Even as drivers continue to demand more than 1 billion gallons of gasoline per month, California’s hostile, high-cost policy environment discourages refinery operators from maintaining fuel production capacities in the Golden State.
This spring, Valero announced an intent to “idle, restructure, or cease refining operations” at its Benicia facility in April 2026. That announcement came on top of Phillips 66’s plans to close its Wilmington refinery by the end of this year.
“Between the two of them, they produce almost 20% of California’s gasoline … That means you have to bring in gasoline from all over the world, and that means you have to have port facilities, and you have to have pipelines, you have to have places to store it, and California is not prepared on those fronts.”
While certainly alarming, the exodus of refineries from the California market should not come as a surprise.
Valero noted in an October 2022 letter to the state Energy Commission that “California policy makers have knowingly adopted policies with the expressed intent of eliminating the refinery sector.” The letter explained in detail how “California is the most challenging market to serve in the United States” given its isolation, environmental requirements, and restrictions against increasing capacity.
Some in Sacramento openly recognize how California’s approach to energy is driving fuel producers out of business.
As the Los Angeles Times reported last year:
“State Sen. Steve Bradford (D-Gardena), who represents the Wilmington-area district where the [Phillips 66] refinery is located, sees the planned closure as the culmination of ‘a death of 1,000 cuts’ from California energy policy ‘that led us to where Phillips saw no real future.’”
Bradford noted that “not only will gasoline prices rise” with the closure, “but now we’ll have ships docked at our ports spewing pollution while they’re unloading gasoline from countries that don’t have the same environmental standards that we have.”
David Hackett, an industry expert who served on the state’s Petroleum Market Advisory Committee, pointed to “an onerous regulatory environment that increases costs” as a key factor in the Phillips 66 decision, noting that the company’s West Coast refining operations have only broken even over the past eight years.
“They looked at the profitability of the place and compared it with the other businesses that they have, and it didn’t make the cut.”
With the Valero and Phillips 66 closures, California – which once had over 40 facilities capable of producing gasoline – will be left with just seven refineries, forcing the state to increasingly rely on imports produced as far away as Asia to meet fuel demands. Notably, the Energy Commission warns that importing refined products is more expensive than producing them in-state.
Sacramento has long ignored warnings that state policies could stifle an industry that tens of millions of Californians depend on every day. Now, as those warnings become reality, Governor Newsom may be shifting course.
In a recent letter to the Energy Commission, Newsom directed the agency to ensure refinery operators “continue to see the value in serving the California market” – explicitly recognizing how the state will need gasoline for decades to come.
With fuel production set to decline far faster than demand over the coming months, California needs action now. Consumers and businesses are paying the price for the Golden State’s hostile, high-cost policy environment.
