Californians are currently paying about $6.31 for a gallon of regular gas, nearly $2 more than the national average. What’s worse is that this is the price even after the state’s early switch to cheaper winter-blend fuel. According to AAA, gas is set to be a record high in California this autumn. That gap isn’t just a temporary spike. It reflects a fuel market shaped by state policy and a growing reliance on imports. This is the difficult situation California’s next governor will inherit in January. 

However, the new governor also inherits a reformed permitting process that has helped speed up in-state drilling permit approvals and a real chance to shape how the rest of the country approaches energy policy.

What happens in Sacramento rarely stays there. California is the world’s fourth-largest economy, and other states regularly model their energy policies after California’s. For example, its fuel standard has already been adopted by other states, and even more states introduced similar legislation this year, according to the Center for American Progress. When California sets energy policy, other states take notes, which gives the next governor real influence over how the country works to balance affordability, reliability, and environmental goals.

A fuel supply that runs through other countries

“When it comes to energy, California needs to do better in balancing today’s needs with tomorrow’s goals,” said Francisco Leon, president and CEO of California Resources Corp., in Pipeline & Gas Journal. “And that includes protecting the state’s oil production and refining infrastructure.”

California has lost two major refineries since October 2025, cutting 17% of the state’s refining capacity, according to Argus Media.  Plants that remain run mostly on imported oil. California crude supplied 110.7 million barrels to the state’s refineries in 2025, down from 240.1 million in 2014, while the foreign share of refinery supply climbed from 51.6% to 61.1%, according to the California Energy Commission. About 29% of that foreign crude came from Iraq, Saudi Arabia, and the United Arab Emirates in 2025, per the CEC, and when Gulf shipments stopped this spring, refiners had to scramble for replacements. California’s growing dependence on foreign oil has become a point of concern for industry, analysts, and lawmakers alike.

The reliance on foreign oil leaves the state’s fuel security tied to events in the Persian Gulf and makes the crude California produces at home more important to its supply, which is where recent changes in Sacramento could make a difference.

Permitting reform with room to grow

Permitting for drilling recently got a meaningful boost from California’s SB 237, which took effect in the state earlier this year and lets state regulators rely on Kern County’s environmental review when they permit oil and natural gas operations there, according to CalGEM. An analysis of state data found 353 new-drill permits approved statewide in the first half of 2026, compared with 17 in all of 2025, when litigation stalled Kern County’s permitting process, KERO-TV reported. Importantly, permits don’t guarantee new wells, since operators still decide when and where to drill based on prices, costs, and other factors, but they give producers more predictability needed to plan ahead.

California Resources Corp. received 193 of the 194 permits it sought in 2026, and Brent Ilott, its vice president of operations, told KERO-TV the added drilling helps “flatten that to about a 1 to 2% decline for the year.” The realistic goal is slowing a decline that has run for decades, not launching a boom, and the benefits reach past the wellhead.

However, the law also has limits the next governor will inherit. It only applies to the Central Valley’s Kern County and caps permits under the county’s review at 2,000 a year unless the state finds more are needed, per CalGEM, while a stricter Cap-and-Invest program, now extended through 2045, tightens emissions limits on the same operators, according to the California Air Resources Board. Whether to build on the momentum of SB 237 will be one of the first energy decisions on the new governor’s desk.

Why the rest of the country is watching

California’s energy choices don’t stop at the state line. Arizona and Nevada rely heavily on California refineries for their fuel, so a closure or policy shift in Sacramento lands on drivers, businesses, and military installations across the region. Nevada is now working to reduce that dependence, a sign that some neighboring states increasingly see dependence on California’s fuel market as a risk to manage.

The global effect gets less attention. Every barrel California declines to produce still gets produced somewhere else, often under weaker environmental and labor standards, and then shipped across an ocean. Moving production overseas doesn’t make demand disappear. It exports the jobs, the tax revenue, and the oversight.

Bottom Line

California has spent years showing the country what happens when a state pushes production out while demand remains. Its next governor has the chance to show the alternative, pairing some of the strictest environmental standards in the nation with steady in-state production, and given how often California’s policies travel, other states will be paying attention.