California’s planned closure of two significant oil refineries is set to shake up the fuel market, impacting small businesses across the state. As Phillips 66 and Valero move forward with the shutdowns, which collectively will remove 17% of the state’s refinery capacity, small business owners need to prepare for potential increases in fuel price volatility.
The Wilmington refinery, which has a capacity of 139,000 barrels per day, and the Benicia refinery at 145,000 barrels per day, are pivotal to California’s energy landscape. Their closures will diminish the state’s already limited refining infrastructure, echoing a trend of diminishing capacity that began with the shutdown of Phillips 66’s Rodeo refinery last year and the Martinez refinery in 2020.
With California traditionally experiencing higher gasoline prices compared to the national average, the loss of these refineries is poised to exacerbate this issue. "The supply shortfall left by their exit is therefore likely to have an outsized impact on the region," according to the U.S. Energy Information Administration (EIA). This is largely because California’s geographic isolation limits its logistical connections to other refining hubs, primarily in the Gulf Coast.
Small business owners, particularly those reliant on transportation and logistics, should note that the closures will likely lead to increased fuel prices and decreased supply. The state’s unique gasoline formulation, known as CARBOB, complicates matters further. Although some gasoline is expected to be imported from Asia—including jet fuel and gasoline meeting CARBOB specifications—these efforts may not be sufficient to fill the gap swiftly.
As imports surged to record levels earlier this year—reaching over 210,000 barrels per day—summer demands are predicted to rise again next year, especially with the impending refinery closures. With California’s relatively low volume of refining capability now accounting for just 17% of its needs, the state will increasingly rely on external sources.
However, importing petroleum products introduces other risks. Shipments from overseas often take longer, potentially leading to temporary price spikes during unexpected shortfalls. Small business owners should remain vigilant of their fuel supply chains, as delays in shipments could considerably affect operational costs.
Adding another layer of complexity, California has recently implemented a minimum inventory law aimed at mitigating these unforeseen shortages. This law is designed to require fuel suppliers to maintain a set level of gasoline and diesel fuel to better cushion shocks in supply.
Looking ahead, the EIA forecasts a slight increase in retail gasoline prices in California, diverging from expected price reductions elsewhere in the country due to the refinery closures. However, it’s important to note that lower crude oil prices anticipated for 2026 could balance some of these price hikes.
For small business owners, especially those that depend heavily on fuel, this situation requires proactive planning. Business owners might consider adjusting budgets and exploring strategies for more efficient transportation and fuel usage. Monitoring fuel prices and examining opportunities to secure contracts at stable rates can also help mitigate the financial impact.
The landscape of California’s refining capacity is evolving, and small business owners need to stay informed and adaptable. The full implications of these refinery closures are still unfolding, but early preparations can help businesses navigate the anticipated changes in an increasingly volatile market.
For further insights and detailed data on refinery capacity changes, visit the original report by the EIA here.
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