California regulator delays oil refinery profit cap for five years

[Oil and Gas Industrial zone,The equipment of oil refining,Close-up of industrial pipelines of an oil-refinery plant,Detail of oil pipeline with valves in large oil refinery.]
Rangsarit Chaiyakun/iStock via Getty Images

The California Energy Commission voted Friday to delay implementing a profit cap [https://www.pbs.org/newshour/nation/california-energy-regulators-halt-efforts-to-penalize-oil-companies-for-high-profits] on the state's refiners until 2030, removing for now one of the most prominent pieces of Gov. Gavin Newsom's 2023 push to rein in oil companies and mitigate price spikes for California drivers.

State Bill X1-2 granted sweeping powers to the commission to determine an acceptable profit margin for fuel makers and penalize those who exceed it, but Newsom this year asked regulators to work with refiners on ways to hold down gasoline prices, which typically are the highest in the lower 48 states; the commission's vice chair, Siva Gunda, then recommended pausing the policy to help improve the energy industry's confidence in the state.

The Western States Petroleum Association had recommended the state delay the penalty for 20 years, which they argued would send a strong market signal to encourage refinery investment.

The postponement comes after two oil refineries accounting for nearly 20% of California's refining capacity announced plans to close in the coming months.

Valero Energy (NYSE:VLO [https://seekingalpha.com/symbol/VLO]) plans to close its 145K bbl/day Benicia refinery, near the Bay Area, in April 2026, and Phillips 66 (NYSE:PSX [https://seekingalpha.com/symbol/PSX]) will shutter its 139K bbl/day refinery in Los Angeles later this year.

MORE ON VALERO ENERGY AND PHILLIPS 66

* Valero Energy: Balance Sheet And Buybacks Support Further Upside [https://seekingalpha.com/article/4815731-valero-energy-balance-sheet-and-buybacks-support-further-upside]
* Phillips 66: A Survived Proxy Fight And Growth [https://seekingalpha.com/article/4814334-phillips-66-a-survived-proxy-fight-and-growth]
* Phillips 66: The Trajectory Is Improving [https://seekingalpha.com/article/4813992-phillips-66-stock-asset-optimization-activist-pressure-continued-buy-rating]