightening.

Norse Atlantic cancels all Los Angeles flights as fuel costs surge — FOX 11
Norse Atlantic became the first airline to exit California entirely over fuel costs, canceling all summer service from LAX to London, Paris, and Rome. The budget carrier cited $200-per-barrel oil and the Strait of Hormuz disruption. This is what a fuel crisis looks like before it reaches the pump: it reaches the gate first. Airlines with thin margins on long-haul routes cannot absorb California's fuel premium. Expect more route cuts if jet fuel supplies tighten further this summer.

Governor Newsom says Trump's Sable offshore pipeline has produced one month of oil — prices have only gone up — Office of Governor Newsom
Governor Newsom released a statement attacking the Sable pipeline restart, arguing that one month of production has done nothing to lower gas prices. The argument is technically correct and strategically misleading. One offshore platform was never going to move the statewide price. But the larger question Newsom's statement avoids: if in-state production does not matter, why did the state spend a decade blocking it?

Week of April 28, 2026 — Source: AAA

California gasoline ticked up 11 cents from last week's $5.86 to $5.97. The national average rose 9 cents. The gap held steady at 43% — the structural premium that refinery closures, CARB fuel specifications, and regulatory costs have baked into every gallon. Diesel moved in the other direction, falling 20 cents from $7.68 to $7.48. That relief is likely temporary: diesel supply depends heavily on refinery throughput, which is declining as Middle Eastern crude feedstock runs out.

Data: AAA Gas Prices (gasoline), EIA Weekly Retail (diesel national avg)

The Jones Act waiver is the near-term story. Nine shipments of gasoline and petroleum products have reached California from the U.S. Gulf Coast via the Panama Canal — five to Los Angeles, four to Martinez. A tenth arrives April 29. These are incremental volumes, not replacement volumes. The California Energy Commission calls the supply "incremental" but declines to disclose specifics, citing confidentiality.

On the crude side, the shift away from Middle Eastern feedstock is underway but incomplete. Ecuador (16.9% of California's 2025 foreign crude) and Colombia (7%) are the most likely sources to absorb volume, but neither produces the heavy sour grades that California refineries were optimized to process from Iraq (22.3%) and Saudi Arabia (16.4%). Adapting to different crude slates requires capital, time, and yields less gasoline per barrel in the interim.

The Russian refining loophole — detailed in this week's Feature — adds another layer. India's Jamnagar complex is California's top foreign supplier of finished gasoline this decade. When that gasoline is refined from Russian crude, it arrives in California with its origins effectively laundered. The CEC does not track crude origins for imported refined products.

Iran declared the Strait of Hormuz open on April 17 and oil prices fell 9% on the news. But physical supply recovery takes months. The tanker fleet that was rerouted around the Cape of Good Hope does not snap back overnight. The import deficit that built up over eight weeks of disruption will take at least as long to unwind.

Sources: CEC, EIA, Capital & Main, Reuters

California's Coming Energy Crisis — Zeihan on Geopolitics
Geopolitical analyst Peter Zeihan breaks down how the Strait of Hormuz closure is hitting California harder than any other state — and why the structural damage from refinery closures and import dependence makes recovery slow even after the strait reopens.

Questions grow over California gas supply as imports face disruption — ABC10
A bipartisan group of California lawmakers sent a letter to the CEC and CARB demanding answers on how many days, weeks, or months of gasoline, diesel, and jet fuel the state actually has. State officials say supply holds through May, with imports expected to increase in June — but the letter signals that Sacramento is no longer confident in its own numbers.

The CA4ES Energy Brief is published weekly by Californians for Energy & Science, a 501(c)(3) nonprofit. Data-driven energy intelligence for Californians.

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