California Has Become Uninvestable

It’s not hard to understand why people live in California, nor why it boomed in the decades after World War II. 

There are few places more blessed by God than California, even with its mudslides, wildfires, and earthquakes, which deterred not a single person from moving there. It is, in most ways, a paradise. 

If there was anyplace that could be said to embody the American Dream, or at least the postwar American Dream in which anybody could aspire to be middle class, it was California. New York City may be where people went to strike it big, but California is where people went to live the good life on a modest salary, and with any luck, one could hit the jackpot and strike it big, too. 

California is still beautiful, but its glitz and glamour, forests and beaches, and still wonderful weather can no longer distract from the fact that it is run by a government class that has been pillaging the wealth and destroying the economic vitality of the state. 

It’s not just the taxes, though they are outrageous. It’s not the celebration of degeneracy, although degenerates roam free. It’s not just the homelessness, the grotesque inequality, or the crime, or the mismanagement, although all of them are reaching intolerable limits. 

It is, above all, the complete disconnection from the realities of running a state without running it into the ground. California’s governing elite is simultaneously corrupt beyond measure, neglectful of its citizens’ needs, and has its head so far up its nether regions that it has substituted fantastical thinking for reality. 

Valero just paid a $1.1 billion breakup fee to leave California.

When a company is willing to absorb a billion-dollar write-down just to exit a market, that’s not a routine business decision. It’s a signal that the operating environment no longer works.

Valero is shutting down… pic.twitter.com/omIEscUZy6

— Mike Netter (@nettermike) February 9, 2026

Valero just paid a $1.1 billion breakup fee to leave California.

When a company is willing to absorb a billion-dollar write-down just to exit a market, that’s not a routine business decision. It’s a signal that the operating environment no longer works.

Valero is shutting down its Benicia refinery by April 2026 rather than continue operating under California’s current regulatory and economic framework.

That facility processes roughly 145,000 barrels per day, about 8.6% of California’s gasoline supply. Around 400 jobs are lost. Local tax revenue takes a direct hit.

With Phillips 66 also exiting, nearly 10% of California’s in-state refining capacity is coming offline in a short window.

The analysts are already modeling the consequences.

Economists at University of California, Davis estimate a $1.20 per gallon increase by summer 2026. Translation: your usual 15 gallon fill up goes from $70 to $95+. 

Fun.

Stanford Energy also warns that removing this much capacity materially increases the risk of severe supply disruptions and extreme price spikes.

Here’s the core issue:

We are taking essential energy infrastructure offline while demand is still growing.

AI data centers, electrification, and industrial reshoring are increasing energy intensity, not reducing it. The idea that demand is about to disappear is a fantasy.

When supply is forced offline in a high-demand system, the outcome is not transition. It is volatility.

And consumers ultimately pay the difference.

The state is becoming uninvestable, and once that happens, it is only a matter of when, not if, the economy begins to shrink. The middle class is already squeezed as badly as Luke, Han, Chewie, and Leia would have been in that compactor if they had not been saved by R2D2.

California’s tech billionaires have been fleeing due to the efforts to steal 5% of their wealth, including unrealized capital gains, and industry is not too far behind. Were it not for the fact that many tech corporations have tens of billions of dollars in sunk costs in the state, they would be following. 

Valero has decided to cut its losses, to the tune over over a billion dollars, just to exit the state as soon as humanly possible. California’s oil industry is far larger than you would expect, accounting for over half a million jobs, but even with such a large economic footprint and a market that is larger than most countries, doing business there is too expensive to bear, so Valero and other companies are de-investing—absorbing huge losses just to get out. 

Refineries are fleeing the Golden State as regulations drive operating costs 26 to 37% higher than the national average. Chevron moved its operations from the Bay Area to Texas, while Phillips 66 powered down its 140,000-barrel-per-day Los Angeles refinery in October.

Ariza warned that as refineries go dark, more Californians will also skip town, noting that the oil and gas industry supports 536,770 jobs and pumps $338 billion into the state’s economy, the outlet reported.

He said Valero’s accelerated shutdown comes after the company scrapped its crude oil contracts back in October.

“Now, Valero is not even seeking to try and sell the refinery,” Ariza told the outlet in December.

“Even after the state tried to convince Valero to remain open, they elected to shut down. And instead of shutting down in April, they shutdown in January. All due to the state’s egregious regulations and unprecedented unjustified fines.”

Don’t expect Apply or Nvidia to follow any time soon, but the writing is on the wall for the state: as long as they travel down this path, the middle class will suffer, the wealthy will flee, and businesses will look elsewhere to invest. 

California is still rich in both natural beauty, and for now human capital, but if tech companies start investing elsewhere a lot of the jobs will follow. Austin is already a tech Mecca, and AI companies will look outside California for reliable energy. California’s quality of life advantages are being eroded by damaging policies, and not everybody wants their kids to become gay communists. 

Even today, standing up in the hills overlooking San Francisco, it looks like a paradise. But strolling the streets strewn with drug needles, homeless encampments, and human feces, it is losing its charm for many. 

Rome looked pretty good under Augustus, which may be why handing so much power over to an emperor seemed like a good bet. But not so much with Caligula and Nero. 

California is being run by a political class who would make Nero blush. 

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