California’s refined products markets are being revamped as in-state refining capacity declines, shifting toward an import-driven supply model to meet the state’s transportation fuel demand, which heavily focused on gasoline.
With a situation reminiscent of that on the U.S. Atlantic Coast fifteen years ago, California’s refinery closures and falling production are creating opportunities for both new and old market participants, both domestically and internationally.
Gasoline is California’s most used transportation fuel, with 13.4 billion gallons of ethanol-blended CARBOB sold in 2024, according to the California Department of Taxation.
Some theorize California’s environmental pioneer role among states was in reaction to the intense smog that blanketed the Los Angeles Basin in the 1950s, which was caused by more drivers and cars on the road in the post-World War II era.
Around June 1996, California began to phase in its own mandated gasoline known as CARBOB as part of the state's Clean Air Act compliance program to achieve air quality standards and significantly reduce smog-forming emissions and carcinogenic toxic air contaminants.
Consequently, seasonality and Reid Vapor Pressures play a more significant role in California gasoline than in other parts of the country due to the state’s strict specifications.
Even within the state, regional differences exist. Gasoline in San Francisco adheres to a stricter year-round RVP than in Los Angeles, which makes it more expensive to produce.
Winter-grade gasoline reaches 14 psi at the end of November before moving down to 12.5 psi at the end of February. Then, it further drops to 5.99 psi RVP, where it stays until October.
An RVP increase of 1 psi would costy 3.42 cents/gal more or 1.65 cents/gal less at a 1 psi lower RVP, according to Platts assessments for U.S. Gulf Coast gasoline RVP.
While weakening refining economics played a role in the shutdown of refineries, California’s refinery closures have an additional policy layer with the recent passage of more stringent legislation imposed on the transportation fuel makers.
With Phillips 66 in the process of permanently mothballing its Los Angeles-area refinery, the state has since softened its once-strong stance against oil and oil refineries by delaying enactment of legislation, including some parts of a bill signed by Governor Gavin Newsom into law in October 2024.
However, the state’s policy about-face and additional sweeteners appear not to be enough to change Valero’s mind. The shutdown of its 145,000 b/d San Francisco-area refinery in Benicia remains scheduled for April 2026.
With the loss of Benicia’s output, California’s refinery capacity will fall by about 9%, along with the state’s CARBOB production, which at 703,000 b/d at the end of September is roughly 120,000 b/d less than two years ago, according to California Energy Commission data.
“Volumetrically, the largest impact will be in the gasoline market, with the refinery producing roughly 74,000 b/d,” according to a research note from S&P Global Commodity Insights analysts. “Although West Coast gasoline demand is in structural decline and expected to fall in 2026, the lost supply from Benicia (and Phillips 66’s Los Angeles refinery) will more than offset the decline in demand, forcing imports to increase despite higher local refinery utilization.”
As a result of Benicia’s closure, Commodity Insights increased its gasoline imports forecast for 2026 to 112,000 b/d, about 30,000 b/d higher than its previous forecast.
In addition to the upcoming decline in refinery operations, the instability that accompanies the maintenance of the remaining aging facilities emphasizes the region’s necessity for imports.
Since the beginning of 2025, three significant fires have occurred across California—PBF Energy’s Martinez plant in February and Valero’s Benicia refinery in May, and the most recent incident -- a fire at Chevron’s El Segundo refinery on Oct. 2.
Despite these incidents, increased imports have cushioned California drivers from the worst gasoline price spikes, a fact which was lauded by the CEC’s Department of Petroleum Market Oversight.
“High import levels of gasoline and blending components kept prices relatively stable during the spring and summer,” Tai Milder, head of DPMO, said in a Sept. 26 letter to Governor Newsom and other legislators.
The shuttering of refineries statewide draws the attention of both international and domestic importers. The refined products range from motor gasoline blending components to finished gasoline.
“Imports have constituted 8.4% of total West Coast gasoline supply this year, up from 2% in 2017 and 6% from the same period in 2024,” according to a recent research note from Commodity Insights.
At the same time, the share of imports from Asia—led by South Korea—has increased from 25% in 2017 to over 70% in 2025. This combination of growing reliance on imports and the concentration of import volumes among fewer and fewer suppliers increasingly exposes the region to supply risks abroad.
Increased imports of MGBC are helping to ease California’s supply gap, thereby stabilizing the price of California’s boutique blend gasoline. MGBC imports in the U.S. West Coast, which averaged 53,000 b/d in 2024, averaged 105,000 b/d for the week ended Oct. 3, according to the latest Energy Information Administration data.
U.S. West Coast MGBC supply is coming mostly from Asia, with South Korea providing just over 28,000 b/d of MGBC and finished gasoline imported into PADD 5 in August, according to the latest South Korea Oil data.
Additionally, U.S. refiners with Pacific Northwest and Rockies refineries have also been increasing production capacity of finished and unfinished refined products to address California’s supply-demand gap.
In the traditional market structure, CARBOB in the San Francisco Bay Area, which is home to most of California’s ports but only about 35% of the state’s gasoline refineries, has consistently held a premium over Los Angeles CARBOB.
This premium has fluctuated between half a cent and over 30 cents over the past five years, driven by market conditions and variations in RVP.
Earlier this year, two fires in the San Francisco Bay Area, coupled with the upcoming closure of Phillips 66’s Wilmington refinery, have led to unusual highs and lows in the spread between the two CARBOB grades.
By May, the premium that San Francisco CARBOB held over its Los Angeles counterpart increased to 31.357 cents/gal on a monthly average basis, marking the widest spread reported by Platts since 2021.
This price hike coincided with tight inventories and refinery utilization challenges in the Bay Area, following the fires at PBF Energy’s Martinez plant in February and Valero’s Benicia refinery in May.
During this period, PBF leveraged its Torrance plant in the Los Angeles metropolitan area to help manage inventories and production in Northern California.
However, as operations in the Bay Area ramped up and those in Los Angeles slowed down due to the Wilmington refinery's closure, the spread between the two CARBOB grades began to shift, showcasing strength in the Los Angeles grades.
The overall strength of the Los Angeles CARBOB differential monthly average is clear in the latest September price, which closed at a two-year high of futures plus 51.048 cents/gal.
The outright price for this gasoline grade, which factored in daily fluctuations for both the differential and the NYMEX RBOB futures contract, also followed suit, rising by 13.76 cents/gal, or nearly 6%, to settle at $2.4964/gal.
Meanwhile, the latest monthly average for September barrels of San Francisco CARBOB closed at futures plus 45.714 cents/gal, reflecting a 7.50-cent, or 20%, increase from August barrels, which stood at 38.095 cents/gal.
Conversely, the monthly average for the outright price of regular CARBOB saw a slight month-on-month uptick of 0.226 cent/gal, which was less than 0.1%, settling at $2.4375/gal for September.
Platts data showed that the monthly averages for Los Angeles and San Francisco CARBOB have had two notable spikes within the last five years—September 2023 and 2022. On both occasions, the state faced back-to-back refinery disruptions, including flarings, and planned maintenance.
Additionally, the recent fire at Chevron’s El Segundo plant pushed the Los Angeles CARBOB spot price to 60 cents/gal above NYMEX RBOB futures on Oct. 5, despite the damage being confined to some jet fuel production.
However, while the state was quick to criticize refiners’ unplanned outages for causing higher gasoline prices, its more conciliatory approach was evident in the CEC’s statement.
“Drivers in LA saw negligible price changes, about 1-2 cents at the pump,” the Commission said in an Oct. 7 emailed statement. “At this time, we are seeing a small decrease in retail prices statewide. However, we anticipate that these prices may increase by a few cents in the next few days.”
As California continues to navigate its evolving fuel market landscape, the focus on imports is expected to grow, especially with the upcoming refinery closures.
The increased reliance on imports and the need for blending components to stabilize local prices indicate a shift toward a more complex supply chain.
Stakeholders will need to adapt to the changing dynamics, balancing supply risks with regulatory challenges.
Additionally, the impact of environmental legislation and market fluctuations will require continuous monitoring and strategic planning to ensure that California's fuel market remains resilient and responsive to both domestic and international pressures.
Zoe Vastakis is on the S&P Global Platts US Light Ends team covering US Midwest and West Coast gasoline. She has been covering gasoline for Platts since October 2023.
Janet McGurty is a multi-faceted energy markets specialist and journalist at S&P Global Commodity Insights currently focused on refineries, renewables and transport fuels. Previously, Janet spent 20 years at Reuters covering energy financials as well as crude oil and refined products markets in London, New York and Toronto
