News Summary

California is set to experience a significant gas price increase, potentially rising by 75% by 2026, due to the impending closure of two major refineries. The Phillips 66 and Valero refineries play crucial roles in local gas production, and their shutdowns could lead to escalating fuel costs and substantial job losses. This situation may further strain California’s already challenged economy, with additional pressures from high regulatory costs and a looming budget deficit.

California is bracing for a significant spike in gas prices, which could soar by 75% by the end of 2026 due to anticipated closures of two major refineries. The Phillips 66 refinery in Los Angeles is expected to shut down by the end of 2025, while the Valero refinery in Benicia is scheduled to cease operations by April 2026. Together, these refineries account for approximately 20% of California’s local gas production.

If these closures proceed as planned, projections indicate that gas prices could rise to around $8.43 per gallon, a stark increase from current estimates of $6.43 per gallon attributed to the Phillips 66 closure. Such a dramatic rise in fuel costs would significantly impact the economic landscape of the state, further exacerbating existing financial challenges.

In addition to the rise in gas prices, these refinery closures are likely to have dire implications for employment. Approximately 1,300 jobs are directly associated with the operations of these refineries. However, considering the job multiplier effect of 2.3, the total job losses across the state could approach 3,000.

The reasons behind the closures are multifaceted, with particular attention on the challenges posed by strict regulations under the Low Carbon Fuel Standard. These regulations have made it increasingly difficult for refineries to operate profitably. There are discussions surrounding potential changes to this standard that may stave off the closures and help retain local job opportunities.

Current and Historical Production Data

Currently, California produces only 23.7% of its own petroleum requirements, which reflects a significant increase in reliance on imported oil. Historical data illustrates a dramatic shift: in 1982, California met 62% of its petroleum needs through in-state production. More recently, California has accounted for only 2.5% to 2.7% of total U.S. crude production.

Economists are projecting that a decrease in refinery operations could lead to a gasoline shortfall ranging from 6.6 million to 13.1 million gallons per day. The contraction in gasoline production could adversely affect California’s GDP, affordability of living, and personal income, creating a ripple effect throughout the local economy.

Government Response and Regulatory Measures

The administration of Governor Gavin Newsom faces mounting pressure to address the looming fuel supply crisis stemming from the refinery closures. Recent regulatory measures proposed by Newsom are aimed at enhancing fuel supply stability. However, the long-term efficacy of these strategies remains in question as complexities surrounding local production continue to evolve.

These refinery closures are expected to exacerbate California’s significant budget deficit, which currently stands at $73 billion, alongside state and local government debt totaling approximately $1.6 trillion. The potential rise in gas prices is particularly concerning, especially when compared to California’s average gas price of $4.918 in April, which is markedly higher than the national average of $3.260.

Challenges for Local Refiners

Local refiners in California confront various challenges, including high regulatory costs, which significantly increase the price of gasoline compared to other states. As the situation develops, stakeholders across the state are closely monitoring the dynamics of fuel production and the potential implications for consumers and the economy overall.

As California’s landscape shifts due to these refinery closures, the outlook for both gas prices and economic stability remains uncertain, with key stakeholders advocating for necessary regulatory adjustments to prevent further crises.

California Faces Major Gas Price Surge Due to Refinery Closures

News Summary

Current and Historical Production Data

Government Response and Regulatory Measures

Challenges for Local Refiners

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Author: HERE Huntington Beach