California is well known for its high fuel prices and strict environmental regulations, but a string of upcoming oil refinery shutdowns—exacerbated by a massive fire at a huge Chevron plant—threatens to spike the state’s sky-high prices further and force the state to import much more oil from Asia.
The upcoming closures by refining giants Phillips 66 and Valero Energy have triggered an about-face from Democratic Gov. Gavin Newsom and state regulators to try to keep the fuel complexes open after years of rules that cut into their bottom lines. It’s too late to save Phillips 66’s Los Angeles refinery, but there’s at least an inkling of hope to cut a deal to salvage Valero’s Benicia refinery just north of San Francisco. Losing both cuts off nearly 20% of the state’s refining capacity and makes California susceptible to potential shortages if there are disruptions to foreign, waterborne supplies.
“The state has continued to overestimate its ability to wean itself off liquid fuels, and I think they’re starting to realize it may be too little, too late,” Patrick De Haan, head of petroleum analysis at GasBuddy, told Fortune. “Prices will rise, and the pricing volatilities are going to be more extreme.”
