By Rob Nikolewski, SAN DIEGO UNION-TRIBUNE
Phillips 66 will start the process of shutting down operations of one of Southern California’s major oil refineries as early as this week, according to a report from Reuters that cited two unnamed sources.
But the company says the complete closure of the twin facilities in Carson and Wilmington remains on schedule for the fourth quarter of this year.
Regardless of when Phillips 66 eventually finishes the work, the shuttering of the 139,000-barrel-per-day facilities in the Los Angeles area figures to tighten fuel supplies and put upward pressure on gasoline prices in the region.
In an email exchange with the Union-Tribune, a spokesperson for Phillips 66 would not confirm the Reuters report but did not deny it, either.
“I cannot comment on refinery operations,” said Al Ortiz, head of the company’s media operations, “but I will note that the process of idling the facilities requires a complex, multi-phased approach. The refinery units will begin idling by (the fourth quarter of 2025) as planned.”
The news comes as gas prices in Southern California have ticked up in the past two weeks. The average price of a gallon of regular in San Diego has increased 14 cents in the past two weeks, landing at $4.691 on Tuesday, according to AAA.
But some fuel analysts aren’t sure if the recent bump is related to the upcoming Phillips 66 closure or not.
“I don’t know that the start of the shutdown is impacting California in a physical way yet,” said Patrick DeHaan, head of petroleum analysis at GasBuddy, “although it certainly could be taking a psychological toll, simply knowing that the market is going to be tighter in the next month or two maybe enough to lead to some of the increases we’re talking about.”
Denton Cinquegrana, chief oil analyst at OPIS, the Oil Price Information Service that provides data and forecasting on global energy, suspects the increase at the pump “has a lot to do with the fact that oil’s up about $4 or $5. It’s probably as simple as that.”
The price of West Texas Intermediate, the benchmark for crude produced in the U.S., has risen from $61 a barrel on May 30 to more than $65 on Monday. Brent crude, the international benchmark, has risen from just over $61 a barrel to $68 in the same time frame.
In October, Phillips 66 announced plans to close the Carson and Wilmington facilities by the end of 2025. The company did not give a specific reason but said it “will work with the state of California to supply fuel markets and meet ongoing consumer demand.”
Then Valero in April of this year gave notice it will shut down operations at its refinery in the Northern California city of Benicia by 2026.
The CEO of the San Antonio-based company said, “California has been pursuing policies to move away from fossil fuels for the past 20 years, and the consequence of that is the regulatory and enforcement environment is the most stringent and difficult of anywhere else in North America.”
The Valero and Phillips 66 facilities combine to account for roughly 18% of the state’s crude oil capacity, raising concerns that the closures will strain supplies of the specially blended gasoline that is sold to California drivers and drive up prices at the pump.
Going forward, “California is obviously going to become a lot more dependent on imports of gasoline and the components that go into making gasoline,” Cinquegrana said. “Overall, California’s going to be walking a little bit of a tightrope here.”
In response to fears of gasoline price spikes, Gov. Gavin Newsom and the California Energy Commission have taken a much more accommodating approach to the state’s petroleum industry.
The commission on Friday postponed until 2030 imposing financial penalties on oil refiners if they make what the state considers to be excessive profits.
“I personally truly believe that this pause will be beneficial to ensure that this mid-transition is smooth,” CEC vice chair Siva Gunda told The Associated Press, insisting the freeze is not a walk-back on the state’s efforts to shift from gasoline-powered cars and trucks to electric vehicles.
The energy commission said it will still require California refiners to keep a minimum level of fuel on hand to avoid shortages when refineries go offline for maintenance.
In the wake of the Phillips 66 and Valero announcements, Newsom earlier this year called on the CEC and other state agencies to “redouble the state’s efforts to work closely with refiners” to help ensure Californians have access to transportation fuels such as gasoline in the short and long term.
Gunda responded with a 24-page letter to Newsom in June, outlining a series of suggestions. Among them: streamlining regulatory and permitting issues to help support “confidence for the private sector” to invest in the petroleum industry, as well as potential changes by the California Legislature to boost in-state oil production.
The change in tone has not pleased some oil industry adversaries.
“Gov. Newsom and the Energy Commission have abdicated their responsibility to protect consumers from price gouging,” said Jamie Court, president of Consumer Watchdog, an advocacy group based in Los Angeles.
De Haan of GasBuddy had a more generous take.
“The only kind of light at the end of the tunnel is we saw a little bit of sensibility from the California Energy Commission deciding not to implement these profit caps,” De Haan said. “It’s not going to give a greenlight to refineries to stick around, but it’s also suggestive that California is now seriously looking at the root cause of this and not simply trying to point fingers.”
Statewide, the average price for regular-grade gasoline stood at $4.61 on Monday, according to AAA. The average price in the U.S. came to $3.196 per gallon.
