California lawmakers, both state and federal, warn that closing refineries could drive up prices, leaving the state more dependent on foreign oil.
At the heart of the warning is the planned shutdown of two major refineries: the Valero plant in Benicia and the Phillips 66 plant in Los Angeles. Together, the shutdowns would eliminate nearly 20 percent of California’s statewide refining capacity, according to Reps. Vince Fong and Stan Ellis, both Republicans from Bakersfield.
Valero, which has operated the 170,000-barrel-per-day Benicia refinery for about 25 years, has announced it will close the site in 2026 due to high operating costs and stringent state environmental regulations (1). The company spent about $1 billion preparing to exit (2).
Fong says the impact could ripple far beyond the gas pump.
“We have an energy crisis in our state, and it looks like it’s going to intensify,” he said, adding that reduced refining capacity could drive up fuel prices while also affecting California’s military supply chain. What appears to be a consumer problem, he said, could quickly become a national one.
California already has the highest gas prices in the country. As of December 2025, drivers are paying about $4.34 per gallon nationwide, according to AAA (3). That’s about $1.40 more per gallon than the national average of about $2.90. Oil expert Mike Ariza, who co-authored a recent report on California’s energy outlook, said ABC10 gas could reach $10 to $12 a gallon in extreme scenarios.
Part of that premium comes down to geography and infrastructure. The West Coast is relatively isolated from other major refining centers such as the Gulf Coast, making it more difficult to replace lost supply when refineries close. While the Los Angeles and Benicia facilities account for less than 2 percent of total U.S. refining capacity, they account for about 17 percent of California’s capacity.
Valero cited years of regulatory pressure, environmental violations and a recent settlement of a lawsuit as factors behind 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 strictest and most difficult anywhere in North America.”
One example is the California Low Carbon Fuel Standard, which requires fuel manufacturers to consistently reduce the carbon intensity of gasoline and diesel fuel based on emissions throughout the fuel’s life cycle (5). While the policy is designed to reduce greenhouse gas emissions and improve air quality, it also adds compliance costs for refiners operating in an already constrained market.
In October 2024, regulators fined Valero nearly $82 million for releasing toxic chemicals and other violations at the site. It was the largest penalty ever issued by the Bay Area Air District, ABC7 reported.
The stakes extend beyond consumer prices, as California is home to more than 30 military bases that rely on fuel production in the state, including major Air Force and Army installations. Fong said the refineries provide critical fuel for military operations, serving bases in California as well as nearby states such as Nevada and Arizona.
According to Greenly, the US 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 imports about a fifth of its refined petroleum products and warned that closing refineries could deepen that dependence. In his view, greater reliance on international supply chains increases the risk of disruption if geopolitical tensions escalate.
“If China or Russia decides to cut off India from getting crude oil for us, guess what? That’s catastrophic,” he told ABC 10. “We’re talking about military training being affected and we’re talking about gas lines.”
The Newsom administration has disputed those claims, saying there is no evidence that California’s energy policies pose a threat to national security or the military’s fuel supply. Officials said they have not identified any credible risk to training.
A spokesman pointed to a bipartisan set of energy bills passed at the end of the last legislative session designed to help stabilize fuel markets as the state moves toward cleaner energy. The measures include the authorization of up to 2,000 new oil drilling permits annually.
For drivers in California, higher gas prices are not a distant concern. While refinery shutdowns and political debate continue, there are still ways households can limit the impact.
Gas prices can vary by more than a dollar a gallon in the same metro area, according to AAA, making it worth shopping around before you fill up. Time matters too. Prices often drop earlier in the week and rise by the weekend.
In the long term, high fuel costs may push drivers to rethink transportation options, from carpooling and public transportation to more fuel-efficient vehicles. Without a clear price cap, being cautious heading into the new year could help prevent fuel costs from quietly stretching 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 construed as advice. Offered without warranty of any kind.
