Democratic Hostility To Oil Industry Causes State to Lose Three More Refineries. Expect $7 a Gallon Gas In 2026.

Los Angeles, CA – September 23, 2025* – California's oil refining industry is in sharp decline, with two major refineries slated to close by mid-2026, slashing the state's crude oil processing capacity by nearly 20%. The closures of Phillips 66's Wilmington refinery and Valero's Benicia facility signal a broader trend driven by declining gasoline demand, stringent environmental regulations, and economic pressures, raising alarms about skyrocketing fuel prices and supply chain disruptions.

The Phillips 66 refinery in Wilmington, which processes 139,000 barrels per day (bpd), began idling operations in early September and is set to fully shut down by the end of 2025, ending the company's crude oil refining in California. Meanwhile, Valero's 145,000-bpd Benicia refinery in the San Francisco Bay Area is scheduled to cease operations by April 2026, citing the state's "regulatory enforcement environment" as a key factor. These closures follow the 2020 shutdown of Marathon's Martinez refinery and the 2025 conversion of Phillips 66's Rodeo facility to renewable diesel, leaving California with just seven crude oil refineries compared to 40 in the 1980s.

The state's refining capacity, currently at 1.62 million bpd, faces a precarious future. Analysts warn that losing these facilities could drive California's already nation-high gasoline prices-averaging $4.61 per gallon in September 2025-to $6.43 by year's end and as high as $8.43 by 2026, a 75% surge. A February 2025 fire at PBF Energy's Martinez refinery underscored the fragility of the state's fuel supply, causing temporary price spikes.

**Why Are Refineries Closing?**

Industry experts point to a perfect storm of challenges. Gasoline consumption has dropped 16% since 2004, fueled by electric vehicle adoption and improved fuel efficiency. California's aggressive climate policies, including the Low Carbon Fuel Standard and the recently signed ABX2-1 requiring minimum fuel inventories to curb price spikes, have added operational costs, though Phillips 66 denied regulations directly caused its closure. Valero, which reported a $1.1 billion impairment charge on its California assets in Q1 2025, highlighted the state's high taxes and maintenance costs. Chevron's 2024 relocation of its headquarters to Texas further reflects the industry's frustrations.

Environmental groups argue the closures align with California's fossil fuel phase-out but warn that increased reliance on out-of-state or foreign fuel imports-up 210,000 bpd in May 2025-could undermine climate goals if those fuels don't meet California's strict standards. Critics, including Republican lawmakers and officials in neighboring Arizona and Nevada, accuse the state of mismanaging its energy transition, risking supply shortages. California lacks pipelines connecting to other U.S. refining hubs, forcing dependence on costly and potentially dirtier imports via ships or rail.

**Economic and Social Fallout**

The closures threaten significant economic impacts. Phillips 66's shutdown will eliminate approximately 600 jobs, while Valero's could cut over 400, with Benicia's city budget facing a potential $10 million-plus tax revenue loss. Governor Gavin Newsom's administration is negotiating subsidies of $80-200 million to keep the Benicia refinery operational or attract a buyer, but local officials see little hope without major policy shifts.

**What's Next?**

State officials are scrambling to address the crisis. The California Energy Commission is studying import infrastructure and renewable fuel incentives to stabilize supply. However, without swift action, experts predict further closures, exacerbating price volatility and supply risks. "This is a painful but necessary transition," said one analyst, noting the delicate balance between California's climate ambitions and immediate energy needs.

As the state grapples with these challenges, Californians brace for higher pump prices and an uncertain energy future, with the ripple effects likely to be felt across the West Coast.