Facing higher gas prices, California grapples with oil refinery closures Image By EPN Staff Two planned refinery closures would cost California 17% of its oil refinery capacity over the next year, according to the Energy Information Administration. The closures are expected to drive up gas prices, not only in California, which often has the nation’s most expensive gasoline, but in other western states too. California officials are reportedly scrambling to avoid at least one of the closures. Reuters reported this month that the California Energy Commission is trying to broker a sale that will keep Valero’s Benicia refinery in the Bay Area open beyond an announced April 2026 closure date. “The rare attempt by a state government to broker the sale of privately-owned infrastructure reflects its growing concerns over protecting fuel supplies in the most populous U.S. state and keeping a lid on prices, where California's nearly 28 million drivers already pay among the highest prices for gasoline in the country,” the news service reported. Why it matters Losing California refinery capacity would likely increase gasoline imports, and West Coast gas imports already hit a record earlier this year, the EIA said. That could push West Coast retail gasoline prices further upward, the EIA said, even as they fall elsewhere in the country. The increases would be larger, except the EIA expects lower crude oil prices overall next year, and crude oil costs account for about half of the price of gasoline. Together the two refineries slated for closure process close to 300,000 barrels a day: Phillips 66 announced its plan in October to close its Wilmington refinery near Los Angeles later this year. Valero made its announcement in April, saying it would close its facility by the end of April 2026. The announcements were part of a West Coast trend – Phillips 66 shut down its refining operations at its Rodeo facility in 2024 and Marathon closed a Martinez refinery in 2020, the EIA said. But the Valero announcement, in particular, sent shockwaves. “WOW,” Patrick De Haan, an oil market analyst, said on social media following the announcement. “$VLO (Valero) will be shutting down its 170kbpd Benicia, CA refinery by April, 2026. Coupled with the loss of $PSX's 139kbpd Los Angeles refinery later this year, will drop the number of refineries in California to just 7. A 309kbpd loss in refining capacity is huge. “It's clear that the political environment in California has been hostile to refiners, and the state badly needs to revise its mentality or face a declining number of refineries and higher prices,” De Haan said. The bigger picture Valero attributed its decision to “years of regulator pressure” and air quality violation fines, including an $82 million penalty in 2024, Yahoo Finance reported. Phillips 66 cited similar challenges from California’s environmental regulations, the site reported. U.S. Energy Secretary Chris Wright lamented California’s policy-driven reliance on foreign oil earlier this year in an interview with Energy Platform News. California consistently has some of the highest gas prices in the United States, partly due to its heavier environmental regulations and fuel blend requirements, and also partly due to geography. “One reason is the relative lack of logistical connectivity on the West Coast to other refinery hubs in the United States, such as the Gulf Coast,” the EIA said. That also means refinery closures are expected to have an out-sized impact on western states because the supply “cannot be easily filled by other refineries elsewhere in the country,” the EIA said. Additional details Replacement fuels would most likely come from Asia, the EIA said, noting that some refineries in India and South Korea can meet California fuel specifications. Phillips 66 plans to produce some California-grade gasoline at its refinery in Washington, the EIA said. “Arizona, which also has a unique gasoline blend, and Nevada receive fuel shipments from California refiners and are also likely to be affected by the reduced regional supply,” the EIA said.