California Faces Gas Crisis as Major Refineries Close

Categories: California Business NewsCalifornia News

Drivers worry about rising fuel costs at a California gas station.

News Summary

California is bracing for a gas crisis as the Valero Benicia and Phillips 66 refineries announce closures, potentially leading to a 20% reduction in gas supply and prices soaring over $8 per gallon. Lawmakers and experts express concern over fuel affordability, while Governor Newsom’s legislation seeks to monitor gas prices amidst the turmoil. The state’s reliance on imported oil may exacerbate the issue as refineries struggle with supply-demand dynamics, impacting consumers and the economy in the long run.

California lawmakers are raising alarms over an impending gas crisis as two major oil refineries have announced plans to cease operations. The Valero Benicia Refinery in the Bay Area is slated to close in April 2026, while the Phillips 66 refinery in Southern California will halt production within the next year. These closures are expected to result in a 20% reduction in the state’s gas supply, prompting concerns about skyrocketing fuel prices.

Currently, gas prices in Walnut Creek hover just under $5 per gallon, with some drivers reporting fuel bills exceeding $100 to fill their tanks. Lawmakers, including Democratic Assemblymember Connie Petrie-Norris, have questioned why refineries are shutting down despite previously reported high profits from oil production. Economic experts, such as UC Berkeley’s Severin Borenstein, have warned that if these closures proceed, Californians could see an “abrupt increase” in gas prices, potentially leading to soaring costs.

Estimates from the University of Southern California indicate that gas prices in California could surge by 75%, reaching over $8 per gallon by next year. The closure of the Valero and Phillips 66 refineries, which account for nearly 18% of California’s crude oil capacity, is also raising concerns about the reliability of the state’s fuel supply going forward. As consumption rates decline within the state, there is apprehension that reductions in refinery capacity may surpass decreases in demand.

California’s regulatory environment for the oil industry is among the most stringent in North America, according to the CEO of Valero. As of 2024, the state is notable for its reliance on imported oil—it imports approximately 63.5% of its oil supply. Experts attribute rising fuel prices primarily to shifts in supply and demand dynamics compounded by refinery closures.

In light of these challenges, Governor Gavin Newsom has implemented legislation aimed at monitoring gas prices and curtailing price gouging practices. Newsom, who has outlined a vision to phase out gas-powered vehicles by 2035 in an effort to mitigate emissions, recognizes the critical need for cooperation with refiners to secure a stable gas supply for Californians.

Despite forecasts indicating lower prices during the summer driving season, longer-term expectations for gasoline costs remain discouraging. Without adjustments to refinery operations or alternatives to address the supply gap, the state’s residents may soon face significant financial strain due to rising fuel costs.

As the situation unfolds, the reliance on imported oil and the ongoing challenges faced by the state’s refineries highlight the need for strategic planning to ensure the availability of affordable gas. The closures of such significant players in California’s oil sector could have repercussions for consumers, businesses, and the overall economy in the coming years.