Justin Hughes, left, Randy Ramirez and Steven Wells, right, of Bridwell Oil Company, work in an injection well on the Bridwell River Ranch. Progress Ed 2019 Oil Industry 3
Sacramento, California – Multiple major refineries in California have announced plans to shut down operations over the next two years, raising new concerns about future fuel supply, rising gas prices, and the state’s ability to balance its climate goals with consumer needs.
Valero Energy Corp. informed the California Energy Commission (CEC) last month that it would “idle, restructure or cease refining operations” at its Benicia facility by the end of April 2026. This follows a similar announcement by Phillips 66 in October 2023, which plans to halt refining at its Los Angeles-area plant in late 2025.
Both companies cited California’s increasingly strict regulatory environment as a key factor in their decisions. “It’s the most stringent and difficult of anywhere else in North America,” said Valero CEO Lane Riggs during a recent earnings call.
Experts say the closures mark the beginning of a broader trend. “California gasoline consumption is going to decline over time,” said Severin Borenstein, a UC Berkeley energy economist. “We are going to have exit, and we need to figure out — how are we going to handle that exit?”
In response to Valero’s plans, Governor Gavin Newsom directed the CEC to ensure fuel reliability and to work more closely with refiners. He also requested updates to the state’s fuel management strategies by July 1.
Yet, balancing fuel security with California’s clean energy transition remains complex. Borenstein warned that refinery closures could lead to “real imbalances,” particularly if the state doesn’t bolster its infrastructure for fuel imports — such as port capacity and pipelines — in time.
To address refinery regulation, Newsom signed Assembly Bill x2-1 in October 2023. The law allows the CEC to set limits on fuel inventory levels and regulate how and when refiners store or release fuel supplies. But implementation has lagged, and critics argue the law could further discourage companies from operating in the state.
Chevron and labor unions pushed back against the legislation, warning it grants the state “unprecedented authority” and could jeopardize refinery maintenance and worker safety. Meanwhile, the CEC has yet to establish the new rules the law permits.
Economist Sanjay Varshney said California’s fuel predicament is partly self-inflicted, citing high taxes, limited infrastructure, and adversarial state policies toward the oil industry. “The companies are fed up, so they leave,” he said.
While both experts agree California gas prices will remain high, Borenstein noted that cleaner fuel blends and better air quality are a result of these policies. “That’s a choice Californians have made — to have a cleaner environment and to pay extra for it,” he said.
