California faces fuel crisis as major refineries shut down, gas prices may hit $8 by 2026
TOI World Desk | TIMESOFINDIA.COM | Aug 05, 2025, 23:37 IST
( Image credit : TIL Creatives )
California faces a potential energy crisis as Phillips 66 and Valero refineries plan to shut down by 2026, eliminating 17% of the state's refining capacity. Driven by stringent environmental regulations, these closures threaten to spike gasoline prices to over $8 per gallon and cause significant job losses. The move raises concerns about fuel security and economic stability in California.
California, the world’s fourth-largest economy, is on the brink of a major energy and economic disruption as two of its largest oil refineries — Phillips 66 near Los Angeles and Valero’s Benicia facility in Northern California — prepare to shut down by 2026. The closures are set to slash nearly 17% of the state’s oil refining capacity, creating far-reaching consequences for fuel prices, employment, and regional supply chains. As California consumes approximately 13.1 million gallons of gasoline daily, the loss of this refining infrastructure could not come at a worse time.
The main driver behind these shutdowns is California’s stringent environmental regulatory environment. Both Phillips 66 and Valero have cited an increasingly difficult business landscape, dominated by aggressive emissions rules and heavy fines, as the key reason for ceasing operations. Valero, for instance, faced an $82 million penalty in 2024 due to air quality violations. Phillips 66 also pointed to a regulatory climate that makes it unfeasible to continue operating profitably in the state. Assemblymember Mike A. Gipson, representing the Gardena district where Phillips 66 is located, called the shutdown a "tremendous loss" for his community — highlighting the economic fallout from lost jobs and reduced local spending.
Currently, California already pays the highest gasoline prices in the United States, averaging around $4.85 per gallon, compared to the national average of $3.16. Experts warn that with the loss of these two major refineries, prices could exceed $8 per gallon by late 2026. This projected surge is not just a result of reduced supply but also due to increased reliance on imported refined fuels. Bringing in fuel from out-of-state or overseas will not only increase logistical costs but also likely raise carbon emissions — ironically countering the environmental goals driving the refinery shutdowns.
The economic ripple effects are equally concerning. Each facility supports hundreds of jobs directly and indirectly. The Benicia refinery employs around 400 workers, while Phillips 66 supports nearly 900 employees and contractors. The impact on local economies could be severe, with diminished tax revenues, increased unemployment, and loss of consumer spending. In total, these closures could weaken the West Coast's fuel security, considering California accounts for around 11% of the region's refining capacity.
University of Southern California Professor Michael Mische summed up the concern by stating California "can ill afford the loss of one refinery, let alone two." As the state marches toward a green future, the immediate challenge lies in balancing environmental priorities with economic and energy realities that millions of Californians face daily.
The main driver behind these shutdowns is California’s stringent environmental regulatory environment. Both Phillips 66 and Valero have cited an increasingly difficult business landscape, dominated by aggressive emissions rules and heavy fines, as the key reason for ceasing operations. Valero, for instance, faced an $82 million penalty in 2024 due to air quality violations. Phillips 66 also pointed to a regulatory climate that makes it unfeasible to continue operating profitably in the state. Assemblymember Mike A. Gipson, representing the Gardena district where Phillips 66 is located, called the shutdown a "tremendous loss" for his community — highlighting the economic fallout from lost jobs and reduced local spending.
Currently, California already pays the highest gasoline prices in the United States, averaging around $4.85 per gallon, compared to the national average of $3.16. Experts warn that with the loss of these two major refineries, prices could exceed $8 per gallon by late 2026. This projected surge is not just a result of reduced supply but also due to increased reliance on imported refined fuels. Bringing in fuel from out-of-state or overseas will not only increase logistical costs but also likely raise carbon emissions — ironically countering the environmental goals driving the refinery shutdowns.
The economic ripple effects are equally concerning. Each facility supports hundreds of jobs directly and indirectly. The Benicia refinery employs around 400 workers, while Phillips 66 supports nearly 900 employees and contractors. The impact on local economies could be severe, with diminished tax revenues, increased unemployment, and loss of consumer spending. In total, these closures could weaken the West Coast's fuel security, considering California accounts for around 11% of the region's refining capacity.
University of Southern California Professor Michael Mische summed up the concern by stating California "can ill afford the loss of one refinery, let alone two." As the state marches toward a green future, the immediate challenge lies in balancing environmental priorities with economic and energy realities that millions of Californians face daily.