California Oil Refineries Shut Down, Gas Prices Could Reach $8/Gallon

Two large California oil refineries, Phillips 66 and Valero's Benicia refineries, are set to close in 2026, eliminating 284,000 barrels-per-day of refining capacity, roughly 17% of the total used in the state. This is attributed to "years of regulatory pressure" and "significant fines for air quality violations." The closures could lead to higher gas prices, potentially reaching $8/gallon.

Two significant California oil refineries, Phillips 66 and Valero's Benicia refineries, are set to close in 2026, eliminating 284,000 barrels-per-day of refining capacity, approximately 17% of the total used in the state. This decision is attributed to "years of regulatory pressure" and "significant fines for air quality violations" [2].

The closures of these refineries could lead to higher gas prices, potentially reaching $8 per gallon, according to industry experts. Patrick De Haan, head of petroleum analysis at GasBuddy, noted that the state's refinery shutdowns are "already building pressure" and could lead to further instability in the market [2].

California officials are scrambling to mitigate potential supply disruptions and price spikes. Gov. Gavin Newsom's staff has drafted a potential bill to boost oil production within the state, while the California Energy Commission is reportedly searching for a private company to buy and keep the Valero refinery open [2].

The proposed legislation aims to fast-track drilling permits in California, specifically in Kern County, where about 75% of oil production in the state is centered. However, environmental groups have criticized the draft language, labeling it "a blank check" to industry and expressing concerns that it could eviscerate environmental and public health protections under state law [2].

The closures of Phillips 66 and Valero's refineries follow a series of regulatory pressures and fines for air quality violations. Phillips 66, for instance, was ordered to pay $800 million in damages to biofuel maker Propel Fuels for stealing trade secrets [1]. The closures highlight the complex interplay between regulatory pressures, environmental concerns, and market stability in California's oil industry.

References:
[1] https://seekingalpha.com/news/4476166-phillips-66-ordered-to-pay-800m-penalty-in-california-biofuel-trade-secrets-case
[2] https://www.siliconvalley.com/2025/07/30/a-do-over-for-newsom-california-crafts-power-plays-to-tackle-looming-refinery-shutdowns/