Oil giant Phillips 66 said on Oct. 16 that it plans to shut down its refinery in the Los Angeles area of California in the fourth quarter of 2025.

About 900 people are involved in operating the oil refinery, including about 600 employees and hundreds of contractors, according to the company.

“We understand this decision has an impact on our employees, contractors and the broader community,” Phillips 66 CEO Mark Lashier said in a statement announcing the plan. “We will work to help and support them through this transition.”

Lashier cited uncertainty regarding “long-term sustainability” and said the refinery was “affected by market dynamics.”

A Phillips 66 spokesperson told The Epoch Times that the statement referred to the low profitability of the refinery in contrast with other company-wide assets and was not a reaction to the state’s regulatory structure or the newly signed Assembly Bill X2, which grants the California Energy Commission the authority to regulate inventory and maintenance schedules.

“We want to continue to be a trusted and deliberate partner with the state,” the spokesperson said. “This announcement is based on the consideration of multiple factors, including future options for the site as part of Phillips 66’s ongoing review of its portfolio of assets.”

Ranking as the seventh largest in California, the facility can refine about 139,000 barrels of crude oil per day and represents more than 8 percent of the state’s crude oil market, according to September 2023 data, the latest available from the state’s Energy Commission. According to the company, that crude oil is used to make about 85,000 barrels of gasoline per day, as well as tens of thousands of barrels of other fuels.

During legislative hearings in September—which began after Gov. Gavin Newsom called a special session on Aug. 31 to address spiking oil prices—lawmakers and administration officials discussed the prospect of refiners leaving the state.

“What happens if we lose one more or two more through whatever issue?” Democratic Assemblywoman Blanca Rubio, a member of the Petroleum and Gasoline Supply Committee, asked during a hearing on Sept. 26. “Because, you know, the industry also says you kept putting these regulations, some of these refiners are going to say, ‘It’s not worth being here, let’s just leave.’”

Siva Gunda, vice chair of the energy commission, said that losing a refinery could negatively affect the market.

“If you are asking what the risk would be if a large refinery were to close, there is risk,” Gunda said. “There’s absolutely reduction in supply, and we'll have demand.”

It is unclear how the loss of production from the Los Angeles refinery will affect supply and what the effect will be on prices at the pump.

The company vowed to work with the state to continue supplying markets and to meet demand using resources from the company’s other refinery complex near San Francisco, as well as through its refining network.

“We are ... not exiting California,” the spokesperson told The Epoch Times. “Phillips 66 still owns and operates midstream assets and ... produces renewable diesel that consumers can find at our branded retail stations across the state. We look forward to finding new ways to serve California markets.”

Although less gas will be refined in the Golden State, the firm plans to use a combination of strategies to continue operating in California.

“Right now, we’re focused on running the Los Angeles Refinery safely and reliably while it operates,” the spokesperson said. “Once we cease operations, we will work with California to supply the market with transportation fuels including ... gasoline imports and renewable fuels.”

Phillips 66 has engaged two real estate development firms, Catellus Development Corporation and Deca Companies, to evaluate the future use of the 650-acre sites in Wilmington, California, and Carson, California, the statement said.

“We are working with leading land development firms to evaluate the future use of our unique and strategically located properties near the Port of Los Angeles,” Lashier said. “These sites offer an opportunity to create a transformational project that can support the environment, generate economic development, create jobs and improve the region’s critical infrastructure.”

One organization representing the industry said gas prices will ultimately rise because of reduced supply.

“This is exactly what happens when our leaders are more concerned with political theater than solving real problems,” Alessandra Magnasco, the California Fuel and Convenience Alliance’s governmental affairs and regulatory director, told The Epoch Times in an emailed statement.

“There is no mystery to our high gas prices—exploding overhead costs to run our stations, costly environmental regulations, and now, with even less supply in the market, every Californian will end up paying higher prices in this government-created energy crisis.”

She said the state’s policies are problematic for the industry.

“We recognize the challenges faced by companies like Phillips 66, which are trying to operate in one of the most highly regulated energy environments in the world,“ Magnasco said. ”Refinery closures are a direct result of policies that make it increasingly difficult to maintain and expand critical infrastructure.”

Oil industry insiders said the timing of the announcement suggests that concerns about regulations and the cost of doing business could, in part, be responsible for the lower profit margins that led to the decision to close the refinery.

“With California waging a de facto war on refiners, you can connect the dots,” Tom Kloza, founder of the Oil Price Information Service—an oil price analysis firm headquartered in Rockville, Maryland—wrote in an Oct. 16 social media post.

His colleague suggested that the news could precipitate more closures given the state’s regulatory environment.

“I don’t think they will be the last either,” Denton Cinquegrana, chief oil analyst for the oil price firm posted on X shortly after the refinery announced the news. “Adversarial relationship between the state and refiners continues.”

Also potentially affecting gas prices in the state is a proposal on the agenda for the California Air Resources Board’s meeting on Nov. 7 and Nov. 8 to amend the state’s low-carbon fuel standards, which some analysts say could raise gas prices by as much as 65 cents in the short term.

“Retail gasoline price impacts could be $0.65 per gallon in the near term, $0.85 per gallon by 2030, and nearly $1.50 per gallon by 2035,” Danny Cullenward, attorney and vice chair of California’s Independent Emissions Market Advisory Committee, said in a report published on Oct. 7 by the University of Pennsylvania’s Kleinman Center for Energy Policy.

The governor’s office did not respond to requests for comment before publication time.