388200 06: Smoke rises around towers at a Tosco oil refinery at sunset after a fire burning as hot as 2,000 degrees Fahrenheit melted steel and sent a huge cloud of toxic smoke across the urban landscape, April 23, 2001 in Carson, CA, 15 miles south of Los Angeles. The refinery was running at full capacity, around 125,000 barrels of oil per day, when a blaze broke out in the ''coker'' unit, where petroleun coke is burned in the making of gasoline. Lost production could add to the recent spike in gasoline prices, which analysts say could hit $3 a gallon or more. (Photo by David McNew/Newsmakers)
California – California is bracing for the closure of two major oil refineries that together account for nearly one-fifth of the state’s refining capacity. Phillips 66’s Los Angeles-area facility and Valero’s Benicia plant are both scheduled to shut down operations by 2026, a development that signals a significant shift in California’s energy infrastructure and economic footprint. The decision by the companies, attributed to a combination of market dynamics and the state’s stringent environmental regulations, has sparked concern from lawmakers, labor unions, and energy economists alike.
The closures will eliminate roughly 300,000 barrels per day of refining capacity. Industry analysts warn this could intensify California’s already precarious fuel market, which is isolated from the rest of the country due to unique gasoline formulations and limited pipeline connections. With California refining only about 24% of the oil it consumes, the state will be forced to increase reliance on imported fuel. That reliance comes with financial and environmental costs, including higher shipping expenses and increased emissions at ports.
The job losses tied to the closures will ripple through communities. Nearly 1,300 workers and contractors between the two sites stand to be displaced. Those employees are also economic anchors for local economies, where their wages contribute to tax revenues and small business vitality. With refineries supporting dozens of ancillary services, the losses will stretch far beyond the gates of the facilities themselves.
For lawmakers and regulators, the challenge now lies in managing a just transition. Governor Gavin Newsom has urged the California Energy Commission to ensure fuel reliability and explore whether refineries can remain financially viable under state rules. Meanwhile, new legislation such as ABx2-1 gives the commission broader authority to regulate fuel storage and inventory—but it remains unclear how, or when, those powers will be exercised.
Experts stress the complexity of this transition. Fuel economist Severin Borenstein of UC Berkeley has warned that refinery closures are not a smooth or linear process. Abrupt exits could leave the market undersupplied, while prolonged transitions might create costly oversupply. Adding to the uncertainty is what Borenstein calls a “mystery surcharge”—a persistent price gap between California fuel and the national average, even after accounting for taxes and regulations.
California currently has the highest gas prices in the U.S., hovering around $4.85 per gallon compared to the national average of $3.16. And though consumers have long paid a premium in exchange for cleaner air and stricter standards, the looming supply disruptions raise questions about the future cost of California’s environmental leadership.
