Is the Valero fire the beginning of another gasoline price spike?

Fire at Valero refinery in Benicia again raises questions of facility's future

A fire at the Valero refinery in Benicia lead to a shelter-in-place and comes soon after the company said it intends to close or "restructure" the facility.

BENICIA, Calif. - The fire on Monday morning at Valero Refinery in Benicia is resulting in more questions than answers, especially about how badly the fire damaged the refinery. 

Valero had already announced that it would cease operations by the end of April 2026 in Benicia.

So, even if it is down for a few weeks now, that could spike prices since other California refineries might not be able to make up for what Valero produces, according to Severin Borenstein, a professor and energy economist at UC Berkeley’s Energy Institute at Hass Graduate School of Business.

Two of the Bay Area's five refineries have switched over to making renewable diesel fuel, leaving just three gasoline producers. 

"If we actually lost all the refinery output of Valero for a significant amount of time suddenly, that would be a real shock to the system," Borenstein said. "So, we would probably see some significant price increases."

Add to that, a huge Phillips 66 gasoline refinery in Southern California that will also close at year's end.

 "That would be losing nearly 20% of the gasoline production in the state," Borenstein said. 

He said that would force California to import its unique blend from other states or countries that can make it; no small or inexpensive feat. 

"And then, how do you line up all the logistics: the ship to move it, the port to receive it, in some cases, based in the Panama Canal, et cetera," Borenstein said. "Even under the best of circumstances, it takes a month to get that gasoline here." 

Tankers and pipelines cost extra to move the gasoline, and refiners say California lacks massive storage capacity. 

"If we don't start planning very carefully and quickly, for being down a number of refineries and needing a lot more imports, we could end up in a situation where we just don't have enough supply and prices really skyrocket," said Borenstein.

 Valero did not respond to KTVU's inquiry about how bad the fire damage is or how long the refinery might be down.