With Valero announcing the pending closure of one of its two remaining California refineries, the state will lose at least 18% of its current refining capacity by the end of 2026.
Because California is an “energy island,” meeting demand for California and the parts of Nevada and Arizona that rely on its refineries will require costly imports of volatile fuel by emissions-heavy tanker ships.
California Gov. Gavin Newsom has long blamed rising gas prices on refiners’ “price gouging,” but even though his own administration has said that it has no found no evidence of such, he called a special legislative session last year to pass new refinery regulations that both Democratic and Republican governors of neighboring states warned would lead to price hikes and supply shortages.
Arizona Gov. Katie Hobbs, a Democrat, and Nevada Gov. Joe Lombardo, a Republican, sent a joint letter to Newsom urging him not to sign his new refinery regulations into law, citing their fear that they would lead to gasoline price spikes and shortages.
Due to the Jones Act, shipping between U.S. ports must be done by U.S. built and crewed ships in rare supply due to limited American shipbuilding capacity. Congress found that in 2022, the United States had just five oceangoing commercial ships under construction, while China had 1,794. As a result, little maritime capacity exists to ship fuel from American refineries in the Gulf Coast, where refining capacity is plentiful, or from Washington state.
