Phillips 66 (PSX), a leading energy company, has announced the closure of its Los Angeles oil refinery by the end of 2025, mentioning "long-term uncertainty" as a key factor behind the decision.

The announcement came just two days after California Governor Gavin Newsom signed a new law that could impose further regulatory requirements on the state’s refiners, including mandates for fuel storage and transparency in resupply and maintenance plans. This Los Angeles facility accounts for approximately 8% of the state's refining capacity, crucial for California's production of its unique low-polluting gasoline blend.

Reasons Behind the Refinery's Imminent Closure

Mark Lashier, CEO of Phillips 66, explained that the Los Angeles refinery is less profitable than the company's other facilities, leading to the decision. The refinery currently produces 85,000 barrels per day of gasoline and 65,000 barrels per day of diesel and jet fuel. This marks the second Phillips 66 refinery in California to be closed since 2020, following the company's conversion of its Rodeo refinery to renewable diesel production.

California, already facing some of the highest gas prices in the United States, could see further supply disruptions due to this closure. The state’s isolation from major refining centers on the Gulf Coast and Midwest means it must either produce its own fuel or rely on imports, primarily from Asia.

The announcement was made right after California Governor Gavin Newsom signed legislation mandating minimum fuel inventories for the state's oil refiners. The bill is aimed at preventing shortages, particularly during maintenance shutdowns, by ensuring that refiners have a plan in place to maintain adequate fuel supplies. However, with the closure of the Los Angeles refinery, it is unclear how these new regulations will impact overall supply and prices in the state.

PSX Refinery Closure to Affect Hundreds of Workers

The Los Angeles refinery currently employs around 600 Phillips 66 employees and 300 contractors. The United Steel workers union, which represents many of these workers, expressed concern over the loss of jobs. Mike Smith, the union's oil bargaining program chair, called the closure "a devastating loss" and announced plans to negotiate severance pay and benefits for affected employees. Phillips 66 is also in talks with real estate developers about potential uses of the 659-acre refinery site.

PSX’s Zacks Rank & Key Picks

Currently, Phillips 66 carries a Zack Rank #5 (Strong Sell).