California Faces Oil Supply Crisis Amid Refinery Closures

California is poised to experience a significant reduction in its oil refinery capacity, following the closure announcements of two major refineries. These shutdowns are expected to lead to higher gas prices for consumers and impact the broader economy. Phillips 66 revealed plans to close its 139,000-barrel-per-day refinery in Wilmington, Los Angeles, by the fourth quarter of 2025. Valero is set to cease operations at its 145,000-barrel-per-day Benicia refinery in April 2026. Collectively, these closures could result in a loss of 17% of California’s oil refining capacity.

The closures come amid a broader trend of decreasing refinery capacity on the West Coast. In 2024, Phillips 66 ended operations at its Rodeo refinery, while Marathon closed its Martinez refinery in 2020. This downward trajectory raises concerns among industry leaders about the state’s ability to meet its energy needs.

Clint Olivier, president and CEO of BizFed Central Valley, emphasized the urgency of the situation, stating that California is “scrambling to replace 17% of its refined oil supply.” He criticized state policies that have been detrimental to the oil industry, pointing to the reliance on gasoline for transportation. Olivier urged policymakers to optimize existing infrastructure until alternative energy systems are fully operational.

As fuel costs rise, the burden will likely fall on consumers, as transportation and logistics companies will pass on increased gas and diesel prices. Olivier noted the importance of a comprehensive energy strategy that includes oil, alongside renewable sources like solar and wind. He argued that California has the capability to produce oil safely and cleanly, and should prioritize domestic production to ensure affordable transportation fuel.

In a recent development, Gov. Gavin Newsom signed Senate Bill 237, aimed at boosting oil and gas production while maintaining environmental protections. This legislation allows Kern County to approve up to 2,000 new well drilling permits annually for the next decade. In contrast, California only approved 84 new well permits in 2024 and a minimal number this year.

Les Clark, president of the Independent Oil Producers Alliance, expressed cautious optimism about the bill, stating it provides refineries with a clearer outlook on future oil supplies. He highlighted the difficulties of establishing new refineries in California due to stringent regulations. Furthermore, global events, such as the ongoing war in Ukraine, continue to influence oil prices by affecting the international market.

Clark noted that while SB 237 represents progress, it should have been enacted much earlier. He raised concerns regarding the appeal of jobs in alternative energy compared to those in the oil industry, suggesting that many skilled workers may seek opportunities in states like Texas as the industry adapts to changing regulations.

With California’s oil supply facing challenges from refinery closures and rising production hurdles, stakeholders are calling for a balanced approach that addresses both energy needs and environmental goals. As the state navigates this critical juncture, the focus remains on ensuring a stable and affordable energy future for its residents.