Valero's Benicia Refinery Shuts Down, California Gas Prices Soar
The Valero oil refinery in Benicia, California, has been shut down, sending shockwaves through the state's energy landscape. This decision comes as a result of a series of events that have been unfolding over the past year, with experts and officials predicting a dire future for California's gas prices and energy sector. Mike Ariza, a former Valero manager and oil and gas expert, confirmed the closure, stating that the refinery had been inactive since January 31st, as evidenced by thermal imaging reports.
The Crimson pipeline, which transported crude oil from Southern California to Northern California, has also ceased operations, further exacerbating the situation. Ariza emphasized the unprecedented nature of the current oil crisis, a sentiment echoed by other industry experts.
Valero Energy Corporation's announcement in April 2025 of its plan to shut down the Benicia Refinery in April 2026 was a significant blow to the state's energy infrastructure. This decision followed the relocation of Chevron Oil Company to Houston, Texas, and the impending closure of the Phillips 66 Los Angeles refinery in October 2025. However, industry predictions suggested that Valero's plans were more aggressive, and gas prices were already on the rise.
In April, Professor Michael Mische, an oil and gas expert at USC, reported on the Globe that Valero's decision was influenced by low operating margins, increased operating costs, and a stringent regulatory environment. The state's mandate to phase out internal combustion engine vehicles by 2035 and the $85 million fine imposed by the California Air Resources Board (CARB) and the Bay Area Air Quality Management District for emissions violations further contributed to the company's challenges.
Governor Gavin Newsom's response to Valero's announcement was met with criticism. His statement, which praised California's collaborative efforts and data-driven approach, was seen as a deflection from the state's energy policies that have significantly impacted the oil and gas industry. Newsom's 'clean energy all-electric future' with a ban on internal combustion engine autos has been particularly harmful to the industry.
The national average gas price is currently $2.89 per gallon, but California's average price is a staggering $4.25, and rising. This situation is not only affecting California residents but also has broader implications for the country. Governor Newsom's energy policies are being scrutinized for potentially causing the largest energy policy collapse in U.S. history, impacting oil industry operations and gasoline production.
A report prepared by California Assemblyman Stan Ellis, Professor Mische, and petroleum expert Michael Ariza highlighted the threat to U.S. military force readiness on the West Coast due to California's self-inflicted gas crisis. Their findings emphasize the need for federal intervention to address the state's energy policies.
Ariza's recent statement revealed that the Phillips 66 refinery closure in Wilmington, which took 140,000 barrels per day of crude oil refining offline, accelerated Valero's Benicia refinery shutdown from April to January. This decision was attributed to the state's regulations and fines, which Ariza believes will lead to more Californians leaving the state.
California's oil and gas industry, a significant contributor to the state's economy, employs 536,770 people directly and generates a $338 billion economic impact. However, the state's reliance on imported oil has increased dramatically, with imports accounting for over 70% of the oil consumed in 2020, up from 4.5% in 1988.
The report by Assemblyman Ellis, Professor Mische, and Ariza underscores the critical role of oil and gas in sustaining the state's GDP, with a warning that without these resources, the remaining 92% of the state's GDP would be unattainable. As refineries continue to close, the prospect of $8.43 per gallon gas looms, a scenario that could have significant political implications.
In response to California's energy policies, Nevada Governor Joe Lombardo has appointed a Fuel Resiliency Committee, highlighting the ripple effects of California's decisions on neighboring states. Arizona, which relies heavily on California for gas, is also feeling the impact.
