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California’s gasoline market is entering a period of heightened uncertainty as two major oil refineries prepare to shut down, raising concerns about higher prices, tighter supplies, and broader economic and security implications. 

Phillips 66 is scheduled to permanently close its Wilmington refinery in the Los Angeles area by late 2025, while Valero plans to shut down its Benicia refinery in the Bay Area in 2026.  

Combined, the two facilities will eliminate approximately 17~20% of California’s gasoline refining capacity.

The closures continue a long-term decline in refining operations across the state, raising concerns about price stability and supply reliability. 

California drivers already bear the highest gasoline prices in the United States, averaging more than $4.30 per gallon in late 2025, which is $1.40 higher than the national average. 

Analysts broadly agree that the loss of refining capacity will widen this gap, though the scale of the increase will depend on market conditions and policy assumptions. 

Economists at the University of California, Davis estimate that gasoline prices could rise by about 40 cents shortly after the first refinery closes, with prices potentially increasing by more than $1 per gallon by mid-2026 as the market adjusts to reduced capacity.

These projections assume no major shifts in demand or state policy and reflect long run equilibrium effects rather than short term disruptions. 

Other analysts warn that prices could climb significantly higher during periods of stress, particularly in the event of unplanned outages  at remaining refineries.

With fewer facilities operating, California’s gasoline system has limited redundancy, making it more vulnerable to fires, maintenance shutdowns, or supply chain disruptions. 

In extreme scenarios, some experts have suggested gasoline prices could temporarily rise well above current levels. 

California’s vulnerability is further amplified by its unique fuel standards, which require a specialized gasoline blend to meet strict air-quality and climate regulations. 

These requirements restrict the ability to replace lost production with fuel from other states, increasing reliance on imported refined gasoline that is typically more expensive and subject to global market volatility. 

Refinery operators cite high operating costs, regulatory compliance burdens, and long term uncertainty as key reasons for exiting the state. 

Policies such as California’s Low Carbon Fuel Standard and the planned phaseout of new gasoline powered vehicle sales by 2035 have further complicated future demand, even as most vehicles on the road continue to rely on gasoline. 

In addition to consumer prices, some lawmakers have raised concerns about energy security, noting that California hosts more than 30 military installations that depend on reliable fuel supplies. 

State officials have disputed claims that refinery closures pose a national security risk, asserting that supply chains remain resilient and that recent legislation is designed to stabilize fuel markets during the energy transition. 

As California pursues long-term climate goals, the refinery closures highlight the challenge of managing near-term fuel needs while transitioning away from fossil fuels. 

For consumers, the immediate outcome is likely to be continued price volatility and upward pressure at the pump as the state adjusts to a tighter gasoline supply.