California state and federal lawmakers have warned that refinery closures could drive up prices while making the state more reliant on foreign oil.
At the heart of the warning are plans to close two major refineries: Valero’s Benicia plant and Phillips 66’s Los Angeles plant. Reps. Vince Fong and Stan Ellis, both Republicans from Bakersfield, said the closures would collectively eliminate nearly 20% of California’s in-state refining capacity.
Valero’s Benicia refinery, which has been operating for approximately 25 years and has a capacity of 170,000 barrels per day, has announced that it will close in 2026 due to high operating costs and strict national environmental regulations (1). The company reportedly spent approximately $1 billion preparing for its exit(2).
Fang said the impact could extend far beyond gas stations.
“We have an energy crisis in our state that’s only looking to intensify,” he said, adding that reduced refining capacity could drive up fuel prices while also impacting California’s military supply chain. What appears to be a consumer problem could soon become a national problem, he said.
Gas prices in California are already among the highest in the country. Statewide, drivers will pay about $4.34 per gallon as of December 2025, according to AAA (3). That’s about $1.40 higher than the national average of $2.90 per gallon. Oil expert Mike Ariza, who recently co-authored a report on California’s energy outlook, told ABC10 that in extreme cases, gas prices could reach $10 to $12 per gallon.
Part of this premium is due to location and infrastructure. The West Coast is relatively isolated from other major refining hubs such as the Gulf Coast, making it more difficult to replace lost supplies when refineries close. While the Los Angeles and Benicia plants account for less than 2% of total U.S. refining capacity, they account for about 17% of California’s refining capacity.
Valero cited years of regulatory pressure, environmental violations and recent lawsuit settlements as factors in its decision to close the Benicia refinery, according to a statement cited by ABC7 (4).
During the company’s most recent earnings call, CEO Lane Riggs described California’s regulatory and enforcement environment as “the most stringent and difficult of any other region in North America.”
One example is California’s Low Carbon Fuel Standard, which requires fuel producers to steadily reduce the carbon intensity of gasoline and diesel based on emissions over the fuel’s life cycle (5). While the policy is intended to reduce greenhouse gas emissions and improve air quality, it also increases compliance costs for refineries operating in an already limited market.
In October 2024, regulators fined Valero nearly $82 million for toxic chemical releases and other violations. According to ABC7, this is the largest fine ever issued by the Bay Area Aviation Authority.
Because California is home to more than 30 military bases that rely on in-state fuel production, including major Air Force and Army installations, the stakes go beyond consumer prices. The refineries provide critical fuel for military operations, serving bases in California and nearby states such as Nevada and Arizona, Fang said.
Greenlee said the U.S. Department of Defense is the world’s largest institutional consumer of oil, using an average of about 93 million barrels of fuel per year between 2015 and 2020.
Ellis noted that California currently relies on imports for about one-fifth of its refined petroleum products and warned that closing refineries could deepen that dependence. He believes heavy reliance on international supply chains increases the risk of disruption if geopolitical tensions escalate.
“If China or Russia decided to stop India from getting crude oil for us, guess what? It would be catastrophic,” he told ABC 10. “We’re talking about military readiness being impacted, we’re talking about natural gas pipelines.”
The Newsom administration disputes those claims, saying there is no evidence that California’s energy policies pose a threat to national security or military fuel supplies. Officials said they found no credible risk.
A spokesman noted that the bipartisan package of energy bills passed at the end of the last legislative session was intended to help stabilize fuel markets as the state shifts to clean energy. These include issuing up to 2,000 new oil drilling licenses each year.
For California drivers, rising gas prices are not a distant problem. While refinery closures and policy debates continue, there are still ways households can limit the impact.
According to AAA, gas prices can vary by more than a dollar per gallon within the same metro area, so it’s worth shopping around before filling up. Timing is also important. Prices typically fall early in the week and rise toward the weekend.
In the long term, persistently high fuel costs may prompt drivers to reconsider transportation options, from ride-sharing and public transit to more fuel-efficient vehicles. With no clear cap on prices, caution heading into the new year could help prevent fuel costs from creeping into household budgets.
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Valero (1); ABC 10 (2); AAA (3); ABC7 (4); California Air Resources Board (5).
This article provides information only and should not be considered advice. It is provided without any warranty of any kind.
