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Released October 30, 2025 | SUGAR LAND
Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)
Summary
Phillips 66 took a $518 million hit from its refinery segment. An oversupply situation for global crude and a downturn in U.S. refinery capacity is taking a toll on the broader markets.
Downstream Markets are Stressed
Downstream markets on the West Coast of the United States are under stress, as Phillips 66 (Houston, Texas) reported Wednesday that its refining business took a third-quarter loss.
The company reported total net earnings of $133 million during the three-month period ending September 30, compared with $877 million during the second quarter. Its refining segment reported a $518 million loss, compared with earnings of $359 billion during the second quarter.
Mark Lasher, the chairman and chief executive officer at Phillips 66, said its refining and midstream segments, however, set records for clean product yields and fractionation volumes. Elsewhere, the company said it was busy with a divestment spree in the European markets.
That comes amid a global slowdown in the oil sector, with prices below the point at which many producers can make a profit. West Texas Intermediate, the U.S. benchmark for the price of oil, is expected to average $65 per barrel this year, but fall to $48.50 by 2026 amid signs of a bloated market.
The U.S. Energy Information Administration (EIA), part of the Department of Energy, said it expects global oil inventories to average 2.1 million barrels per day (BBL/d) next year, compared with a forecast for 1.9 million BBL/d for this year. By the first quarter of next year, the EIA expects global inventories will reach 2.7 million BBL/d, weighing on profits and margins.
Meanwhile, domestic refinery capacity is on the decline. Valero (San Antonio, Texas) now plans to close its refinery in Benicia, California, with 144,000 BBL/d in processing capacity, and a nearby asphalt refinery, with 13,000 BBL/d in capacity, by the end of April.
Subscribers to Industrial Info's Global Market Intelligence (GMI) Petroleum Refining Plant Database can read a detailed profile of the Benicia refinery here and the asphalt facility here.
Valero Chief Executive Officer Lane Riggs said during the company's earnings call that it will continue to supply fuel for its California wholesale operations after the refinery closes, and that it plans to import waterborne barrels into the state from "anywhere in the world." Canada is a major oil exporter to West Coast refineries.
Phillips 66, for its part, received its final batch of waterborne crude oil at its Los Angeles refinery at the end of September. The company said market dynamics in California were in part behind its decision to shut operations at its Los Angeles plants by the fourth quarter.
Subscribers can read details about the Los Angeles components here and here.
By the Numbers
• $133 million: Phillips 66's earnings for the third quarter
• $518 million: The loss reported by Phillips 66's refining segment
• $4.58: The average cost of a gallon of regular unleaded gasoline in California
Phillips 66 already ended operations at the 133,000-BBL/d crude unit at its refinery in Carson, California. Subscribers can see the refinery details here. Should others follow suit due to California legislation on storage levels, the state may become heavily dependent on foreign supplies.
But the proposed Western Gateway Pipeline, a 200,000-BBL/d fuels artery, could serve as something of a stop-gap measure by delivering refined fuels drawn from domestic reserves to California. Phillips 66 and Kinder Morgan are behind a project that, if build, would start delivering refined products by the start of the 2030s.
Phillips 66 said in its quarterly earnings report that the project would connect mid-continental assets to Arizona, California and Nevada. Construction, if sanctioned, would be complicated by U.S. tariffs on steel as the nation is dependent on foreign supplies of the tubular products necessary for pipelines. For more information, see October 24, 2024, article - Proposed Pipeline Could Ease California Future Transportation Fuel Imbalance.
Even without refinery closures, California has the highest average retail price for gasoline in the Lower 48 states. California's average is around $4.58 for a gallon of regular unleaded, compared with a national average of $3.04 per gallon.
Phillips 66's WRB Refining Purchase Offsets Closed California Capacity
Faced with many problems in California, Phillips 66 has shifted its refining capacity inland. On October 1, the company completed its acquisition of the 365,000-BBL/d Wood River, Illinois refinery and the 146,000-BBL/d Borger, Texas refinery by purchasing the remaining 50% in WRB Refining LP from Cenovus.
Accounting for the 50/50 joint venture stakes, this reflects a combined increase of 255,000 BBL/d in refining capacity added to Phillips 66's refining ownership.
The capacity addition from the joint venture dissolution more than offsets the closure of Phillips 66's 133,000 BBL/d Los Angeles-area refineries.
Other than the Wood River, Borger and Los Angeles refineries, Phillips 66 owns six other refineries in the U.S. with a total of 1,174,500 BBL/d in operational crude distillation capacity. Click here for full list of Phillips 66-owned, U.S. refineries.
Key Takeaways
• Phillips 66 took a $518 million hit from its refinery segment.
• Valero now plans to close its refinery in Benicia, California, by the end of April.
• The proposed Western Gateway Pipeline could deliver refined fuels to California.
About Industrial Info Resources
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).
