CA losing one of its few gas refineries by October, drawing pushback from AZ, NV

(The Center Square) - California is set to lose one of its nine remaining gasoline refineries by October, calling the security of its gasoline supplies into question.

With much of Arizona and Nevada relying on California for gasoline, the closure could have a broad regional impact on prices for gasoline and other products created by the refinery such as diesel and jet fuel.

Phillips 66 announced the closure of its Los Angeles facility, which accounts for 8.57% of the state’s remaining refining capacity, last year after the passage of new refinery regulations.

The governors of Arizona and Nevada, a Democrat and Republican respectively, pleaded with the California Gov. Gavin Newsom to not sign the new legislation, which lets the state require refiners carry more inventory on hand — and spend billions of dollars on storage to do so — and have final say over when refineries are allowed to shut down for safety or maintenance reasons.

“It is evident that increased regulatory burdens on refiners and forced supply shortages will result in higher costs for consumers in all of our states,” wrote Arizona Gov. Katie Hobbs and Nevada Gov. Joe Lombardo in their letter to Newsom. “With both of our states reliant on California pipelines for significant amounts of our fuel, these looming cost increases and supply shortages are of tremendous concern to Arizona and Nevada.”

With Newsom having called the special session of the legislature to pass these regulations, there was little surprise that he signed them into law.

But Hobbs and Lombardo’s fears are already materializing.

After investigators blocked refinery repairs in February following a fire amid maintenance-related activity, gas prices in California, Arizona and Nevada rose markedly, demonstrating the states’ reliance on California refineries.

With the loss of the Phillips 66 refinery, prices could rise to an even higher baseline for gasoline. That could impact the price of most consumer goods that involve the use of diesel-powered rail or truck transportation.

California legislators said this closure is just the first of more to come. They warned that working Californians will pay the brunt of the costs.

“Expect CA gas prices to skyrocket and more refineries to shut down as Sacramento Democrats double down on their agenda to exterminate affordability and make a middle-class life impossible to achieve for millions,” said Assemblywoman Kate Sanchez, R-Trabuco Canyon, on X.

California’s tightening of its Low Carbon Fuel standard, approved last year but put on temporary hold for required non-substantial amendments, is expected to result in a $162 billion fuel cost hike to fund credits for cleaner “fuels” such as EV charging and hydrogen.

When refineries make gasoline or other carbon intensive fuels for California, they must purchase credits, the cost of which is passed on to consumers. With the tightening of LCFS to further reduce greenhouse gas emissions, those costs for each unit of produced fuel will rise even further, likely impacting demand for refined products and driving more refinery shutdowns.