California is on monitor to lose one other main refinery simply months after Phillips 66 totally shuttered its Los Angeles-area operations on the finish of 2025. Valero’s Benicia plant is now set to finish refining by April 2026. Collectively these two closures wipe out roughly 309,000 barrels per day of capability, about 18% of the state’s refining base.
When you’ve heard concerning the Benicia closure, odds are it was tied to gasoline costs in the most costly state within the nation. For asphalt contractors, that’s solely half the story. Benicia additionally provides near 45% of the paving asphalt and binder utilized in Northern California.
The final couple of years have already been brutal on prices predictability. Politics, the financial system, tariffs, labor shortages, and rates of interest can transfer the goalposts between bid day and paving day. Shedding a serious refinery simply piles on one other layer of chaos. As of December 2025, diesel in California averages about $4.92 per gallon (31% above the nationwide common of $3.76), so each further penny on the pump or the terminal hits the underside line arduous.
Benicia Refinery Historical past and Closure Drivers
In-built 1968 on the Carquinez Strait northeast of San Francisco as an Exxon refinery (initially 100,000 bpd), Benicia modified arms a number of instances (Tosco, Ultramar Diamond Shamrock) earlier than Valero acquired it in 2002 and expanded it to its present 145,000 bpd. For many years it was a West Coast workhorse, changing heavy bitter crude into excessive yields of fresh diesel and paving-grade asphalt.
California’s very strict low-carbon gasoline requirements, skyrocketing carbon-credit prices, and tons of of tens of millions in required emissions upgrades made continued operation unprofitable. Valero’s personal filings state the plant is not viable previous 2026. In April 2025 the corporate notified the California Vitality Fee it intends to idle, restructure, or stop refining by April 2026 and recorded main impairment expenses. In different phrases: the plant will shut.
When these barrels cease, Northern California loses its major binder supply and a large share of native diesel. Contractors will face each: larger and extra risky binder prices, plus a tighter diesel market that drives up gasoline costs for each loader, paver, curler, and haul truck on the job.
Ryan Clark
Provide Chain Shifts on the Sizzling Plant
When a plant that has leaned on Benicia for many years abruptly has to search out new provide, three issues occur quick:
- New binder sources must be certified, usually from out of state or abroad.
- Terminals scramble to deal with greater volumes from farther away.
- On public jobs, Caltrans labs steadily demand new JMF verification even when the PG grade stays the identical.
You gained’t see the lab work or the logistics scramble, however you’ll really feel it. Worth holds get shorter, lead instances stretch, and there’s much less slack when one thing goes sideways.
Binder Volatility and Escalation Methods
Binder is simply 5–6% of the combination by weight, but it usually accounts for half the raw-material value. When provide tightens and distances develop, binder will get risky, and producers get nervous about lengthy value holds. That volatility spills over to diesel, too, making conventional 60 or 90 day bid home windows dangerous.
There are two easy methods to guard your self:
- Shorten bid validity to match what the plant will truly maintain (15–30 days is the brand new regular).
- Use index-based escalation clauses for binder and, when homeowners permit it, for diesel too. A easy EIA diesel index clause can save margins on a six-month overlay.
Diesel Price Impacts on the Backside Line
Gas consumption on an asphalt paving mission is substantial. A big chilly planer, resembling a Wirtgen W 190 working at full load, can eat 20 to 40 gallons of diesel per hour. Observe loaders within the Caterpillar 953–963 measurement class usually use 10 to fifteen gallons per hour, whereas an ordinary asphalt paver requires 5 to 10 gallons per hour throughout placement. When haul vehicles are added—usually a number of hundred gallons over the course of a single mission—gasoline routinely accounts for 10 to twenty% of complete manufacturing and placement prices.
At California’s present common diesel value of $4.92 per gallon, a busy crew can simply burn $4,900 to $5,500 per day in gear gasoline alone. A forecasted 30-cent enhance provides $300 to $400 each day, or $6,000 to $8,000 over a typical three-week overlay. On a $2 million contract with a ten% goal margin, that swing can wipe out 30-40% of anticipated revenue.
Most public company contracts nonetheless don’t embrace diesel value escalation provisions. Consequently, any enhance in gasoline value is absorbed fully by the contractor, instantly decreasing revenue margins. Though some non-public homeowners are open to fuel-adjustment clauses, fixed-price public work leaves contractors—significantly smaller companies with out entry to bulk-purchase agreements or hedging choices—totally uncovered to those value fluctuations. A single refinery discount or regulatory change can remodel a aggressive bid right into a monetary loss.
Contractor Playbook for 2026 and Past
You’ll be able to’t cease a refinery from closing, however you possibly can cease it from blindsiding you. Right here’s a six-step playbook:
- Discuss to your vegetation yearly about binder and gasoline provide adjustments.
- Match bid validity to what suppliers will truly honor.
- Push escalation clauses for asphalt and diesel on each job that can allow you to.
- Construct further time into schedules for potential JMF delays.
- Give homeowners a brief, clear rationalization if you tighten phrases. Context turns pushback into understanding.
- Observe diesel costs weekly (EIA or AAA) and take a look at on-site tanks, route optimization, or locked-in bulk purchases when costs dip.
When Your Native Refinery Is Subsequent
California’s state of affairs feels excessive, however the underlying sample performs out in pockets all throughout the nation. From the Gulf Coast to the Midwest to the Pacific Northwest, many areas nonetheless lean on one or two growing older refineries for the lion’s share of their paving-grade asphalt and diesel. A single plant going offline, changing to renewables, or just reducing asphalt manufacturing can set off the identical chain response we’re about to stay by way of in California.
Take into consideration the Marathon refinery in Martinez (shut in 2020) or the Husky plant in Superior, Wisconsin (idled in 2022). Every time, contractors tons of of miles away abruptly noticed binder shipped in by rail, value holds shrink to weeks as an alternative of months, and diesel surcharges seem on each combination ticket. In Louisiana and East Texas, the place refineries like Citgo Lake Charles and ExxonMobil Beaumont dominate native provide, a single turnaround or unplanned outage can push diesel 30–50 cents larger in a single day and maintain it there for months.
The warning indicators are normally public lengthy earlier than the gates shut: large impairment expenses, delayed upkeep, whispers of renewable-diesel conversions, or state regulators floating new low-carbon guidelines. Good contractors outdoors California are already treating these alerts the identical means we’re treating Benicia:
· Mapping precisely which refinery provides most of their binder and diesel.
· Asking vegetation each winter, “What if that plant cuts asphalt subsequent 12 months?”
· Constructing escalation language for each binder and gasoline into each bid they will.
· Locking in bulk diesel or hedging when costs dip, as a result of the subsequent spike is never far behind.
The playbook works anyplace: discuss early, bid tight, defend your margins with clauses, and by no means assume the refinery down the highway can be there perpetually.
Keep sharp on the market.
