California Governor in Crisis Mode as Valerio Benicia & Phillips 66 Refineries Begin Shutdown!
California is reeling from a significant blow to its energy infrastructure as two major refineries, Phillips 66’s Carson facility and Valero’s Benicia refinery, prepare to cease operations. This unprecedented shutdown has resulted in a staggering 20% reduction in the state’s fuel production capacity, sending shockwaves through the economy and raising concerns over rising fuel prices and job losses.
The Impact of Shutdowns
The Phillips 66 Carson refinery, which had been operational since 1923, officially stopped processing crude oil this December. This closure, which was announced back in October 2023, eliminated 238,000 barrels per day of gasoline, diesel, and jet fuel production. The facility employed approximately 650 workers, all of whom are now facing unemployment just before the holiday season. The loss of this refinery is particularly striking, as it had supplied about 12% of California’s gasoline, a critical resource for millions of residents.
In just four months, the situation will worsen further as Valero’s Benicia refinery, capable of producing 145,000 barrels per day, is set to shut down. This facility has been a cornerstone of fuel production in Northern California since its inception in 1969. The impending closure is expected to eliminate hundreds of jobs in Benicia, a small town of 26,000 residents, and will significantly impact the local economy. Mayor Steve Young has already warned of a severe financial hit, estimating a loss of $10 to $12 million in annual revenue for the city.
Regulatory Challenges and Market Dynamics
The decisions to close these refineries stem from a combination of market dynamics and California’s stringent regulatory environment. Mark Lashier, the CEO of Phillips 66, cited the long-term sustainability of the Los Angeles refinery as a key factor in their decision. He indicated that the financial pressures from California’s regulatory landscape made continued operations unfeasible. Essentially, the company was unable to justify the costs of compliance with the state’s environmental regulations against the backdrop of declining profitability.
Valero’s situation is equally complex. Just six months prior to announcing its closure, the company faced an $82 million fine for illegally releasing toxic emissions for over 20 years. This hefty penalty, coupled with a significant impairment charge of $1.1 billion for its refineries, raised questions about the viability of Valero’s operations in California. While the company did not explicitly link the fine to the closure decision, the timeline suggests financial distress played a crucial role.
The Ripple Effects on Fuel Prices
As these refineries close, the immediate consequence is a tightening fuel supply, which is likely to lead to increased prices at the pump. California already experiences some of the highest gasoline prices in the nation, averaging $4.54 per gallon in December 2025, compared to the national average of under $3. The closure of the Carson refinery alone is anticipated to add an additional 5 to 15 cents per gallon to fuel prices, exacerbating the financial burden on consumers.
Energy analysts warn that Southern California will feel the most significant impact, as the Carson facility was a primary supplier of fuel for the region. With the loss of local production, the state may have to rely on other refineries operating at maximum capacity or increase imports from overseas, both of which are likely to drive prices even higher.
Community and Economic Consequences
The closures are not just a blow to fuel production; they also have far-reaching implications for local communities. In Benicia, the loss of 400 jobs and millions in tax revenue will strain public services and local businesses. The city relies heavily on the revenue generated by the Valero refinery, which contributes significantly to utility, property, and sales taxes. As these funds evaporate, essential services may be jeopardized, leading to a decline in the quality of life for residents.
In contrast, while the Carson refinery’s closure will hurt Los Angeles County, the larger budget and diverse revenue streams of the county may mitigate some of the financial fallout. Nevertheless, the loss of income for 650 families just before the holidays is a significant tragedy.
The Future of California’s Energy Sector
As California grapples with the fallout from these refinery closures, questions loom about the future of its energy sector. With the state pushing for a transition to renewable energy sources, the current regulatory environment poses challenges for maintaining existing refineries. Industry experts argue that it is becoming increasingly difficult for refineries to operate profitably while also adhering to stringent environmental regulations.
The situation is further complicated by the potential for more refinery closures in the near future. Other facilities, such as the Marathon Martinez refinery and Chevron Richmond, are already facing pressures that could lead to similar outcomes. The ongoing struggle between regulatory compliance and operational viability raises concerns about the overall stability of California’s fuel supply.
Conclusion
The shutdown of the Phillips 66 Carson and Valero Benicia refineries marks a pivotal moment for California’s energy landscape. As the state transitions towards renewable energy, the immediate consequences of these closures—higher fuel prices, job losses, and reduced local revenues—underscore the challenges of balancing environmental goals with economic stability.
Residents and businesses alike are bracing for the impact, as California’s energy future becomes increasingly uncertain. With the closure of these major refineries, the state is not only losing critical fuel production capacity but also facing the reality of greater reliance on imports and the associated costs. The decisions made today will shape the energy landscape for years to come, and the residents of California are left to navigate the repercussions.
