California Oil Production Faces Challenges Amid Refinery Closures

California is navigating a complex landscape as it aims to increase oil production while facing significant refinery closures that threaten the state’s gas supply. The planned shutdowns of two major oil refineries are set to impact consumers and businesses alike, leading to expectations of rising gas prices.

Phillips 66 announced the closure of its Wilmington refinery, which has a capacity of 139,000 barrels per day, scheduled for the fourth quarter of 2025. This facility employed approximately 600 workers and 300 contractors, posing a significant workforce challenge as the state gears up for reduced refining capabilities. Additionally, Valero has filed notice to cease operations at its Benicia refinery, which has a capacity of 145,000 barrels per day, by April 2026. These closures contribute to a broader trend of declining refinery capacity on the West Coast, following earlier shutdowns, including Phillips 66’s Rodeo facility in 2024 and Marathon’s Martinez refinery in 2020.

The implications of these refinery closures are significant. According to a news release from Phillips 66, California could lose up to 17% of its oil refinery capacity over the next year. Clint Olivier, president and CEO of BizFed Central Valley, a nonprofit business advocacy group, expressed concerns about the impact on the state. “The state has been so openly hostile to oil, refineries, and the sources of power that exist now,” Olivier stated. He emphasized the importance of optimizing existing infrastructure until new energy systems are implemented.

Olivier noted that rising fuel prices would not only affect consumers directly but also escalate costs for transportation and logistics companies, which typically pass on these expenses to customers. He advocates for a balanced energy policy that includes oil alongside renewable sources such as solar, wind, and hydrogen. “Oil has a place in the California economy and a major role to play. California is making it extremely difficult for its economy,” he added.

The state’s approach to oil production is evolving. In late September, Governor Gavin Newsom signed Senate Bill 237, introduced by Senator Shannon Grover (R-Bakersfield). This legislation certifies the Kern County Environmental Impact Report, allowing for streamlined permitting to boost oil and gas production while ensuring environmental protections remain in place. The bill enables Kern County to approve up to 2,000 new well drilling permits annually for the next decade. For context, California approved only 84 new well permits in 2024 and a handful this year.

Les Clark, president of the Independent Oil Producers Alliance, which represents independent oil and gas producers, highlighted the potential benefits of SB 237. “It’s good news that there is going to be oil in the pipelines, but we have to have the refineries,” he remarked. Clark added that the stringent regulations in California make it challenging to construct new oil refineries, a situation exacerbated by global factors such as the ongoing conflict in Ukraine, which influences oil prices internationally.

While Clark sees SB 237 as a positive step, he believes that such measures should have been taken earlier. He raised concerns about job retention in the oil industry, noting that many skilled workers might seek opportunities in states with more favorable regulations. “For the guys that are going to get back into drilling, a lot of them might go to Texas,” he said. “Through those downtimes, you lose some top employees. That is going to be something that the industry is going to have to deal with.”

As California grapples with the implications of these refinery closures and legislative changes, the future of its oil production remains uncertain. The state’s efforts to balance increased drilling with environmental considerations will be critical in determining the accessibility and affordability of fuel for its residents.