Valero's Benicia Refinery Shuts Down, Causing Gas Price Hikes in California
The Valero oil refinery in Benicia, California, has been shut down, leading to a potential oil crisis. Mike Ariza, a former Valero manager and oil and gas expert, confirmed the closure on January 31st, citing thermal imaging reports indicating a cold refinery. Additionally, the Crimson pipeline, which transported crude oil from Southern to Northern California, has also ceased operations.
Ariza emphasized the unprecedented nature of the situation, stating, 'We are in an unprecedented oil crisis.' This development comes as no surprise, as Valero had previously announced its intention to shut down the Benicia Refinery in April 2026, following Chevron Oil Company's relocation to Houston and Phillips 66's closure of its Los Angeles refinery.
However, recent predictions suggested an earlier shutdown, and gas prices have already started to rise. In April 2025, Valero Energy Corporation officially notified the California Energy Commission of its plans to 'idle, restructure, or cease refining operations' by April 2026, citing low operating margins, increased costs, and a challenging regulatory environment, including a state-mandated moratorium on internal combustion engine vehicle sales by 2035.
California Governor Gavin Newsom's response was met with criticism. His statement, which seemed to prioritize political posturing over practical solutions, failed to address the immediate concerns of the oil and gas industry. Newsom's 'clean energy all-electric future' policies, including a ban on internal combustion engine autos, have been accused of inflicting significant harm on the industry.
The national average gas price is currently $2.89 per gallon, while California's average is $4.25 and rising. This situation is exacerbated by Governor Newsom's energy policies, which are deemed to be sabotaging domestic refining capacity and threatening U.S. military force readiness on the West Coast. A report by California Assemblyman Stan Ellis, USC Professor Michael Mische, and petroleum expert Michael Ariza highlights the potential for federal intervention to address the crisis.
Ariza further explained that the early shutdown of Valero's Benicia Refinery is due to the October 17th closure of the Phillips 66 refinery in Wilmington, which has reduced crude oil refining capacity by 140,000 barrels per day. Despite attempts to convince Valero to remain open, the company has chosen to shut down, citing state regulations and fines as the primary factors.
The impact of these closures extends beyond California, as Arizona and Nevada heavily rely on California's gas supply. Nevada, for instance, imports 88% of its gas from California. The oil and gas industry in California contributes significantly to the state's GDP, and its closure poses a threat to jobs and economic stability.
The report by Ellis, Mische, and Ariza also emphasizes the critical role of oil and gas in supporting the remaining 92% of the state's GDP. Without these resources, achieving the state's economic goals becomes increasingly challenging. As the situation unfolds, the potential for a presidential campaign crisis looms, with California facing a projected $8.43 per gallon gas price as refineries continue to close.
