California Faces Gasoline Supply Crisis Amid Refinery Closures

California is poised to experience a significant gasoline supply crisis as two major refineries, Valero’s Benicia refinery and Phillips 66’s Los Angeles refinery, are set to close by 2026. Together, these facilities account for approximately 17% of the state's gasoline supply. The closures are expected to exacerbate California's already high gas prices, which average $4.34 per gallon—about $1.40 higher than the national average. Experts predict that prices could rise by an additional 50 cents per gallon, potentially reaching extreme scenarios of $10 to $12 per gallon if supply issues persist.

Gas prices in California, the world's fifth-largest economy, could hit $12/gallon, and here's the worrying reasonCNN

Both refineries have cited high operating costs and stringent environmental regulations as primary reasons for their shutdowns. Phillips 66's CEO Mark Lasiher described the Los Angeles refinery as a "challenged asset," while Valero has reportedly spent around $1 billion preparing to close its facility. The closures reflect a broader trend of refinery operators withdrawing from California due to the state's regulatory environment, which is considered the most stringent in North America.

Gas prices in California, the world's fifth-largest economy, could hit $12/gallon, and here's the worrying reason

California state officials maintain that there will not be any gasoline shortages, pointing to the Martinez refinery, which is expected to return to normal capacity in early 2026. They argue that the state will adapt by importing more refined oil products to meet its cleaner fuel standards. However, industry experts warn that California's geographic isolation from major refining hubs complicates the replacement of lost supply, making the state particularly vulnerable to price spikes.

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Critics, including Jodie Muller, CEO of the Western States Petroleum Association, express concern that the continued closure of refineries will weaken the supply system, leading to higher prices and potential disruptions. Lawmakers have also raised alarms about the implications for energy security, particularly given California's reliance on local fuel production for over 30 military bases, which could be jeopardized by reduced in-state refining capacity.

Gas prices in California, the world's fifth-largest economy, could hit $12/gallon, and here's the worrying reason

The impact of these refinery closures extends beyond fuel prices. As gasoline costs rise, California residents may need to reconsider their transportation options, potentially shifting towards carpooling, public transit, or more fuel-efficient vehicles. The state's ambitious plans to phase out gasoline-powered vehicles by 2035 further complicate the situation, as the transition to electric vehicles is still in its early stages, with only about 6% of cars on California roads being electric or plug-in hybrids.

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• “The loss of the refineries are certainly going to result in California having much shorter gasoline supplies,” — Andy Lipow, President, Lipow Oil Associates

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• “These companies are making business decisions (based on conditions) years down the road and decided that California is a difficult place to do business,” — Jodie Muller, CEO, Western States Petroleum Association

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• “As California refining capacity decreases over time, the state will import less crude and more refined oil products, which refiners around the world now produce to meet cleaner burning fuel standards in California and elsewhere,” — California Energy Commission

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California's gasoline supply crisis, driven by the impending closures of key refineries, poses significant challenges for drivers and raises concerns about energy security. While state officials express confidence in managing the transition, the potential for sustained high prices and supply disruptions remains a pressing issue for the state's economy and its residents.

Gas prices in California, the world's fifth-largest economy, could hit $12/gallon, and here's the worrying reason