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Valero Refinery Closure Sparks California's Unprecedented Energy Crisis

Automobile

Business Honor
05 Febuary, 2026

California's Fuel Landscape Crumbles as Refineries Flee Amid Regulatory Challenges.

The energy situation in California has changed dramatically in the last few weeks with the closure of Valero Energy Corp.'s 145,000 barrel per day refinery. This unexpected event will likely result in a large spike in gas prices and disrupt California's economy, as many other refiners have moved out of California because it has become increasingly difficult to operate in California due to higher demands on regulatory compliance. According to Oil Industry Analyst Mike Ariza, the closure of Valero's refinery is a crisis that will have a major effect on California's future energy infrastructure. This announcement comes after California had the second highest gas price in the United States, at an average retail price of $4.23 per gallon in January, and is about to be further impacted by a new very volatile energy situation.

Thermal imaging shows the Valero facility is cold, and the Crimson Pipeline, which moves crude oil between Southern and Northern California, is offline. The facility was closed much earlier than expected; the original announcement was for closure in April, but the actual shutdown will occur in January. Many refiners have already left California due to additional operating costs that are between 26% to 37% more than the average operating costs nationwide. For example, Chevron has moved t heir operations to Texas, and Phillips 66 shut down its Los Angeles refinery in October.

According to Ariza, there could be very broad economic ramifications from this move, especially considering that the oil and gas industry already provides approximately 536,770 jobs and contributes approximately $338 billion to the State's economy. The acceleration of this closing comes on the heels of Valero's termination of contracts for crude oil with no intention to sell the refinery, even with state officials desperately trying to convince Valero to stay operational.