California faces a potential economic crisis as two major refineries close due to regulatory pressures, threatening skyrocketing gasoline prices and widespread job losses.
At a Glance
- Phillips 66 refinery in Los Angeles will close by late 2025, affecting about 900 employees.
- Valero’s refinery in Benicia will cease operations by April 2026, impacting around 400 direct jobs.
- Together, closures eliminate roughly 20% of California’s refining capacity.
- Analysts predict gasoline prices could reach $8 or higher by late 2026.
- State regulations cited as primary reasons for the closures, sparking policy debates.
Refinery Shutdowns Fuel Price Spike Fears
California is bracing for an economic shock as two major refineries—Phillips 66 in Los Angeles and Valero’s facility in Benicia—prepare to shut down operations permanently, citing an inability to remain profitable under stringent state regulations. Together, these closures will remove nearly 20% of California’s refining capacity, intensifying concerns over fuel availability and prices.
Industry analysts warn that reduced local refining could see gasoline prices surge dramatically. Current projections indicate pump prices could climb from today’s statewide average of approximately $4.85 per gallon to as high as $8.40 by late 2026. According to Pipeline & Gas Journal, such an unprecedented spike would put significant economic strain on households already grappling with California’s notoriously high cost of living.
Watch a report: California Refinery Closures Could Push Gas Prices Beyond $8.
Economic Fallout and Employment Crisis
The ripple effects of refinery shutdowns extend beyond gasoline prices. Direct job losses are estimated to total about 1,300 positions, while indirect job losses could affect an additional 2,000 to 3,000 workers. Phillips 66 alone employs approximately 900 individuals at its Los Angeles refinery, while Valero’s Benicia refinery employs around 400 workers.
Local communities dependent on these refineries face potential revenue shortfalls. Spectrum News notes the loss of well-paying refinery jobs could severely impact regional economies, creating financial hardships and reducing tax bases critical for local public services and infrastructure maintenance.
Regulatory Pressures Prompt Policy Reactions
Refinery operators have explicitly blamed California’s stringent regulatory environment for their decision to cease operations. Compliance with the state’s Low Carbon Fuel Standard, cap-and-trade regulations, and steep excise taxes significantly increase operational costs for refiners. In response, policymakers, including Governor Gavin Newsom, are considering adjustments to environmental regulations or incentives for biofuel conversions to mitigate the fallout.
However, transitioning existing facilities to alternative fuel production or importing refined gasoline from other states or countries could take years and raise additional environmental concerns due to increased tanker emissions. The Independent Women’s Forum reports growing calls from industry stakeholders to ease regulations, highlighting the delicate balance between environmental goals and economic stability.
California now stands at a critical crossroads, balancing its commitment to environmental standards against the immediate economic pressures posed by these refinery closures. The decisions made in the coming months could set crucial precedents for other states navigating similar energy and regulatory challenges.
