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How did U.S. refinery capacity and outages between 2021–2025 affect retail gasoline prices?
Executive summary
U.S. operable refinery distillation capacity hovered around 18.4 million barrels per calendar day (b/cd) at the start of 2024–2025, essentially flat year‑over‑year, though EIA projects capacity to fall to about 17.9 million b/d by end‑2025 as specific refineries close [1] [2]. Regional outages and lower utilization—U.S. utilization fell from about 93% to the mid‑80s in early 2025—reduced gasoline production and inventories in key markets (notably the West Coast), producing localized retail price spikes even while national averages moved modestly [3] [4] [5].
1. Refinery capacity trends: steady headline numbers, shifting geography
National operable atmospheric distillation capacity was reported at about 18.4 million b/cd as of Jan. 1, 2025, with only small incremental changes coming from process tweaks rather than big expansions; yet announced closures (e.g., LyondellBasell’s Houston and Phillips 66’s California moves) point to a nearly 3% decline in capacity by end‑2025 in EIA forecasts [1] [2]. In other words, aggregate capacity looked steady in the headline EIA report, but announced and expected retirements mean the physical footprint of refining is shifting — especially away from parts of the West Coast [1] [2].
2. Utilization and outages: timing matters more than totals
Weekly utilization fell in early 2025—from the low 90s into the mid‑80s—which matters because utilization (running rates) determines short‑term product output; localized unplanned outages in California and staggered maintenance elsewhere drove much of that drop [3] [4]. EIA and industry reporting emphasize that whether an outage affects retail pump prices depends on inventories, seasonality, and regional pipeline and import options, not just the raw fact that a unit is offline [6] [4].
3. Inventories and regional bottlenecks amplified price signals
Lower refinery throughput translated into decreased motor gasoline and diesel inventories in 2024–25, tightening the supply cushion that normally dampens price swings [4]. Where regional connectivity is poor—California’s market is relatively isolated and requires specific CARB blends—outages can create acute supply shortfalls and large local price increases, prompting unusual import paths and higher landed costs [7] [5].
4. How outages translated to retail prices: national moderation, local spikes
On the national level, crack spreads and wholesale margins were drifting down since 2022 and EIA expected retail gasoline averages to stay moderate (around $3.20/gal in 2025 under one outlook), so aggregate U.S. pump prices did not uniformly skyrocket despite capacity losses [2]. By contrast, localized incidents—fires and major unit outages in California—produced sharp regional retail spikes and prompted record‑level gasoline imports to the West Coast, which raised costs there relative to Gulf Coast benchmarks [5] [8].
5. Empirical nuance: outages sometimes move prices, sometimes don’t
EIA’s technical work cautions that outages do not automatically translate into higher crack spreads; prices respond to the balance of supply and demand and prevailing inventory levels, so the statistical relationship is complex [6]. Academic and industry studies likewise show unplanned outages can significantly affect wholesale and retail prices for specific blends or regions, but not always at national scale—especially when inventories and imports can cushion the shock [9] [10].
6. Policy and market responses that altered the outcome
Regulators in California moved to strengthen resupply planning and consider margin caps after outages and fires, explicitly linking planned maintenance and outage planning to consumer price risk [11]. Market responses—staggered maintenance, shifting product slates, and increased imports into stressed regions—also mitigated some price impact but at a cost: more expensive long‑haul shipments and higher local wholesale spreads [4] [5].
7. Bottom line and competing perspectives
Fact: headline U.S. capacity was roughly flat at 18.4 million b/cd as of Jan. 2025 but is projected to decline toward 17.9 million b/d by end‑2025 due to announced closures [1] [2]. Interpretation splits: EIA and some analysts argue national retail prices remain moderated by lower crack spreads and crude prices, while regional commentators and traders point to clear evidence that outages and closures produced sharp local price spikes and increased reliance on costly imports—especially on the West Coast [2] [5] [8]. Available sources do not mention any single causal chain that makes outages the sole driver of pump prices nationally; instead, they show a mix of regional outage shocks, changing inventories, import flows, and broader crude‑price/margin trends jointly set retail gasoline outcomes [6] [4].
Limitations: this summary relies on EIA reports, industry coverage, regional reporting, and academic studies supplied in the search results; available sources do not mention detailed station‑level retail pass‑throughs or elasticities beyond the cited studies [10] [9].