California’s fuel market, already known for consistently higher gasoline prices compared to the national average, is facing increasing challenges. These issues have led to new state legislation and the announcement of a major refinery closure in October, according to an analysis by the Energy Information Administration (EIA) on Monday.
As of December 9, the average price for a gallon of regular gasoline in the U.S. was $3.02, according to AAA. However, in California, the price was significantly higher at $4.37 per gallon. Gasoline prices in the state are among the highest in the country, regularly surpassing the U.S. average by over $1 per gallon.
The EIA pointed out that several factors contribute to California’s higher gasoline prices, including more expensive crude oil and refining costs on the West Coast. Additionally, the state has traditionally maintained lower fuel inventories compared to the rest of the country, exacerbating price volatility.
To address these challenges and reduce price fluctuations, Governor Gavin Newsom signed new legislation in October. The law requires oil refiners in California to maintain a minimum inventory of fuel to prevent supply shortages. The ABX2-1 law also gives the California Energy Commission (CEC) the power to adjust storage requirements based on factors like regional conditions, refinery size, and seasonal demand. The CEC can also use a tradable compliance mechanism, similar to the state’s approach for its Low Carbon Fuel Standard (LCFS).
Shortly after the legislation was signed, Phillips 66 announced it would stop refining operations at its 139,000-barrel-per-day Wilmington refinery in Los Angeles by the fourth quarter of 2025. The company emphasized that the decision was based on long-term trends, with refining in California becoming increasingly difficult. Phillips 66 has already converted its San Francisco refinery to produce renewable diesel. With the closure of the Wilmington refinery, the company will cease all crude oil refining in California, marking a significant shift in the state’s refining landscape.
Related Topics: