California Refinery Closures - More Bad News…
California's Refinery Closures and the Looming Fuel and Asphalt Shortages
The impending closures of California's Phillips 66 Los Angeles and Valero Benicia refineries threaten to create a daily supply shortfall exceeding 6 million gallons due to a confluence of reduced production capacity, logistical constraints, and regulatory barriers. These facilities collectively process 284,000 barrels per day (bpd) of crude oil, equivalent to 11.9 million gallons daily when converted at a rate of 42 gallons per barrel[1][7]. However, the projected 6.6–13.1 million gallon shortfall[4][10] stems specifically from the loss of gasoline production, which represents a critical subset of total refined output. The Valero Benicia refinery also produces 45% of Northern California’s asphalt, potentially impacting road maintenance.
Refinery-Specific Production Losses
Phillips 66 Los Angeles Refinery:
Processes 139,000 bpd of crude oil, producing 85,000 bpd of gasoline (3.57 million gallons daily)[1].
Supplies CARB-grade gasoline to California, Nevada, and Arizona via pipeline and truck[1].
Valero Benicia Refinery:
Processes 145,000 bpd of crude oil, with 70% of output (101,500 bpd) dedicated to gasoline (4.26 million gallons daily)[2].
Provides 25% of the San Francisco Bay Area’s CARB gasoline and 45% of Northern California’s asphalt[16].
Combined, these closures eliminate ~7.83 million gallons of daily gasoline production, directly contributing to the shortfall[1][5].
California’s Consumption-Demand Mismatch
California consumes 13.1 million gallons of gasoline daily but produces only 24% of its crude oil needs[9]. The state already relies on imports for 76% of its crude supply, primarily from foreign sources[9]. The refinery closures will slash domestic refining capacity by 21%, forcing California to bridge the gap through:
Increased imports: Limited by CARB fuel specifications, which only 15% of global refiners can meet[5].
Logistical delays: Shipping fuel from the U.S. Gulf Coast takes 10 days, while Asian imports require 3 weeks[5].
Regulatory and Infrastructure Constraints
CARB Gasoline Requirements:
California’s unique fuel blend reduces emissions but restricts supply sources. During the 2015 Torrance refinery outage, the state imported gasoline from as far as India and Russia, but such shipments are costly and slow[5].
Pipeline Limitations:
California lacks pipelines connecting to major refining hubs in the Gulf Coast or Midwest, unlike other U.S. regions. This isolates its market, making rapid supply adjustments impossible[19].
Regional Dependencies:
Arizona and Nevada rely on California for 33% and 88% of their gasoline, respectively[1].
Closures will force these states to compete for the same constrained imports, exacerbating California’s deficit[10].
Economic and Operational Vulnerabilities
Seasonal Maintenance: The Phillips 66 closure in October 2025 coincides with the annual maintenance period, when inventories are already low. Historical precedents, like the 2022 price spike ($2.45/gallon premium), highlight systemic risks during supply crunches[7].
Global Market Volatility: Reliance on maritime imports exposes California to geopolitical disruptions, hurricanes, and labor strikes. For example, Asian jet fuel exports to the West Coast recently hit one-year highs due to refinery outages, illustrating the fragility of import-dependent supply chains[5].
Projected Shortfall Mechanics
The 6.6–13.1 million gallon daily shortfall[4] arises from:
Direct production loss: ~7.83 million gallons of gasoline[1].
Inability to offset losses:
Washington State refineries, which California historically relies on for backups, operate at 648,000 bpd—less than 40% of California’s pre-closure capacity[15].
Import terminals and storage facilities lack capacity to handle sudden surges in demand[10].
Policy-Driven Challenges
California’s regulatory environment exacerbates the shortfall:
Low Carbon Fuel Standard (LCFS) and cap-and-trade programs add $0.54/gallon to production costs, discouraging refiners from maintaining operations[4].
Assembly Bill X2-1 mandates minimum fuel inventories but fails to address the root causes of refinery closures, such as declining profitability[7].
Conclusion
The projected shortfall reflects not just lost production but a systemic failure to reconcile California’s environmental ambitions with energy reality. Without immediate infrastructure investments or regulatory reforms, the state’s dependency on volatile global markets will leave consumers vulnerable to prolonged shortages and price instability[5][14].
Sources
[1] Los Angeles Refinery: Advanced Fuel Processes - Phillips 66 https://www.phillips66.com/refining/los-angeles-refinery/
[2] [PDF] Valero Benicia Refinery August 2019 Overview - Solano County https://www.solanocounty.com/civica/filebank/blobdload.asp?BlobID=30995
[3] Has Gasoline Use in California Peaked? - The Equation https://blog.ucs.org/dave-reichmuth/has-gasoline-use-in-california-peaked/
[4] Two Refinery Closures Could Lead to $8 Gas in California https://www.iwf.org/2025/05/16/two-refinery-closures-could-lead-to-8-gas-in-california/
[5] California gas prices could reach $8 by end of 2026, report says https://www.cbsnews.com/sacramento/news/report-california-gas-prices-8-dollars-in-2026/
[6] Planned closure of Valero's Benicia refinery ups the CO2 stakes in ... https://www.gasworld.com/story/planned-closure-of-valeros-benicia-refinery-ups-the-co2-stakes-in-california/2155030.article/
[7] REFINERY NEWS: Phillips 66 said it will cease operations at Los ... https://www.spglobal.com/commodity-insights/en/news-research/latest-news/refined-products/101624-refinery-news-phillips-66-said-it-will-cease-operations-at-los-angeles-refinery-in-q4-2025
[8] Valero considers possible closure of Benicia refinery in 2026 https://www.cbsnews.com/sanfrancisco/news/valero-benicia-oil-refinery-2026-possible-closure-shutdown/
[9] California's Economy is Supported by Oil and Gas | CEI https://www.energyindependenceca.com/californias-economy-is-powered-by-oil-and-gas/
[10] Local Gas Prices Could Exceed $8 By 2026 As Refineries Close ... https://pasadenanow.com/main/local-gas-prices-could-exceed-8-by-2026-as-refineries-close-report-warns
[11] California Gas Prices Forecast to Reach $8 by 2026, Report Warns https://www.koreadailyus.com/california-gas-prices-forecast-8-dollars/
[12] Benicia Refinery - Valero https://www.valero.com/about/locations/benicia-refinery
[13] Lake Charles Manufacturing Complex - Phillips 66 https://www.phillips66.com/refining/lake-charles-refinery/
[14] California gas could reach $8 by 2026 due to refinery closures and ... https://www.washingtonexaminer.com/policy/energy-and-environment/3406882/california-gas-refinery-closures-regulation/
[15] California gas prices could reach $8 a gallon by 2026, new report ... https://www.foxla.com/news/california-gas-prices-8-dollars-a-gallon-by-2026-usc-study
[16] [PDF] BENICIA REFINERY - Valero https://www.valero.com/sites/default/files/valero-documents/Benicia%20Refinery%20Fact%20Sheet%20MAR2020.pdf
[17] California regs force Phillips 66 refinery closure - Odessa American https://www.oaoa.com/local-news/california-regs-force-phillips-66-refinery-closure/
[18] California gas prices could reach $8 a gallon by 2026, new study ... https://www.ktvu.com/news/california-gas-prices-8-dollars-a-gallon-by-2026-usc-study
[19] Valero books $1.1 billion impairment, may idle California refinery https://finance.yahoo.com/news/valero-books-1-1-billion-004830729.html
[20] Gov. Newsom Smears USC Professor Mische for Reporting CA is ... https://californiaglobe.com/fr/gov-newsom-smears-usc-professor-mische-for-reporting-ca-is-facing-8-43-gallon-gas-as-refineries-close/
[21] California's Oil Refineries - California Energy Commission https://www.energy.ca.gov/data-reports/energy-almanac/californias-petroleum-market/californias-oil-refineries
[22] Energy Transition Squeeze: The Phillips 66 Los Angeles Refinery ... https://stillwaterassociates.com/energy-transition-squeeze-the-phillips-66-los-angeles-refinery-closure/
[23] USC professor predicts California gas prices could rise to over $8.40 ... https://www.abc10.com/article/news/local/california/california-gas-reces-rise/103-00726892-a7fc-4eea-baad-9dea58eaf466
[24] California Gas Prices May Soar to Over $8 Per Gallon by 2026 https://www.moneytalksnews.com/california-gas-prices-may-soar-to-over-per-gallon-by/
[25] California Oil Refinery History - California Energy Commission https://www.energy.ca.gov/data-reports/energy-almanac/californias-petroleum-market/californias-oil-refineries/california-oil
[26] Valero Announces Notice to the California Energy Commission ... https://investorvalero.com/news/news-details/2025/Valero-Announces-Notice-to-the-California-Energy-Commission-Regarding-its-Benicia-California-Refinery/default.aspx
[27] California's Refinery Situation Looks Like It Will Get Worse - IER https://www.instituteforenergyresearch.org/fossil-fuels/gas-and-oil/californias-refinery-situation-looks-like-it-will-get-worse/
[28] [PDF] BENICIA REFINERY - Valero https://www.valero.com/sites/default/files/valero-documents/2024-06/Benicia%20Fact%20Sheet.pdf