Job Market Challenges Revealed By Closing A California Oil Refinery

Last month, officials with Valero Energy announced they would be closing the company’s 170,000 barrels-per-day oil refinery in Benicia, California—a city of 25,000 residents, east of San Francisco. The plant, spread across 900 acres, employs over 400 workers, and is scheduled to close in April 2026.

In the weeks since the announcement, state and regional officials have come forward to assure Benicia officials, local residents and workers that there will be a “just transition.” The workers will be provided with re-training and re-employment services to achieve “good jobs, quality jobs.”

We’ll see.

In California we’ve had experience with refinery closures over the past decade and “just transition”—a popular phrase of the Biden Administration. In these previous refinery closures, despite generous amounts of government funding for retraining and re-employment, few of the laid-off workers were able to obtain new jobs at anywhere near their previous wages, and a high number remained unemployed, more than a year after closure.

The Valero and broader refinery story is timely, given the prominent role of manufacturing jobs in today’s economic debates. Retraining and reemployment of laid-off refinery and other manufacturing workers have proved to be far more difficult in practice than in the retraining theories of high profile journalists (Thomas Friedman) as well as economists with the Obama and Biden Administrations. The experiences suggest why policymakers might not be so cavalier going forward about refinery closures and other manufacturing closures.

Only a Minority of Workers Find New Jobs at Anywhere Near Their Previous Wages

The Valero plant is located in a part of East Contra Costa that for the past few decades has been site of several oil refineries. One of these refineries was the Marathon Oil refinery. In October 2020, the Marathon refinery shut down operations and laid off 345 unionized workers.

The Contra Costa Country Workforce Development Board immediately responded with a series of re-employment and re-training services. An individualized employment plan was developed for each worker, incorporating skills and goals, and singling out skills that might be transferable to other occupations. Workers who sought training for new occupations were provided with such training at no cost, and also were provided with assistance in identifying and pursuing job openings.

Additionally, the Contra Costa Board was assisted in re-employment activities by the California Federation of Labor Unions, which had its own Rapid Response unit, as well as by the United Steelworkers Local 5.

Despite these expansive re-employment efforts, only a minority of the laid off workers were able to find jobs at anywhere near their former salaries. The University of California, Berkeley Labor Center tracked the shutdown and re-employment process, and surveyed laid-off workers. The Labor Center final report, issued in April 2023, noted that 14-16 months after the shutdown, 26% of the laid off workers were still not employed. Of those who had found jobs the job paid on average $12 per hour less than the average job at Marathon: the average hourly wage at Marathon was $50 per hour compared to a post layoff average wage of $38 per hour.

Though East Contra Costa has been the hub of refinery activities in Northern California, the number of jobs in the remaining refineries was limited, and had been shrinking in the past decade. Much was made of transitioning workers in the “green economy”, but the number of these jobs in the Bay Area was small, and they paid far less than the Marathon and oil and gas jobs. Health care, business services and information technology were growing sectors in Contra Costa, but often not good fits for or of interest to the Marathon workers.

Following the Valero announcement, Joe Garofoli, Senior Political Writer with the San Francisco Chronicle, contacted Benicia city officials as well as workers at the Valero plant. The officials emphasized the main role that Valero played in the city’s finances: of the city’s $60 million general fund budget, Valero contributed $7 million, and contributed another $2.9 million toward the city’s enterprise fund for water and wastewater.

Garofoli profiled one long time worker at the plant, Mark Felsoci, 63, who had been a crane operator at the plant for 28 years. He was grateful for the job, which had enabled him to purchase a house in Benicia, achieve stable employment, and unlike many other crane operators not commute to multiple work sites. Felsoci told Garofoli that he had few hopes that he or other workers would find similar jobs. He singled out for criticism the idea that the Valero workers could be retrained for green economy jobs.

“These guys that are putting up these solar panels or working in solar fields, they’re probably making half of what refinery workers do. They don’t get the benefits…You can transition to anything you want, but it’s going to pay way less than what you doing before.”

Green Energy Jobs Are Few, with Lower Wages

Kern County, the center of oil production in California, illustrates the big gap in number of jobs and wage levels between oil and gas jobs and green economy jobs. Kern, which stretches over 8100 square miles in the south Central Valley, is one of the state leaders in green energy. In 2020, it produced a quarter of the state’s total renewable energy in 2020, through its network of solar power generators and its 5000 wind turbines in the Tehachapi wind corridor.

But this renewable energy production created only 543 jobs in 2020. This number amounted to less than 4% of the 16,223 direct jobs in oil and gas in 2020 (with nearly double that amount for the oil and gas sector counting suppliers and other jobs connected to oil production). The average wage of the direct jobs in oil and gas was $82,017 in 2019 while the average wage for green economy jobs in Kern was 40% lower , at $57,000.

Phasing Out the Oil and Gas Industry in California: No Illusions

Kern County employment in oil and gas has rebounded in the past few years with the rebound in worldwide oil prices. However, Kern officials know the future of oil and gas employment in the county, as well as statewide, is daunting. Since 2015, the oil and gas industry in California has been faced with California state government and politics aimed at phasing out fossil fuels: a lengthy moratorium on permits for new wells, more stringent air quality requirements, and general higher costs of doing business in the state.

In announcing its closing, Valero described it as following “years of regulatory pressure, significant fines for air quality violations, and a recent lawsuit settlement related to environmental concerns.” Similar government policies were singled out by Phillips 66 officials when in October 2024 they announced the closing of the Phillips 66 refinery in Wilmington, Southern California. That refinery accounted for 8% of the state’s oil processing. That shutdown will result in layoffs for 600 direct workers by the end of this year.

With the politics of oil and gas in California (the industry has been the main villain in state government for years), it may be that the industry can do nothing to reverse the trend of refinery closures. But at least as this process continues, there should be no illusions on any side about what can be expected for many of the laid-off workers–even with the sophisticated and well-funded re-employment systems in place. There should be no illusions about “just transition.”