California Faces Gas Supply Crisis as Oil Refineries Close

News Summary

California lawmakers are alarmed by the impending closures of two major oil refineries that could drastically affect the state’s gas supply and prices. The Valero Benicia Refinery will cease operations in 2026, while Phillips 66 plans to shut down within a year. Together, they represent nearly 18% of California’s crude oil capacity, raising concerns of gas price increases up to 75%. Governor Newsom is advocating for cooperation between state officials and refiners to ensure a reliable fuel supply amidst this brewing crisis.

California lawmakers are alarmed as two major oil refineries, Valero Benicia Refinery and Phillips 66, announce closures that could severely impact the state’s gas supply and prices. The Valero Benicia Refinery, located in the Bay Area, plans to cease operations in April 2026, while Phillips 66 in Southern California is expected to close within the next year. Together, these refineries account for nearly 18% of California’s crude oil capacity, raising concerns among officials about a potential 20% reduction in the state’s gas supply.

Current gas prices in locations like Walnut Creek are hovering just below $5 per gallon, with some drivers reporting costs exceeding $100 to fill their tanks. Analysts predict that if the planned refinery closures go ahead, California could see gas prices increase by as much as 75%, eventually surpassing $8 per gallon. The potential jump in prices has prompted questions from state officials about why refineries are shutting down despite high profit margins.

Experts such as Severin Borenstein from UC Berkeley have highlighted the possibility of an “abrupt increase” in gas prices if the refiners follow through with their closure plans. As California’s gas consumption decreases, the capacity reductions in refineries may outpace this drop, contributing to looming supply issues. This contrast between declining demand and diminishing refining capacity poses a significant risk to the state’s fuel availability.

California’s stringent regulatory environment is another factor in the current crisis. According to Valero’s CEO, the state’s regulations on oil companies are among the tightest in North America, complicating operational sustainability. As of 2024, California imports 63.5% of its oil supply, emphasizing its dependency on external sources. The combination of these factors has led to an unstable gas market, where both supply dynamics and refinery closures play critical roles in driving up fuel prices.

Governor Gavin Newsom has voiced concerns regarding the implications of the refinery closures and has set an ambitious goal to phase out gas-powered vehicles by 2035 in an effort to reduce emissions. However, federal political hurdles may complicate this initiative. In response to the refinery announcements, Newsom has encouraged more cooperation between state officials and refiners to ensure a reliable gas supply for all Californians.

In an effort to address rising fuel prices and prevent price gouging, recent legislation introduced by Newsom aims to monitor gas prices closely. The state’s regulatory concerns, combined with active legislative measures, highlight the challenging landscape of California’s gas market. Despite expectations of temporary price reductions during the upcoming summer driving season, long-term forecasts for gasoline prices remain pessimistic, underscoring the potential for escalating fuel costs in the near future.

As lawmakers and economists assess the impact of these refinery closures, stakeholders are urged to consider strategies that can stabilize supply and protect consumers from soaring gas prices. The future of Texas and California’s energy markets remains uncertain, as authorities continue to navigate through both environmental ambitions and the economics of fuel supply.

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