While politicians bicker over carbon credits and green bragging rights, the real decisions driving California’s gas prices are being made far from the Capitol—in oil company boardrooms, where the only green that matters is printed on a balance sheet.
California is bleeding refining capacity. Texas is booming. And it’s not because voters asked for it. It’s because CEOs and shareholders ran the numbers—California lost.
The Boardroom Exit Plan
Two major California refineries—Phillips 66 in Los Angeles and Valero in Benicia—are shutting down by 2026. That’s a hit of over 20% of the state’s refining capacity, and the consequences won’t just be felt by industry insiders. These decisions were made by the CEOs last year.
According to a recent study by the University of Southern California, these closures could push gas prices as high as $8.43 per gallon by the end of 2026. That’s not hyperbole—it’s a worst-case scenario based on shrinking local supply, increased reliance on foreign imports, and a logistics system already stretched to the breaking point.
This is the high-cost future California is steering into—and no one’s grabbing the wheel.
The Crude Disadvantage
What most Californians don’t realize is that their gas doesn’t come from the Golden State anymore.
Three-quarters of the crude oil refined in California is shipped in.
-
14% from Alaska
-
61% from foreign countries—Iraq, Saudi Arabia, Brazil, Ecuador, and now Canada via the Trans Mountain Pipeline (Don’t forget those tariffs the White House placed on these imports).
-
Only 25% is drilled in-state
Back in the ’80s, California produced three times more oil than it does today. But after decades of regulatory hurdles and high-cost wells, producers left. Now the state depends on the global oil market—and global instability—for its daily fill-up.
I’ve Seen This Before
In the 1980s, I worked for an investment firm in Denver that specialized in the oil and gas sector. My job was to take data from rigs and exploratory sites, feed it into early CAD-CAM systems, and build sprawling maps that energy executives used to plan their drilling strategies. These weren’t PowerPoint slides—they were blueprints for billion-dollar bets.
Then the oil bust hit. Prices cratered. Overnight, firms folded. And just like that, the entire industry retreated back to Houston, where land was cheaper, regulations lighter, and pipelines abundant.
The writing was on the wall then—and it’s smeared all over the gas pumps now.
California’s Pipeline Problem
California has no refined-products pipelines connecting its northern and southern hubs. Worse yet, it has no pipelines importing gasoline from other states. It’s an island—dependent on local refineries and ocean tankers.
So when a refinery goes down in Torrance, gas prices in Oakland spike. There’s no flexibility. No redundancy. No buffer. Just chaos and cost.
Meanwhile, Texas is built for throughput—crude in, gasoline out, across highways, railways, and a pipeline network that hums with profit.
Why Texas Wins
Let’s make it plain:
-
Texas has cheap land.
-
Texas has pipelines.
-
Texas has lower labor costs.
-
And it has refiners that aren’t trying to navigate an environmental gauntlet every time they swap out a compressor.
Texas makes fuel faster, cheaper, and at greater volume—and they’re exporting the excess while Californians pay luxury prices for a basic need.
The Catch-22 Nobody Wants to Talk About
California wants to go green. Good. But what’s the backup plan while the state phases out the fuel 26 million drivers still rely on?
The answer, so far, is: import it. From Saudi Arabia, from Ecuador, from refineries in Texas they told to buzz off a decade ago.
So we shut down local refining, increase dependence on foreign and out-of-state fuel, and then act shocked when gas hits $7 or $8 a gallon. That’s not a crisis—it’s a business plan.
This isn’t about ideology. It’s about infrastructure.
It’s about logistics.
That’s economics and business.
6 Economic Reasons California Refineries Are Closing (That Have Nothing to Do with Politics)
While state policy and environmental regulation get most of the headlines, the truth is refineries close when the business math breaks down. Here are six economic forces driving California’s refinery shutdowns—no partisan spin required.
1. Declining Profit Margins
Refining is a low-margin, high-volume business. Older refineries in high-cost regions like California struggle to stay profitable, especially when fuel demand dips or global prices fluctuate.
2. Global Competition
New megarefineries in Asia and the Middle East are producing fuel more efficiently and cheaply than aging U.S. plants. That makes it harder for California refineries to compete—even at home.
3. Aging Infrastructure
Most California refineries are 40–70 years old. The ones being shut down are almost 100 years old. Upgrading them to modern standards costs hundreds of millions or close to $2 billion—often more than the asset is worth. Faced with that price tag, many companies opt to shut down instead.
4. Falling Fuel Demand
The long-term trend toward electric vehicles and fuel efficiency standards means gasoline consumption is expected to decline. Companies are adjusting early to protect long-term investor returns.
5. Shareholder Pressure
Wall Street doesn’t like uncertainty. And aging refineries are seen as liabilities. Investors now push companies to focus on leaner, higher-yield operations—which often means fewer, larger, more profitable plants.
6. High Operating Costs
California refineries face higher labor costs, land costs, taxes, permitting delays, and environmental compliance than their Gulf Coast counterparts. Refineries in Texas and Louisiana can operate more cheaply—and with far less bureaucratic overhead.
Bottom Line:
The decision to close a refinery isn’t made in Sacramento—it’s made in the boardroom. And unless the business case makes sense, no amount of political will can keep an unprofitable plant running.