Phillips 66's 900-mile pipeline will carry gasoline, diesel, and jet fuel from the Texas Panhandle to Phoenix and Los Angeles.
California's reserves of crude oil and refined products, originally held as a buffer against supply shocks from the US-Iran conflict, have now fallen to low levels.
Key highlights
Phillips 66 and its partners have formally approved the $5 billion WicketGate Pipeline System project. This 900-mile pipeline will have a capacity to transport 230,000 barrels per day of gasoline, jet fuel, and diesel from the Texas Panhandle to Arizona and California.
Over the past year, California has lost two major refineries, while the supply of refined products from coastal Asia has shrunk dramatically. A planned pipeline from Texas is now expected to help fill this supply gap. California's retail gasoline prices are currently the highest in the nation, and Governor Gavin Newsom has expressed support for the project.
On Tuesday, Phillips 66 and two partners finalized the $5 billion WicketGate Pipeline System project. The 900-mile pipeline will have a capacity of 230,000 barrels per day, carrying gasoline, jet fuel, and diesel from the Texas Panhandle to Arizona and California. The new pipeline will connect to an existing 500-mile line in Phoenix, ultimately reaching Colton, California, located about an hour east of Los Angeles.
The pipeline is expected to begin operations in 2029, and its capacity is nearly enough to offset the production losses from the recent closure of two refineries. One of the partners, Kinder Morgan, will operate the pipeline segment from Arizona to California. This segment currently moves refined products out of California but will be reversed to supply the state. Another partner, HF Sinclair Refining Company, holds a minority stake. The companies stated that product sources will include refineries in Texas, Oklahoma, and near St. Louis, Missouri.
California is in urgent need of additional refined product supply. The US-Iran conflict has disrupted exports of refined products from South Korea and Japan to California, and also impacted crude oil imports from the Middle East. Phillips 66 closed its Los Angeles refinery (with a capacity of 139,000 barrels per day) in December, and Valero closed its Benicia refinery near San Francisco (with a capacity of 145,000 barrels per day) in April. These two closures have reduced California's crude oil refining capacity by 20%.
"A pipeline dedicated to transporting refined products to California is critical to the state's energy security," said Donald Baldridge, Phillips 66's executive for midstream and chemicals operations.
The average price of gasoline in California on Monday was about $5.60 per gallon, the highest in the nation. Since the onset of the US-Iran conflict this year, diesel supply has been particularly tight; the price of diesel for trucking reached $6.86 per gallon, compared to $5.15 a year ago. Gasoline prices in some California cities have exceeded $7 per gallon.
Over the past decade, California's policies have consistently pushed to reduce fossil fuel consumption, leading to increased demand for electric vehicles, which now account for one-fifth of new car sales in the state. However, California still consumes 1.8 million barrels of crude oil daily, second only to Texas in the US.
Decades ago, California was a major crude oil drilling hub. Since the 1980s, many oil and gas producers and refiners have left the state, and now 75% of the crude oil consumed in California is imported. This year's US-Iran conflict has nearly blocked the Strait of Hormuz, disrupting global energy flows for months. Before the conflict, nearly one-fifth of the world's oil and gas passed through the strait, supplied by countries including Saudi Arabia, Iraq, and Kuwait.
Saudi Arabia, one of California's most important crude oil suppliers, did not send any crude to the US in July, marking the first time this has occurred since federal monthly data began in 1985. California relies more heavily on crude from Saudi Arabia, Iraq, and the UAE than any other state. Meanwhile, Asian countries that export jet fuel and gasoline to California are facing shortages of Middle Eastern crude oil, preventing their refineries from operating at full capacity and reducing their exports of refined products.
California has received a positive development: a significant increase in imports of refined products from Texas. From February to May, the volume of refined products shipped from the Gulf Coast to the West Coast surged nearly sevenfold. This rise was triggered by the Trump administration's temporary 60-day waiver of the Jones Act, a 1920 shipping law that prohibits foreign-flagged vessels from transporting cargo between US ports. On Monday, the Trump administration extended the waiver for another 90 days.
Governor Newsom's office described the pipeline as a "promising solution" that could increase the supply of refined products while utilizing existing pipeline infrastructure, avoiding the additional environmental burden on California that a new pipeline construction project would bring. Newsom has blamed the high gasoline prices on the Trump administration and the US-Iran conflict; Trump recently called on oil companies to lower retail fuel prices.
California has relied on its crude oil and refined product inventories to buffer the supply shock from the conflict. However, Andy Walz, who oversees Chevron's refining, pipeline, and chemicals operations, said that even with companies like Chevron continuously sending tankers from the Gulf Coast to replenish stocks, inventory levels continue to decline.
"Inventories are falling and are approaching historic lows," Walz said. "If the situation doesn't ease within the near term, everyone will face higher prices and increased operational pressure."
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