The Central Valley's Indigenous peoples knew about and used the Valley's natural oil seeps and tar pits for thousands of years before white settlers discovered them in 1864. Oil was first discovered in the extreme southwestern portion of the Valley near McKittrick and Reward. In 1865, the Buena Vista Petroleum Company opened a refinery ten miles north of McKittrick, which produced kerosene for lamps, lubricants for wagon wheels, candle wax, and asphalt. Asphalt was the Valley's key resource--it was considered better quality than asphalt imported from Trinidad, the world's main supplier. Asphalt production was very hard on both the landscape and the workers, and transporting the finished asphalt was challenging because there was no rail service to the western side of the Valley. Throughout the latter half of the 19th century, asphalt extraction continued and explorers began to experiment with drilling for oil as more and more oil fields were discovered (including the Midway-Sunset field, today one of the largest fields in the continental U.S.).

In 1902, the arrival of rail to the western San Joaquin Valley made further development of extensive fields like Midway-Sunset economically feasible. The growing dependence of the U.S. on rail for shipping and industry helped drive the need to develop this field as railroads shifted from coal to oil as their primary fuel. Exploration of these oil fields was characterized by frequent discoveries of "gushers," or spectacular fountains of oil caused by tapping oil reserves under high pressure without sufficient control. The most famous of these gushers, the Lakeview Gusher, was created in 1910 and resulted in one of the largest oil spills in history, with more than 9 million barrels spilled (compared to 4-5 million barrels in Deepwater Horizon). The oil released by the gusher nearly contaminated Lake Buena Vista, which at the time was a key source of irrigation and drinking water.

The railroads also enabled the development of towns in the western San Joaquin Valley. Taft is perhaps the most notable of these towns: it was located directly between the Midway-Sunset field and the Buena Vista field, and was once the headquarters of Standard Oil (now Chevron). The town's economy was (and, to some degree, remains) heavily dependent on the oil industry, which employed the majority of the town's residents. These jobs, which were often high-paying compared to other opportunities in the region (e.g. agricultural labor), were not accessible to everyone: oil companies only hired whites. Taft was also a "sundown town"--a town where African Americans were not allowed after dark.

At the beginning of the twentieth century, most of the prospective areas on the southwestern side of the San Joaquin Valley, including Midway-Sunset and Elk Hills fields, were in the public domain. Attempts to apply laws written for the disposal of agricultural and mining lands led to conflicts and reckless drilling. Mining laws required an actual discovery before a patent would be granted. As a result, rival claimants drilled simultaneously. The first to drill a well that hit oil or gas received title to the tract. There was no protection from resources being drained by adjacent wells or from wells introducing water or draining gas pressure from reservoirs in adjacent tracts. This began to change with the Navy's reservation of the Elk Hills Oil field in 1909 and transformed with the formation of the Department of Petroleum and Gas in the California State Mining Bureau. The department's mission was "to supervise the drilling, operation, maintenance and abandonment of petroleum or gas wells in such a manner as to prevent damage to the petroleum and gas deposits of the state from infiltrating water and other causes."

Oil became increasingly critical during World War I. California was providing most of the country's oil, but the government and industry worried about the state's ability to meet rapidly rising future demands. This spurred both technological innovation in oil extraction and the discovery of many new oil fields, including Mount Poso, Kern River, Edison, and Kettleman Hills. Throughout the 1920s and 1930s, oil companies in the San Joaquin Valley worked to expand the definition of "recoverable" oil, which again became an issue of national importance during World War II. By the late 1950s, companies knew of billions of barrels of viscuous, heavy oil that could not be extracted using existing methods. The creation of the "steam flooding" method in the early 1960s allowed the extraction of much of this oil, contributing to the peak of San Joaquin Valley oil production in the late 1980s. However, the extraction of this oil produced large amounts of air pollutants, particularly nitrous oxide and sulfur dioxide, and contaminated the water injected into the wells. Some of this water was treated and used as irrigation water, and cogeneration helped generate electricity and reduce air pollution by using natural gas in the extraction process.