California's Gasoline Production Threatened by Potential Closure of Two Major Refineries

Regulatory Pressure May Force Shutdown of Refineries

In a recent development that could potentially escalate gas prices on the West Coast, two major refineries contributing to 14% of California's gasoline production are on the verge of shutting down. This is primarily due to the overwhelming regulatory pressure they are facing. According to a report by Just The News, Valero, the company operating these refineries, is contemplating their closure. This comes at a time when California is already importing 8% of its gasoline supply due to previous refinery shutdowns. The closure of these two refineries could further increase California's dependence on imported refined gasoline, in addition to its reliance on crude oil from the Middle East and South America.

State Lawmakers Express Concern Over Potential Closures

Valero's CEO, Lane Riggs, stated last week that the company's refinery business is already experiencing low profit margins and has minimized strategic capital expenditures. He further revealed that due to the increasing regulatory pressure on the industry in California, all options, including the closure of refineries, are being considered. Although Riggs did not explicitly confirm the closure of the refineries, which represent 14% of California's refining capacity, state lawmakers have expressed concern. They have linked the potential closures to the new regulatory powers granted during a special legislative session.

Previous Refinery Closures and Rising Dependence on Imports

Phillips 66, another major player in the industry, recently announced the closure of its Los Angeles refinery, which accounted for 8% of the state’s refining capacity. This decision was made following the enactment of new legislation. Since 2008, California's oil production has decreased by half, falling from 249 million barrels (38% of state needs) to 124 million barrels in 2023 (23.4% of needs). Consequently, the state's dependence on imports has increased, with 61% of its supply now coming from countries like Iraq, Saudi Arabia, Ecuador, and Colombia, compared to 48.5% in 2008.

Lawmakers Criticize Governor's Stance on Oil

State Assemblymember Joe Patterson, R-Rocklin, criticized California Governor Gavin Newsom's 2021 statement about not seeing a future for oil in California. He expressed surprise at the rapid pace of changes in the state's oil industry and attributed the potential refinery closures to Newsom's legislation.

Bottom Line

The potential closure of two major refineries in California due to regulatory pressure could have significant implications for the state's gasoline supply and prices. It raises questions about the balance between environmental regulations and economic considerations. What are your thoughts on this development? Feel free to share this article with your friends and discuss it. Don't forget to sign up for the Daily Briefing, which is available every day at 6 pm.