--- title: "The Sunset of Traditional Refining: How Phillips 66’s Closure Signals a New Era for Energy Markets" description: "The closure of Phillips 66’s Los Angeles refinery by late 2025 marks a significant shift in the U.S. energy sector, reducing California's refining capacity by 8%. This event highlights the declining d" type: "news" locale: "en" url: "https://longbridge.com/en/news/241700585.md" published_at: "2025-05-24T04:50:32.000Z" --- # The Sunset of Traditional Refining: How Phillips 66’s Closure Signals a New Era for Energy Markets > The closure of Phillips 66’s Los Angeles refinery by late 2025 marks a significant shift in the U.S. energy sector, reducing California's refining capacity by 8%. This event highlights the declining demand for gasoline and the rise of electric vehicles, prompting investors to reassess traditional refining assets. The transition to renewable fuels is underway, with Phillips 66 pivoting towards renewable diesel and sustainable aviation fuel. Investors are advised to focus on resilient refining assets and companies leading in decarbonization, as the energy transition reshapes the market. The shutdown of Phillips 66’s Los Angeles refinery, set to cease operations by late 2025, marks a pivotal moment in the U.S. energy sector. With a capacity of 139,000 barrels per day—8% of California’s refining capability—the closure underscores a seismic shift in refining economics, regulatory pressures, and the energy transition’s growing influence. For investors, this is not merely a regional disruption but a clarion call to reassess exposure to traditional refining assets and prioritize companies with resilient strategies or decarbonization plans. ### The Immediate Impact: Supply Tightening and Price Risks California, already grappling with some of the nation’s highest gasoline prices, faces heightened vulnerability. The refinery’s closure will reduce local refining capacity by a margin that cannot be easily replaced. While phillips 66 plans to offset supply via imports and its Rodeo Renewable Energy Complex (RREC), analysts warn of a potential supply bottleneck. The Energy Information Administration (EIA) forecasts a 3% drop in U.S. refining capacity by year-end 2025, with closures like this contributing to a long-term decline. The ripple effects are already visible. West Coast gasoline crack spreads—the profit margin for refiners—have halved since 2023, squeezing profitability. For consumers, this could mean higher prices, as the region becomes more reliant on imported fuel. Meanwhile, California’s stringent environmental regulations, like the Low Carbon Fuel Standard (LCFS), add compliance costs that disproportionately burden older refineries. ### Structural Shifts: Why Refining’s Golden Age Is Over The Los Angeles closure is part of a broader trend. Declining gasoline demand (down 13% since 2017) and rapid EV adoption (now 15% of new car sales in California) are eroding the business case for legacy refineries. Regulatory headwinds, from emissions caps to infrastructure mandates, further strain profitability. Competitors like Valero (VLO) face similar pressures. Despite its Gulf Coast dominance—accounting for 57% of its refining capacity—Valero’s Q4 2024 margins dropped across all regions. Its West Coast operations, contributing just 8% of refining capacity, reported a 60% margin decline year-over-year. This highlights the vulnerability of geographically concentrated assets. ### The Transition to Renewables: Winners and Losers The energy transition isn’t just about shutting down old refineries; it’s about repurposing them for low-carbon fuels. Phillips 66’s strategy exemplifies this pivot. Its Rodeo facility, converting to renewable diesel and sustainable aviation fuel (SAF), now produces 10 million barrels annually. Crucially, this aligns with California’s LCFS incentives, which reward fuels with lower carbon intensity. Valero, too, is investing in renewables, with its Diamond Green Diesel joint venture producing 1.2 billion gallons of renewable diesel annually. However, its capital allocation remains skewed toward sustaining legacy assets. While PSX’s 2025 capital budget allocates $74 million to renewables, Valero’s renewable spending lags its Gulf Coast refining investments. This divergence underscores a critical divide: PSX is aggressively transitioning, while VLO remains anchored to a shrinking market. ### Investment Strategies: Where to Find Resilience Investors must prioritize two criteria: **resilience in refining** and **progress in decarbonization**. 1. **Resilient Refining Assets**: Gulf Coast refineries, with access to cheap shale crude and export infrastructure, are better positioned. Phillips 66’s Rodeo and Valero’s Gulf Coast facilities benefit from economies of scale and proximity to global markets. 2. **Decarbonization Leadership**: Companies like PSX, which are repurposing assets for renewables and battery materials (e.g., specialty coke for EV batteries), are creating new revenue streams. Their participation in carbon capture and hydrogen projects adds long-term optionality. Avoid overexposure to regions with declining refining capacity, such as the West Coast, where regulatory costs and demand shifts create a toxic mix. ### Risks and Opportunities Ahead The path forward is not without pitfalls. Regulatory changes, such as stricter emissions limits or import tariffs, could disrupt supply chains. Additionally, the success of renewable projects hinges on feedstock availability and policy support. Yet the opportunities are vast. Renewable diesel demand is projected to grow 15% annually through 2030, while global EV battery demand will require 50% more graphite by 2027—a market where Phillips 66’s specialty coke production gives it an edge. ### Conclusion: The Energy Transition Is Here—Adapt or Fall Behind The Los Angeles refinery closure is more than a footnote in corporate history; it’s a harbinger of industry consolidation and transformation. Investors must recognize that the old guard of refining is fading, and those leading the shift to renewables will define the next era. **Action Items for Investors:** \- **Buy PSX**: Its renewable pivot and asset flexibility position it to thrive in a low-carbon world. \- **Avoid VLO**: While its Gulf Coast dominance offers some stability, its slower transition and reliance on declining regions make it a higher-risk bet. \- **Monitor Renewable Diesel Markets**: Track LCFS credits and global SAF demand as key indicators of profitability. The energy transition is no longer a distant threat—it’s reshaping markets today. Those who adapt will fuel the future. ### Related Stocks - [PSX.US - Phillips 66](https://longbridge.com/en/quote/PSX.US.md) ## Related News & Research | Title | Description | URL | |-------|-------------|-----| | 菲利普 66 的一位顶级内部人士通过最新的股票出售采取了重大行动 | 菲利普 66 执行副总裁 Don Baldridge 于 2026 年 2 月 19 日出售了 7,500 股公司股票，交易金额约为 120 万美元，显示出显著的内部交易活动。Spark 的 AI 分析师将 PSX 评级为 “跑赢大盘”，指 | [Link](https://longbridge.com/en/news/276407954.md) | | 炼油公司股票在 2026 年表现优异。你是否应该投资 1000 美元？ | 石油炼油公司在 2026 年正经历显著增长，这得益于较低的原材料成本和对精炼产品需求的增加。像瓦莱罗能源、菲利普 66 和马拉松石油这样的股票表现出色，超越了标准普尔 500 指数。持续的石油过剩使得原油价格保持低位，而对精炼燃料的需求预计 | [Link](https://longbridge.com/en/news/276003733.md) | | 菲利普 66 公司报告称，2024 年全年在营销和特种产品领域的利润达到 10.1 亿美元，较之前增长了 345.2% | 菲利普 66 在 2024 年的市场与特种业务部门报告利润为 10.1 亿美元，增长幅度达到 345.2%。在 2025 年第四季度，公司在中游业务中实现利润 6.38 亿美元，而化学品部门则报告亏损 1200 万美元。炼油部门在第四季度赚 | [Link](https://longbridge.com/en/news/274808404.md) | | 菲利普 66 的首席执行官 Mark Lashier 在接受 CNBC 采访时表示，公司没有上游能力，因此不会进入委内瑞拉参与该地区的开发 | 菲利普 66 首席执行官马克·拉希尔表示，公司没有上游能力，不会前往委内瑞拉帮助该地区的发展 - CNBC 采访 | [Link](https://longbridge.com/en/news/274837507.md) | | 欧洲汽油/石脑油市场中，汽油炼油利润率下降 | 西北欧洲汽油炼油利润率下降了 58 美分，约为每桶 9.25 美元。交易活动包括由挪威石油和 Trafigura 向 TotalEnergies 和 Varo 出售的 10,000 吨 E5 汽油驳船，以及由菲利普 66 向埃克森美孚出售的 | [Link](https://longbridge.com/en/news/275641444.md) | --- > **Disclaimer**: This article is for reference only and does not constitute any investment advice.