Refinery Closures Current Danger for Increased Gasoline Costs on the West Coast

California is about to lose 17% of its oil refinery capability over the subsequent 12 months due to two deliberate refinery closures. If realized, the closure of the amenities is more likely to contribute to will increase in gas value volatility on the West Coast.

Phillips 66 introduced plans final October to shut its 139,000-barrel-per-day (b/d) Wilmington refinery within the Los Angeles space later this yr. Valero submitted a discover in April to finish refining operations at its 145,000-b/d Benicia refinery within the Bay Space by the top of April 2026. The refinery closures proceed a pattern of reducing refinery capability on the West Coast, following the top of petroleum refining operations at Phillips 66’s Rodeo refinery early final yr and the closure of Marathon’s Martinez refinery in 2020.

California often has larger retail gasoline costs in contrast with the nationwide common. One purpose is the relative lack of logistical connectivity on the West Coast to different refinery hubs in america, such because the Gulf Coast. Though the Los Angeles and Benicia refineries make up lower than 2% of present U.S. refining capability, they account for 17% of California refinery capability and 11% of West Coast (PADD 5) capability. The provision shortfall left by their exit is subsequently more likely to have an outsized impression on the area as a result of it can’t be simply stuffed by different refineries elsewhere within the nation.

Given the restricted connectivity to different U.S refining hubs, the most certainly supply of substitute fuels will probably be imports from Asia, notably imports of jet gas and gasoline. California’s distinctive specification gasoline blendstock, often called CARBOB, can solely be manufactured by correctly outfitted refineries. Phillips 66 is planning to produce some California-grade gasoline at its refinery in Washington, and a few refineries in India and South Korea can meet these specs. Arizona, which additionally has a singular gasoline mix, and Nevada obtain gas shipments from California refiners and are additionally more likely to be affected by the lowered regional provide.

Information for late Could 2025 confirmed complete gasoline imports (together with completed gasoline and mix elements) into the West Coast above 210,000 b/d, setting a report on a four-week common foundation. Though these imports have since come down in June, summer season imports are more likely to additional improve subsequent yr after the 2 California refineries come offline.

Importing petroleum merchandise presents sure dangers for gas provides on the West Coast. Shipments of petroleum merchandise throughout the Pacific Ocean will take longer to answer market calls for, which means that sudden shortfalls may contribute to momentary value will increase or heightened volatility. Final yr, the California state authorities instituted a brand new minimal stock legislation, which may scale back the chance of potential shortfalls in gasoline provides.

In our July Brief-Time period Power Outlook, we forecast a small improve in West Coast retail gasoline costs subsequent yr in response to the capability closures, in distinction to cost decreases elsewhere within the nation. We count on decrease crude oil costs, which account for round half of the worth of gasoline, in 2026 to counteract among the impact of the refinery closures on retail gasoline costs within the close to time period.

Principal contributor: Kevin Hack. Article from At the moment in Power.