California Refinery Closures Set Up a Downstream Stress Test for Fuel Jobbers and Distributors

California’s fuel landscape is entering a period of significant change as two of the state’s nine gasoline-producing refineries move toward closure by early 2026. Phillips 66’s Los Angeles/Wilmington refinery, with a capacity of 139,000 barrels per day (bpd), began a phased shutdown in October 2025, ceasing petroleum production on October 16 and targeting full idling by year-end. Valero’s 145,000 bpd Benicia refinery is planned for permanent closure by April 2026. Together, these facilities represent approximately 284,000 bpd—about 17% of California’s total gasoline-production capacity of roughly 1.7 million bpd. The shutdowns reflect a combination of regulatory pressure, rising operating costs, and long-term declines in conventional motor fuel demand, all of which make reinvestment increasingly difficult for refinery operators.

Governor Gavin Newsom acknowledged the shifts in remarks on November 13, 2025, citing concerns about environmental cleanup and outlining actions being advanced through the state’s refinery-transition task force. He also introduced a draft bill aimed at expanding drilling in Kern County—an unexpected policy pivot intended to mitigate supply risks and discourage further refinery closures.

For fuel jobbers and distributors, these shutdowns represent more than upstream restructuring; they create a downstream stress test in a state already known for its isolating geography, tight inventories, and volatile rack dynamics. California’s unique fuel specifications and limited connectivity to other U.S. refining centers mean the state relies heavily on in-state production. When that production declines, imports must fill the gap—typically at higher cost, with longer lead times, and lower predictability.

For jobbers and fuel distributors, these shutdowns represent more than upstream restructuring; they signal a downstream stress test in a state already known for its isolation, tight inventories, and volatile rack dynamics. California’s unique fuel specifications and limited connectivity to other U.S. refining centers mean the state relies heavily on in-state production. When that production contracts, imports must fill the gap—typically at higher cost and with less dependable lead times.

Potential implications for fuel jobbers and distributors include:

• Tighter product availability, contributing to sharper rack price swings.

• Greater sensitivity to seasonal maintenance or unplanned outages at the remaining refineries.

• Increased focus on inventory management, supply diversification, and terminal-level monitoring to maintain continuity.

Some long-term mitigation efforts are emerging. In October 2025, Phillips 66 and Kinder Morgan launched a binding open season for the Western Gateway Pipeline Project—a proposed 1,300-mile line from Borger, Texas, to Phoenix, Arizona, with potential flow reversals into California. If realized, the project could boost refined-product supply options by the late 2020s.

The economic ripple effects extend well beyond fuel logistics. The Phillips 66 closure alone will displace roughly 600 employees and 300 contractors, affecting local industrial-service firms and transportation fleets—segments that consume large volumes of lubricants, diesel, and specialty products. Redevelopment plans for the Wilmington site, under the proposed Five Points Union project, aim to transform the 440-acre property into a mixed-use development featuring retail, restaurants, recreational fields, warehousing, and public open space—potentially shifting local demand patterns over time.

For fuel jobbers and distributors, this period of transition presents both risks and opportunities. While some industrial demand may soften near shuttered facilities, California’s accelerating move toward renewable diesel, changing fuel blends, and expanding value-added service needs create new avenues for those prepared to adapt. The state’s structural transition does not diminish the essential role of distributors; instead, it underscores the importance of resilience, foresight, and strategic flexibility as California’s fuel ecosystem evolves.

Based on reports from Reuters, the U.S. Energy Information Administration (EIA), company announcements, and statements from state officials.