EIA:Calif. Faces Fuel Cost Spikes after 2 Refinery Closures


   
Kristina Davis
DTN Refined Fuels Market Reporter

    

    

   MIAMI, FL (DTN) -- California is set to lose nearly one-fifth of its 
in-state oil refining capacity within a year, after Phillips 66 and Valero 
announced plans to shut down two major facilities. The move threatens to 
heighten fuel price volatility across the West Coast, as the region becomes 
more dependent on costly and time sensitive imports according to information 
from the Energy Information Administration.

   The shutdowns come as California's already isolated fuel markets brace for 
tighter supply constraints and limited pipeline access. Phillips 66 plans to 
close its 139,000 bpd Wilmington refinery in Los Angeles later this year. 
Valero's Benicia facility, with a processing capacity of 145,000 bpd, is 
expected to cease operations by April 2026, according to the EIA.

   Together, the closures account for 17% of California's total refinery 
capacity and 11% of refining capacity across the West Coast region.

   Due to geographic constraints and the state's environment fuel standards, 
California cannot easily rely on pipeline connections to Gulf Coast refiners. 
Instead, the state imports most of its replacement barrels via waterborne 
shipments from Asia; a route that has delays and other global supply chain 
risks.

   California's strict clean-fuel regulations also add complexity. The state 
mandates a specialized gasoline blend known as CARBOB, which limits the number 
of refineries able to produce the compliant fuel. The EIA shared that while 
some overseas refineries in South Korea and India have adapted to meet the 
state's standards, the added logistical hurdles make supply much less flexible.

   These factors, the EIA projects, will drive gasoline prices higher on the 
West Coast next year even as prices are forecast to fall across other U.S. 
regions. The agency attributes the expected West Coast increases to heightened 
reliance on imports and regional supply limitations.

   In order to buffer price hikes, California Governor Newsom signed into law 
in 2024 a requirement for refiners to maintain minimum levels of fuel 
inventory. A policy, which allows regulators to adjust reserve targets based on 
supply outlooks.

   Analysts, however, warn that declining in-state production could leave 
California more exposed to global disruptions. While falling crude prices may 
offer short term relief at the pump, long term supply security will depend on 
how quickly and reliably the state can source compliant fuel from overseas 
markets.




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