Refinery closures increase uncertainty about California’s fuel future

Who didn't see this coming?

Multiple refineries in California have recently declared their intentions to shutter operations, leaving the Golden State uncertain about future fuel supplies and impacts on prices at the pump.

Valero Energy Corp. was the latest to make such an announcement, alerting the California Energy Commission (CEC) last month that it would “idle, restructure or cease refining operations” at its Benicia refinery by the end of April 2026.

Firms are attributing these decisions to the restrictive regulatory environment in California, which is home to the nation’s biggest car market, despite an unparalleled clean energy push.

Following Valero’s announcement that it would be reducing or closing operations at Benicia, in the northern San Francisco Bay Area, Gov. Gavin Newsom (D) reportedly sent a letter to the CEC, directing the regulators to guarantee reliable fuel supplies.


Homer Bhullar, vice president of Valero, referred last week in an earnings call to a “plan to cease refining operations” at Benicia. Lane Riggs, the company’s CEO, on the same call described a regulatory ecosystem that “is the most stringent and difficult of anywhere else in North America.”

Similarly, the Phillips 66 announcement in October described the “long-term sustainability” of the Los Angeles location as “uncertain and affected by market dynamics.”

The ABx2-1 bill, approved in a special legislative session, gives the CEC the ability to set constraints on storage levels for each refiner, fuel and blending component, while also adjusting inventory minimums and establishing conditions under which refiners can draw down or rebuild reserves.

Chevron sent a letter to lawmakers warning that the imposition of new inventory constraints would only cause further price spikes, as first reported by local television station KRCA.

Sanjay Varshney, a finance professor at California State University, Sacramento, had a different outlook on the fuel predicament, arguing that the Golden State is coping with “self-inflicted wounds.”

The higher prices at the pump, he contended, reflect California’s higher gas taxes, the state’s stricter fuel blend requirements and the lack of transportation pipelines.

Varshney said that because Newsom has both historically “used the oil industry as a punching bag” and told “them that they are basically rogues and scoundrels,” doing business right now makes for “interesting” circumstances.

Although Varshney said he believes that California’s climate-oriented policies are well-intentioned, they may be “overly aggressive” when it comes to meeting consumer demands and keeping prices down.

“If you are leading, but nobody is following, can you basically change the world on your own?” Varshney asked.

He suggested, for example, that if everyone nationwide was using a higher blend of gasoline, then all states would be on an “equal footing” and Californians wouldn’t necessarily be paying higher prices than other Americans.

LINK