Oil giant Valero announced this week it may shutter its refinery in Benicia.
The company sent a notice to the California Energy Commission indicating it may restructure the refinery or cease operations altogether by April of 2026.
“We understand the impact that this may have on our employees, business partners, and community, and will continue to work with them through this period,” said Lane Riggs, Chairman, CEO and President of Valero in a statement. The company did not elaborate on reasons for the potential closure.
The refinery employs over 400 people and can process 170,000 barrels of oil per day.
“It is the sixth largest refinery in the state and this is a very big deal,” said Severin Borenstein, an energy expert at UC Berkeley.
Borenstein said between Valero’s possible refinery closure and the Phillips 66 refinery closure in the Los Angeles area, California could lose 20% of its gasoline supply in a year, which would mean higher prices at the pump.
“We aren’t talking about 50 cents or a dollar type of price spikes,” Borenstein said. “If we aren’t ready and we lose 20% of the California gasoline supply, we’re talking about dollars.”
Democratic Assemblymember Lori Wilson represents Benicia. In a statement, she called the potential refinery closure “deeply concerning”.
“We need to urgently engage to see what can be done to prevent this closure, while also rethinking the broader environment in California around energy production,” Wilson said in a statement.
California’s gas prices are among the highest in the nation. Valero’s announcement comes months after the legislature held a special session on gasoline supply and prices last fall. During that special session, Governor Gavin Newsom signed a law requiring refineries to maintain minimum fuel inventories – the goal is to prevent supply shortages when refineries shut down for maintenance that lead to price spikes.
Republican lawmakers blame California’s heavy restrictions on oil and gas operations for this latest move by Valero.
Republican Assemblymember James Gallagher criticized regulations passed during the legislature’s special session in October.
“This is another casualty of Gavin Newsom’s policies in California,” Gallagher said. “I mean people are going to continue to drive, costs are going to go up, and on top of that in Benicia and Los Angeles we’re losing good paying jobs people rely on to sustain their families.”
California Energy Commission Vice-Chair Siva Gunda said in a statement the commission “is committed to its efforts to collaborate with the industry and stakeholders so that the state continues to have a safe, reliable and affordable supply while transitioning away from fossil fuels.”
Borenstein with UC Berkeley said it’s hard to know if a single policy led to Valero’s announcement and that it’s likely due to a combination of factors. He noted there are lots of costs associated with operating in California.
The state and regional air quality boards also fined the Benicia refinery $82 million for multiple environmental violations last October – Valero would likely have to make significant capital investment to come into compliance. California’s ambitious climate and emissions goals could also be part of oil companies’ calculations for operating in the state.
“I think these refineries see that over the not too distant future there is going to be a decline in gasoline demand,” Borenstein added.
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