California’s Refinery Crisis Could Cut Off Alaska and Hawaii — Here’s How

Two U.S.states—Alaska and Hawaii—are closely watching California’s energy crisis with growing concern.

Unlike mainland states that can source fuel from neighboring regions, Alaska and Hawaii depend almost entirely on California’s refinery capacity for gasoline, diesel, and jet fuel.

As California’s refineries shut down permanently, these states confront a precarious future with no viable alternatives at the scale they require.

This is no longer a regional issue; it is a matter of national energy security.

Alaska, despite producing roughly 450,000 barrels of crude oil daily from its North Slope, has very limited refining capacity.

Most of its crude is shipped south to refineries in Washington State and California, which then process it into refined fuels that are shipped back north.

Hawaii, located 2,400 miles from California’s coast and without any domestic oil production, relies entirely on fuel shipments originating from California refineries or passing through California ports.

Hawaii’s economy, heavily dependent on tourism, runs on jet fuel produced by these same refineries.

The crisis escalated with the closure of Philip 66’s Los Angeles refinery in December 2024, eliminating 139,000 barrels per day of refining capacity.

Valero’s Benicia refinery is set to close in April 2026, removing another 145,000 barrels per day.

Combined, these closures reduce California’s refining capacity by about 17% in just 16 months.

While California could theoretically import fuel from other states or countries, Alaska and Hawaii have no such backup options.

There are no pipelines, no neighboring states to buy from, and no alternative supply routes that bypass California or Washington refineries.

Four major forces have created this crisis, each compounding the others.

First, California’s refinery economics have collapsed under the weight of strict environmental regulations.

Compliance with low-carbon fuel standards, cap-and-trade programs, and new inventory mandates requiring extensive fuel storage have made refinery operations prohibitively expensive.

Philip 66 and Valero both cited these regulatory burdens as reasons for their closures.

Second, Alaska’s refining paradox deepens its dependency.

Despite producing large quantities of crude, Alaska’s two small refineries cannot meet local demand economically due to high construction and maintenance costs in harsh weather and a limited population.

It remains cheaper to export crude and import refined products processed elsewhere.

Third, Hawaii’s geographic isolation leaves it with zero alternatives.

Fuel must arrive by ship from distant refineries, primarily in California.

Shipping from Asia or the Gulf Coast is possible but significantly more expensive and slower, increasing risks of delays and higher insurance costs.

This threatens Hawaii’s tourism-driven economy, which relies heavily on steady jet fuel supplies.

Fourth, the military dimension heightens urgency.

Alaska and Hawaii host critical military bases requiring vast fuel supplies for operations and readiness.

The Pentagon monitors these vulnerabilities closely, as refinery closures reduce supply redundancy.

Prolonged supply interruptions could force adjustments in military training and operations.

Experts outline three scenarios for the coming years.

The best case sees California stabilizing its refinery operations, with increased imports and adjusted supply contracts allowing Alaska and Hawaii to manage without severe disruption.

Gas prices would rise but remain manageable, and military operations would continue normally.

The base case, more likely, involves tightening supplies, significant price spikes, and logistical challenges.

Fuel costs in Hawaii could approach $7 to $8 per gallon, impacting tourism and transportation.

Alaska would face similar pressures, with increased costs for heating oil and transportation.

Military bases would adjust fuel reserves and training accordingly.

The worst case envisions a major disruption—an accident, severe weather, or geopolitical event—that pushes an already tight market into crisis.

Severe fuel shortages could trigger rationing, airline service cuts, tourism collapse, and economic hardship.

Military readiness would be strained, and recovery would take years.

For residents of Alaska and Hawaii, understanding this crisis is vital.

Monitoring local fuel prices, conserving fuel where possible, and preparing for higher costs can mitigate impacts.

Tourism businesses in Hawaii should plan for fluctuating demand, while Alaskans reliant on heating oil should secure supplies early and improve home efficiency.

For mainland Americans, this crisis illustrates how state-level policy decisions ripple nationwide.

California’s refinery closures affect multiple western states and highlight the need for balanced energy policies that consider supply reliability alongside environmental goals.

The question remains: Should the federal government treat Alaska and Hawaii’s fuel supply as a strategic priority? Should emergency supply routes and refinery upgrades receive more support? These debates will shape the future of energy security for these vulnerable states.