EIA:Calif. Faces Fuel Cost Spikes after 2 Refinery Closure
7/09 11:18 AM
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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