How will Valero’s Benicia refinery shutdown impact West Coast fuel supply?  

Benicia Refinery

On Tuesday, April 15th, Valero Energy submitted notice to the California Energy Commission of its intent to idle, restructure, or cease refining operations at its Benicia refinery by the end of April 2026. Stillwater published an article analyzing the potential impacts of this closure on California’s gasoline market (Benicia Blues: Valero’s Shutdown Signals Trouble for California Gas) and another article highlighting California’s declining gasoline demand, which contributed to Valero’s announcement regarding Benicia (Running on Empty: The Decline of Gasoline Demand in California). This article will zoom out a bit and consider the potential impacts of a Benicia closure on fuel supply for the entire West Coast. 

Stillwater maintains a Supply/Demand Outlook for the West Coast, breaking it into three market enclaves – Southern California, Northern California, and the Pacific Northwest. Using annual data, the outlook projects trends through 2035. With the announcement of the Benicia shutdown, the regional fuel supply outlook is expected to shift significantly.  

Table 1 below shows a condensed version of Stillwater’s most recent West Coast Petroleum Fuel Supply/Demand Outlook – published in 2024 using full-year 2023 data as the baseline. This outlook originally considered the Phillips 66 Wilmington refinery closure in 2025 but did not incorporate the Valero Benicia refinery closure in 2026 as it had not yet been announced. For the purposes of this article, we have incorporated the impacts of the Benicia closure in Table 1. Note: We are in the process of fully updating this outlook for 2025 (using full-year 2024 data); Stillwater’s 2025 West Coast Supply/Demand Outlook will consider the impact of the latest refinery closure announcements through 2035.  

The values in the table below are aggregated for the three markets mentioned above, portraying the West Coast as a whole, and showing a short-term view through 2030. This condensed version only includes petroleum fuel products supplied; likewise, demand is net of renewables, so all numbers represent fuels produced from crude oil. Stillwater’s full West Coast Supply/Demand Outlook extends out to 2035, shows petroleum product flows between the three enclaves and into and out of these enclaves via pipelines and ships, and includes both renewable and petroleum fuels products supplied into each enclave. Please contact us if you would like to learn more about our long-term outlook.   

As can be seen in the table below, Stillwater projected West Coast petroleum fuel production would decline starting in 2025 due to refinery closures. The net imports in this table include waterborne imports and exports. Negative net imports imply that more product is being exported than imported. Pipeline movements represent product supplied to Nevada and Arizona.  

Table 1. Stillwater’s 2024 West Coast Petroleum Fuel Supply/Demand Outlook – 2023 Baseline

Stillwater projects that the shutdown of the Benicia refinery in 2026 will reduce West Coast production by approximately 9% for gasoline, 3% for jet fuel, and 5% for diesel. To meet demand, gasoline imports will need to rise, as in-region supply will be insufficient. Jet fuel needs can still be met through a combination of local production and imports. Diesel will also be less impacted than gasoline since there are significant volumes already exported from the West Coast. Gasoline imports will need to exceed the amount forecasted by Stillwater in 2024 in order to meet both local consumption, and the fuel requirements in Nevada and Arizona. By 2030, the West Coast will need to further increase imports of gasoline to account for the loss in production.  

Although projections suggest that by 2035 the market could rebalance – due to declining gasoline demand – additional supply will be needed in the interim, either from other PADDs or foreign imports. This shift will move the West Coast’s gasoline market from a position of export parity, where prices are influenced by the cost of exporting excess supply, to import parity, where prices are instead set by the higher cost of bringing fuel in from global markets. The result is likely to be escalating price volatility and upward pressure on retail gasoline prices.  

These impacts are unlikely to be borne equally across the entire West Coast. As Stillwater has noted previously, California is uniquely difficult to supply from other PADDs due to the state’s unique fuel specifications, strict regulatory environment, and the fact that there are no pipelines into California. The Pacific Northwest, with less stringent gasoline requirements, may experience less disruption. Consequently, California is expected to bear the brunt of the short-term impacts.  

The Bottom Line 

The planned shutdown of Valero’s Benicia refinery marks a significant turning point for the West Coast fuel landscape. While long-term trends – such as declining gasoline demand and increasing renewable diesel supply – may eventually help rebalance the market, the near- to mid-term outlook indicates growing reliance on imports and heightened vulnerability to supply disruptions, particularly in California. And with the trend of intense pressure being placed on California refineries by the many state and local regulations, along with efforts to manage and control refinery margins – there is a likelihood that additional refinery closures will occur. Policymakers, fuel suppliers, and regulators will need to act proactively to ensure fuel availability, price stability, and infrastructure resilience in the face of this and future refinery closures. The Benicia closure underscores the broader challenges of maintaining energy security during a time of rapid transition in the transportation and fuel sectors.