California is grappling with significant challenges in oil production as the state prepares to shut down two major oil refineries. These closures could lead to increased gas prices for consumers and impact the broader economy. The refinery closures come at a time when California is seeking to boost its oil drilling efforts.
In a recent announcement, Phillips 66 revealed plans to close its 139,000-barrel-per-day refinery in Wilmington, Los Angeles, by the fourth quarter of 2025. This facility employed approximately 600 workers and 300 contractors. Similarly, Valero submitted a notice to cease operations at its 145,000-barrel-per-day Benicia refinery in the Bay Area, scheduled for April 2026. These closures reflect a troubling trend of diminishing refinery capacity on the West Coast.
The state is projected to lose 17% of its oil refinery capacity within the next year due to these shutdowns, according to Phillips 66’s announcements. Clint Olivier, president and CEO of BizFed Central Valley, expressed concern over the impact of these closures. “The state has been so openly hostile to oil, refineries, and the sources of power that exist now,” Olivier stated. He emphasized the need for policymakers in Sacramento to consider the implications of their decisions on Californians who rely on gasoline for transportation.
Transportation and logistics companies are also likely to face higher costs as they will ultimately pass these expenses on to consumers. Olivier highlighted the importance of optimizing existing infrastructure until new energy systems become operational. “Oil has a place in the California economy and a major role to play,” he noted.
Governor Gavin Newsom recently signed Senate Bill 237, introduced by Senator Shannon Grover (R-Bakersfield), which aims to streamline the permitting process for oil and gas production while maintaining environmental protections. This law allows Kern County to approve up to 2,000 new well drilling permits annually for the next decade, a significant increase compared to the 84 new well permits approved in 2024.
Les Clark, president of the Independent Oil Producers Alliance, welcomed the bill, stating that it provides refineries with assurances that there will be more oil available for processing. “It’s good news that there is going to be oil in the pipelines, but we have to have the refineries,” he said. He acknowledged the stringent regulations in California, which complicate the construction of new oil refineries.
Global events, such as the ongoing conflict in Ukraine, also affect oil prices as producers around the world navigate the same market dynamics. Clark believes that while SB 237 is a positive move, it should have been implemented much earlier. He raised concerns about the attractiveness of jobs in alternative energy compared to those in the oil industry.
Olivier hopes that Governor Newsom will adopt a more comprehensive approach to oil legislation that benefits Californians. He argued that California is capable of producing oil and gas safely and efficiently, asserting that it should meet its residents’ needs for affordable transportation fuels.
As California navigates these refinery closures and legislative changes, the future of its oil production and pricing remains uncertain, with potential implications for both consumers and the state’s economy. The balance between environmental goals and energy needs will be critical as California seeks to chart its path forward.
