Phillips 66 Faces Nearly $1 Billion Loss Amid Rising Oil Prices and Refinery Challenges

Phillips 66 posted nearly a $1 billion loss in Q1 2025. The company faced rising oil prices, scheduled refinery maintenance, and changes in the energy market. The Houston-based refiner’s troubles come as it announces the closure of a century-old refinery near Los Angeles, signaling major changes in its operations and California’s fuel supply.

Quarterly Losses Hit Hard

Phillips 66’s first quarter financials revealed a nearly $1 billion loss, a sharp downturn driven by several factors. Refinery throughput fell sharply, going from 94% utilization last quarter down to 80% in Q1 2025. This decline resulted from planned maintenance and turnarounds at key facilities, including its largest refining asset, the Sweeny Refinery in Texas, which processes roughly 265,000 barrels of crude oil daily.

That drop in refinery activity meant Phillips 66 processed a total of 1.616 million barrels per calendar day globally—less than its peers Valero Energy and Marathon Petroleum. While the company remains one of the top independent refiners in the U.S., its smaller scale compared to rivals partly explains the lower throughput and revenue.

Renewable Segment Struggles Amid Market Shifts

On top of refining woes, Phillips 66’s renewable fuels segment posted a $185 million loss. The renewable business, which includes renewable diesel and biofuels, faced a squeeze from changing tax credit structures and weaker international demand. Despite selling about 63,000 barrels per day of renewable fuels, margins came under pressure.

By contrast, competitors like Marathon Petroleum maintained steadier performances through ventures like their Diamond Green Diesel joint venture, and Valero Energy led the pack with robust margins and higher capacity in renewables. Phillips 66 is pushing to grow its renewable portfolio, signaling a long-term move toward cleaner energy despite current losses.

Refinery Closure Adds to Uncertainty

The company announced plans to shutter its refinery near the Port of Los Angeles by the end of 2025.

This facility in Wilmington, along with a crude oil processing plant in nearby Carson connected by a five-mile pipeline, dates back over 100 years. About 600 employees and 300 contractors work there.

CEO Mark Lashier cited doubts about the refinery’s long-term viability as the reason for closure. Phillips 66 intends to continue supplying California’s fuel needs by sourcing from other refineries both inside and outside its network.

They will also lean more on renewable diesel and sustainable aviation fuels from their San Francisco Bay Area complex.

The shutdown will reduce California’s refining capacity by about 8%, which is significant since the state already struggles to supply its 31 million gas-powered vehicles with special-blend gasoline. However, experts say the closure likely won’t cause immediate gas price spikes, as Phillips 66 imports fuel from other regions and could view external supply as more cost-effective.

Facing New Regulations and Market Realities

The refinery closure was announced soon after Governor Newsom signed a law requiring refiners to keep minimum fuel inventories across the supply chain.

The law aims to prevent shortages and price surges. Still, energy experts doubt this new regulation directly influenced Phillips 66’s decision.

Severin Borenstein from UC Berkeley’s Energy Institute noted that shutting down a refinery isn’t a quick reaction—it’s a decision in the works for at least a year. He suggested Phillips 66 might find importing fuel more profitable than operating older, less efficient facilities.

Meanwhile, Phillips 66 is exploring redevelopment opportunities for the Wilmington and Carson sites with real estate firms Catellus Development Corp. And Deca Cos. The company envisions projects that could support environmental goals, create jobs, and improve regional infrastructure.

Broader Industry Context

Phillips 66’s struggles come amid a turbulent period for U.S. Refiners. Oil prices have surged, driven by global supply constraints and geopolitical tensions. At the same time, the refining sector faces growing pressure from regulatory changes and a push toward renewable energy sources.

While Phillips 66 invests in renewables, the transition remains challenging. Its renewable segment’s losses contrast with gains in traditional refining margins seen by some peers, though that advantage might not last as fuel standards tighten and consumer preferences shift.

Phillips 66’s smaller scale compared to rivals like Valero and Marathon means it has less operational flexibility. That shows in its lower throughput and the heavier impact from refinery downtime. But the company’s diverse midstream assets—including natural gas and liquids transportation and processing—offer some cushion.

Still, the near-term picture looks tough. Planned refinery shutdowns and maintenance will weigh on production.

The loss in renewable margins signals ongoing challenges in that space. And the closure of a major West Coast refinery marks a major strategic shift that could reshape Phillips 66’s footprint.

The Q1 losses and refinery shutdown show the challenges traditional refiners face amid volatile oil prices and changing energy policies. How the company balances its legacy operations with renewable ambitions will be key to its future in an industry undergoing major change.