California Gas Prices Projected to Surge by 75% by 2026

Categories: California Business NewsCalifornia News

Increase in gas prices projected in California due to refinery closures.

News Summary

California is facing a projected 75% rise in gas prices by the end of 2026 due to the closure of two major refineries, which together account for 20% of the state’s gas production. The impending refinery shutdowns are causing concern over fuel availability and affordability, with potential prices hitting $8.43 per gallon. Additionally, the closures threaten thousands of jobs and exacerbate California’s budget deficit. Experts are calling for action as the state grapples with its heavy reliance on imported oil and the implications on local economy and residents’ finances.

California is bracing for a significant increase in gas prices, with projections indicating a potential surge of 75% by the end of 2026. The anticipated closures of two major refineries, the Phillips 66 refinery in Los Angeles and the Valero refinery in Benicia, are primary factors driving this alarming forecast.

The Phillips 66 refinery is expected to halt operations by the end of 2025, while the Valero refinery is scheduled to close by April 2026. Together, these refineries account for approximately 20% of California’s local gas production, leading to widespread concerns about fuel availability and pricing in the state.

Experts estimate that without the contributions of these two facilities, gas prices in California could reach around $8.43 per gallon. Current forecasts suggest the closure of Phillips 66 could already elevate prices to about $6.43 per gallon. This staggering price hike represents a substantial burden for California residents and businesses alike.

In addition to rising prices, the closures threaten approximately 1,300 jobs that are directly tied to these refineries. The ripple effect of these job losses could be significant, as economic assessments indicate that, with a job multiplier of 2.3, the total job losses could approach 3,000 statewide.

One key factor contributing to these refinery closures is the implementation of challenging regulations, particularly those established by the Low Carbon Fuel Standard. These regulations have created a difficult operating environment for local refiners, exacerbating their financial challenges. Without changes to these standards, the future of these refineries—and consequently fuel prices—remains precarious.

California’s reliance on imported oil further complicates the situation. Currently, the state produces only 23.7% of its own petroleum needs, a stark contrast to historic levels; in 1982, California met 62% of its petroleum requirements through in-state production. In recent years, California has contributed only 2.5% to 2.7% to total U.S. crude production, underscoring its heavy dependence on outside sources for fuel.

Furthermore, economists caution that further refinery closures could lead to a gasoline deficit ranging from 6.6 million to 13.1 million gallons per day. This sharp decline in production is likely to adversely affect California’s GDP, personal income, and overall affordability for its residents.

In light of these impending challenges, Governor Gavin Newsom’s administration is facing mounting pressure to address the looming fuel supply crisis triggered by these refinery closures. Recent regulatory measures enacted during Newsom’s tenure aim to stabilize fuel supply, yet their long-term effectiveness remains uncertain amidst growing scrutiny.

These refinery closures could also exacerbate California’s already significant budget deficit of $73 billion and the staggering $1.6 trillion in state and local government debt. With the average gas price in California reported as $4.918 in April— significantly higher than the national average of $3.260—the financial strain on Californian households is expected to intensify as the state navigates this precarious period.

The challenges posed by high regulatory costs add to the pressure faced by local refiners, leading to significantly increased expenses compared to gasoline prices in other states. With the dual threat of refinery closures and escalating prices, Californians are left to wonder what the future holds for fuel availability and affordability in the coming years.