Valero Energy Corporation’s announcement that it may close its Benicia refinery by April 2026 has sent shockwaves through the western U.S. energy markets. Stillwater has published several articles on how this shutdown, along with the Phillips 66 Wilmington closure by the end of 2025, will greatly impact transportation fuel supply on the West Coast. But the market impacts go beyond the West Coast; the Arizona and Nevada gasoline markets will also be heavily impacted. We explore those impacts in this article.
Arizona and Nevada both rely on California refineries for much of their gasoline supply. Figure 1 below shows the supply flows of gasoline into the area.
Figure 1. Gasoline Supply Flows into Arizona and Nevada
According to Stillwater analysis, California supplies about 33% of the Arizona gasoline market and 88% of the Nevada gasoline market (including 100% of the Reno, NV market). With the closures of the P66 Wilmington and Valero Benicia refineries, California’s gasoline refining capacity will reduce by about 17%. With this refining reduction, the supply of gasoline from California to other states will also likely decrease, leading to potential fuel shortages, especially during peak demand periods.
Historically, disruptions in California’s refining capacity have led to immediate price increases in the Arizona and Nevada markets. Figure 2 shows the gasoline price impact of California refining issues. As can be seen, in the fall of 2022 and fall of 2023, unplanned maintenance of California refineries caused gasoline prices to increase not only in California but also in the Arizona and Nevada markets. The P66 Wilmington closure closely followed by a closure of Benicia could similarly trigger price volatility in the Arizona and Nevada gasoline markets.
Figure 2. Three-Year Gasoline Price Trend for Los Angeles, Phoenix, and Las Vegas 
Similarly to California, transporting gasoline from alternative markets into Arizona and Nevada will be logistically challenging. Existing pipelines into the areas have limited capacities, and the pipeline running from El Paso, TX into Arizona is already running at capacity. Arizona also uses a boutique fuel that not all markets can supply. Additional gasoline could be trucked in or imported from other areas, but those are both costly options and will further contribute to price volatility.
The shift toward renewable energy sources will help with gasoline supply constraints in the long term. However, short-term solutions will be needed to avoid fuel shortages or price spikes. Especially as the populations of Arizona and Nevada increase. According to U.S. Census data, the population in Nevada increased 1.7% from 2023 to 2024 and the population in Arizona increased 1.3% over the same period. Growing population will lead to increased gasoline demand which will worsen the effects of any gasoline shortages the California refinery closures cause.
Bottom Line: The closure of the Benicia refinery underscores the interconnectedness of regional energy markets. Comprehensive measures are needed to ensure energy security for Arizona and Nevada. This includes diversifying supply sources, investing in alternative energy infrastructure, and collaborating with neighboring states to develop resilient energy policies.
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