Valero May Be the Next California Oil Refiner to Close

Last week, Phillips 66 announced plans to shut down its Los Angeles oil refinery by the end of next year. Now, refining company Valero Energy Corp is indicating that it might follow suit. As the second-largest refiner in the United States by capacity, Valero is considering all options for its two California refineries. According to Chief Executive Lane Riggs, this decision is driven by increasing regulatory pressures in the state.

California oil refiners experienced lower-than-average profit margins in late spring and early summer this year. This decline was due to reduced operating capacity, which failed to yield higher margins, as refiners raised their current capacity utilization rates.

Despite these lower margins, California has the highest gasoline prices in the United States. The Governor’s Office has attributed this situation to the actions of refiners. In response, the Office has threatened to penalize them for price gouging. Additionally, California has the highest excise tax on gasoline across all states.

Recently, state legislators enacted a law permitting authorities to cap refiners’ profits as necessary. Moreover, California Governor Gavin Newsom signed a bill granting state energy regulators the power to mandate fuel inventory levels for refiners and to approve or deny scheduled refinery maintenance.

“Price spikes at the pump are profit spikes for Big Oil,” Newsom commented. “Refiners should be required to plan ahead and stockpile supplies to maintain stable prices, instead of manipulating the situation for greater profits. By enforcing responsible actions and ensuring a gas reserve, Californians could save money at the pump each year.”

Chevron previously warned that such regulations could pose significant challenges for California refiners and would ultimately affect consumers adversely.

Valero operates refineries in Benicia and Wilmington, California.