Phillips 66 dropped a bombshell this week, announcing plans to close its Los Angeles refinery—California’s seventh-largest—which currently provides about 8% of the state’s gasoline. The decision, made just two days after Governor Gavin Newsom signed a groundbreaking law designed to regulate gasoline prices, puts a spotlight on the tension between California’s aggressive climate policies and the oil industry.
With a state market that struggles to meet the demand of its 31 million gas-powered vehicles, the closure could be a significant disruption. Phillips 66 CEO Mark Lashier cited “long-term uncertainty” and changing market dynamics as reasons for the closure, noting that the company will start working with developers to repurpose the refinery’s prime property near the Port of Los Angeles. In a statement, Lashier assured that Phillips 66 would still support California’s fuel needs, but it’s unclear exactly how, as California’s unique, low-emission fuel blend is already difficult to source.
Governor Newsom, who has long positioned himself as an adversary of Big Oil, signed a law this week that grants the state authority to oversee refiner operations, mandates strategic gas storage, and enhances transparency around supply and maintenance planning. The move aims to prevent price gouging after two consecutive Septembers saw prices spike to over $6 per gallon. Newsom didn’t mince words in his remarks, accusing Big Oil of “gouging” Californians and prioritizing profits over people.
The oil industry has warned for months that increased regulation could push refineries out of California, and this latest shutdown has amplified their arguments. Lobbyists for the industry had fiercely opposed Newsom’s law, and the governors of neighboring states Arizona and Nevada even raised alarms about potential fuel shortages affecting their states if California refineries shuttered. While Phillips 66 insists this closure was not a direct response to the new law, the timing has fueled speculation that the regulation-heavy environment in California is making oil companies uneasy about their future in the state.
Phillips 66 isn’t completely abandoning California, however. The company will continue operating its San Francisco refinery and says it is committed to producing renewable diesel and sustainable aviation fuels. Yet, the Los Angeles facility’s closure—which affects roughly 600 jobs—adds pressure on a state with limited refinery capacity. Just nine refineries meet nearly all California fuel demands, and the current capacity only barely matches consumption, meaning even small disruptions could impact prices and availability.
The California Energy Commission (CEC), the body overseeing these energy transitions, called Phillips 66 a “valuable partner” in the state’s shift toward renewables. CEC Vice Chair Siva Gunda said the plan to compensate for the lost output from the refinery “embodies the type of innovative solutions we need as California moves away from fossil fuels.”
Newsom’s aggressive approach is part of a broader effort to steer the state away from fossil fuels. With landmark clean energy policies like a ban on new gas-powered car sales by 2035, Newsom aims to establish California as a national leader in climate action. However, as Phillips 66’s departure underscores, balancing energy supply with bold climate goals may prove more challenging than anticipated.
