California faces a looming crisis in gasoline supply as Valero contemplates the closure of its two refineries, which produce over 14% of the state’s gasoline. This troubling development follows Phillips 66’s recent decision to shut down its Los Angeles refinery, responsible for approximately 8% of the state’s refining capacity. With these closures, California could face significant challenges in meeting its fuel demands.
Currently, California imports about 8% of its gasoline supply, and the potential loss of these refineries may force the state to ramp up its imports even further. This increased dependence on foreign oil raises serious concerns about vulnerability to global market fluctuations. California primarily relies on crude oil imports from regions like the Middle East and South America, where geopolitical tensions can disrupt supply chains.
Valero’s CEO, Lane Riggs, highlighted during an earnings call that the company’s profit margins are under pressure. Increasing regulatory burdens in California have made it difficult to justify ongoing investments in the state’s refineries. This financial strain indicates that refineries may opt for closures rather than face the mounting costs associated with regulatory compliance.
The ramifications of these potential refinery closures are profound. Higher gasoline prices are likely on the horizon, putting additional financial pressure on consumers already grappling with inflation.
Sources:
- Phillips 66 Closure: Politico
- Valero’s Potential Closure: The Center Square
- General Overview: MSN
- Impact of New Regulations: Institute for Energy Research