Earlier this month, Valero announced that it currently intends to close its Benicia refinery in California, partly due to declining gasoline sales in the state. Since the peak in gasoline sales in 2004, California’s refineries have faced a significantly different business environment compared to the previous 50+ years. By examining California’s historic and projected gasoline demand trends, we can better understand why a refinery closure is being considered.
Figure 1 illustrates the steady annual growth in gasoline sales that supported refinery operations up until 2004. Following this peak, gasoline sales began to decline as consumers and the automotive industry increasingly embraced vehicles with higher fuel efficiency. Looking into the future, we have analyzed three primary cases for gasoline demand changes. The dashed blue line in Figure 1 shows Stillwater’s base case forecast for gasoline demand in California. This base case includes:
- The impacts of expected improvements in the fuel efficiency of conventional internal combustion engine vehicles (ICEVs) as required by Federal Corporate Average Fuel Economy (CAFE) standards, and
- Moderate gasoline price levels, impacting vehicle miles travelled and thus gasoline demand.
The base case does not assume any zero-emission vehicle (ZEVs) sales for 2025-2050; ZEVs sold through 2024 are assumed to remain on the road through their useful life, then replaced with ICEVs.
The dashed green line in Figure 1 shows that gasoline sales would stagnate well above our base case through 2050 if conventional vehicles do not continue improving fuel economy as they have since 2004. Finally, the potential added impact of growing adoption of ZEVs (plug-in hybrid electric vehicles (PHEVs) and electric vehicles (EVs)) is shown in the dashed red line.
Figure 1. Historic and Forecasted Gasoline Demand in California (1950-2050)
Sources: Historic Board of Equalization Taxable Gasoline Sales and Stillwater forecasts
Zooming in on the final 50 years of the 100-year picture above, Figure 2 provides a more detailed view of Stillwater’s forecasted gasoline sales trends and compares scenarios with and without future fuel economy improvements mandated by CAFE regulations. Improvements in ICEV fuel economy alone – excluding the impact of ZEVs – are projected to reduce gasoline demand in 2035 by 10.0-11.8% compared to the “Stable Fuel Economy” forecast shown in Figures 1 and 2. When factoring in the additional gasoline reductions resulting from the continued adoption of ZEVs, California would see an additional 7.25% reduction in gasoline demand.
Because gasoline forecasts are sensitive to future price assumptions, we present a range of pricing scenarios, based on the Base Case in Figure 1, to illustrate potential variations in gasoline demand. The Mid Gasoline Price line shown in Figure 2 assumes nominal gasoline prices of $4.27-$7.48 per gallon while the High Gasoline Price line assumes nominal gasoline prices of $5.10-$7.75 per gallon from 2025-2050. The “Stable Fuel Economy” line matches that displayed in Figure 1 and assumes future new vehicle fuel economy remains at the level observed for 2024 model year vehicles. Finally, we add ZEV adoption to each of the gasoline pricing scenarios, assuming the adoption rates shown in Figure 3 further below. Future ZEV adoption is less certain than future fuel economy requirements, so we break out the two for clarity.
Figure 2. Historic and Projected Gasoline Demand in California (2000-2050) 
Source: Historic Board of Equalization Taxable Gasoline Sales, Stillwater analysis and forecasts
Stillwater’s ZEV forecast assumes new ZEV sales continue to grow as shown below in Figure 3. This is an optimistic view considering that ZEV sales have been relatively modest for the last six quarters[1] compared to prior years which showed significantly greater growth. The forecast used for this analysis should be considered an upper bound for discussion purposes.
Figure 3. Assumed ZEV Sales as Percent of Total New Vehicle Sales in California (2022-2050)
Source: California Energy Commission Reported Vehicle Sales, Stillwater analysis and forecast
Figure 4 shows the magnitude of ZEV-related gasoline demand reduction in California. As of 2024, ZEVs had reduced gasoline sales by 577 million gallons (a 4.4% decline in gasoline demand) compared to a 2010 baseline. As shown in Figure 4, we project that ZEVs will account for a 5.5% gasoline demand destruction in 2025, growing to 11% by 2030 and 22% by 2050. Combined with the reduced fuel consumption resulting from improved fuel economy, the decline in gasoline sales is significant in future years. Consequently, all refineries must run as efficiently and economically as possible if they are to survive.
Figure 4. Historic and Projected Impacts of ZEV Adoption on Gasoline Demand (2015-2050) 
Source: Stillwater analysis
The Bottom Line
By 2030, we forecast a 1.3-1.7 billion-gallon-per-year (bgy) decline in gasoline demand from 2024 volumes given our mid and high gasoline price cases, respectively. By 2040, this gasoline demand destruction will grow to 3.4-3.7 bgy and by 2050 it’s likely to reach 4.7-4.9 bgy. In Stillwater’s forecast, conventional fuel economy improvements alone (excluding ZEV impacts) will reduce gasoline demand by 0.5-0.9 bgy in 2030 from 2024 volumes. By 2040, that volume grows to 1.8-2.1 bgy, and balloons to 3.2-3.4 bgy in 2050.
Conclusion
For more than 50 years, growing gasoline demand supported the California refining industry. That rising tide began to turn at the start of the 21st century with the adoption of higher fuel economy vehicles, which are currently the primary driver of reduced gasoline consumption. Circa 2010, ZEVs began entering the market in meaningful numbers, and their impact on gasoline sales has grown significantly since then. Looking ahead, ZEVs are expected to play an even larger role in reducing gasoline demand.
Stillwater’s market insights and forecasting expertise help us to forecast gasoline demand trends with confidence. Our analysis considers advancements in vehicle technology, changes in automotive and fuel regulations, and broader market dynamics.
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