California Refineries Announce Closures, Raising Gas Concerns

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Gas prices are reaching new highs as refinery closures loom in California.

News Summary

California lawmakers are alarmed as the Valero Benicia and Phillips 66 refineries announce closures, which could slash the state’s gas supply by 20%. Current gas prices hover around $5 per gallon, with predictions of a potential rise to over $8 within a year. While gas consumption has decreased, refinery closures may exacerbate the situation, prompting Governor Newsom to to enhance cooperation with operators and curb potential price gouging. The upcoming summer driving season may see temporary price relief, but the long-term outlook for gas prices remains bleak.

California lawmakers are expressing alarm as two major oil refineries have announced their plans for closure, intensifying concerns over a potential gas crisis in the state. The Valero Benicia Refinery, located in the Bay Area, is set to cease operations in April 2026, while the Phillips 66 refinery in Southern California plans to shut down within the next year. Together, these closures could lead to a 20% reduction in California’s gas supply, which is raising red flags among state officials.

Current gas prices in the state are around $5 per gallon, with some drivers reporting that they are paying over $100 to fill their tanks. Concerns among lawmakers, including Democratic Assemblymember Connie Petrie-Norris, have been raised about the closures of these refineries, especially given that they were reportedly generating high profits prior to these announcements.

As the situation unfolds, experts warn that if the plans proceed, California could see an abrupt increase in gas prices. A study conducted by USC indicates that California’s gas prices could soar by 75%, potentially exceeding $8 per gallon within the next year. Valero and Phillips 66 together account for nearly 18% of California’s crude oil processing capacity, further exacerbating concerns regarding gas supply.

The state has seen a decline in gas consumption, yet the capacity reductions at refineries may be outpacing this drop in demand. The state’s stringent regulations governing oil companies contribute to the ongoing discussions. According to Valero’s CEO, California has some of the toughest regulations on oil companies in North America. Presently, California imports 63.5% of its oil supply, a situation that makes it even more vulnerable to disruptions in refinery operations.

Factors that influence rising fuel prices are closely linked to supply-demand dynamics and the looming refinery closures, as indicated by various consulting firms. In response to these developments, Governor Gavin Newsom has outlined an ambitious plan to phase out gas-powered cars by 2035 as part of efforts to alleviate emissions. However, federal politics remain a significant barrier to the effective implementation of this initiative.

In light of the refinery announcements, Governor Newsom has called for enhanced cooperation with refinery operators to ensure a stable and secure gas supply for Californians. Recent legislative measures introduced by the governor aim to monitor gas prices and curb potential price gouging during crises.

Despite predictions of temporary reductions in gas prices during the upcoming summer driving season, longer-term forecasts remain pessimistic. Analysts caution that the overall outlook for gas prices continues to be a cause for concern as Californians brace for the potential implications of these refinery closures and the resultant impact on fuel supply and pricing dynamics.