California motorists are getting a preview of what energy experts warn could soon become a full-blown gasoline shock — one that sends prices soaring to $8.43 per gallon, the California Globe reports.
The warning comes as the Valero Benicia Refinery quietly shut down operations on January 31, months earlier than planned, removing another critical pillar of California’s already fragile fuel supply system.
Thermal imaging confirms the refinery is now cold, according to industry sources, and a key artery — the Crimson Pipeline, which transported crude oil from Southern California to Northern California — is also offline.
“We are in an unprecedented oil crisis,” said Michael Ariza, a former Valero manager and longtime petroleum expert.
As of February 3, AAA reports the national average gas price at $2.89 per gallon, while California drivers are paying an average of $4.25 — and climbing.
Experts say this is only the early stage of a supply squeeze that could intensify rapidly as refinery capacity disappears.
USC Professor Michael Mische, an energy economist who has tracked California’s refining decline for years, has repeatedly warned that the state’s policies are pushing gasoline prices toward a breaking point.
Mische's conclusion: $8.43 per gallon is not a worst-case fantasy — it’s a foreseeable outcome if refinery closures continue.
A Chain Reaction of Closures
Valero’s shutdown is the latest — and most damaging — in a cascade of refinery exits:
- Chevron relocated its headquarters from the Bay Area to Houston
- Phillips 66 began shutting down its Los Angeles-area refinery in October 2025, removing 140,000 barrels per day of refining capacity
- Valero announced in April 2025 it would shutter Benicia by April 2026 — but accelerated the closure by four months
According to Ariza, Valero canceled its crude oil contracts more than six weeks ago, signaling an earlier shutdown long before it became public.
“They weren’t even trying to sell the refinery,” Ariza said. “After the state tried to convince Valero to remain open, the company still elected to shut down — sooner than scheduled — because of California’s egregious regulations and unjustified fines.”
Valero alone took a $1.1 billion write-off tied to California refinery assets, citing low margins, soaring compliance costs, and a hostile regulatory climate — including California’s mandate to ban the sale of internal combustion engine vehicles by 2035.
Imports Can’t Replace Lost Capacity
Governor Gavin Newsom has insisted California will rely on imported gasoline to stabilize supply. But energy experts warn imports are not a safety net — they are a vulnerability.
California now produces less than 23% of its in-state petroleum needs and imports over 65% of its crude oil from foreign sources. In 1988, the state imported just 4.5% of the oil it consumed. By 2020, imports exceeded 70%.
“Once you lose refining capacity, you don’t get it back,” Mische warned. “Imports are more expensive, less reliable, and exposed to global disruptions.”
The consequences won’t stop at California’s borders. Arizona gets nearly half its gasoline from California, while 88% of Nevada’s fuel supply originates in the state.
A recent report authored by Assemblyman Stan Ellis, Professor Mische, and Ariza warns that the collapse of California’s refining sector also poses a national security risk, threatening fuel availability for U.S. military bases on the West Coast and increasing dependence on foreign energy sources — including adversaries like China and Russia.
The trio conclude that federal intervention may be unavoidable.
© 2026 Newsmax Finance. All rights reserved.