Projected increase in gas prices in California due to refinery closures and supply chain issues.
California gas prices are expected to exceed $8 per gallon by the end of 2026, increasing by up to 75% from current rates. This surge is linked to significant refinery closures that could reduce gasoline supply by millions of gallons daily. The state, which imports most of its crude oil, faces a supply-demand imbalance as production capabilities decline. In response, Governor Newsom’s office aims to collaborate with refiners. Critics warn of a looming energy and economic crisis, urging immediate action amidst rising operational costs for businesses and consumers.
California gas prices are projected to soar beyond $8 per gallon by the end of 2026, signaling a substantial increase for residents. This forecast, detailed in a recent study led by Michael A. Mische at USC’s Marshall School of Business, indicates that prices could rise by as much as 75% from the current average of $4.82 per gallon, recorded as of April 23, 2025. The report estimates that the price for regular gasoline will likely fall between $7.35 and $8.43 per gallon in the coming years.
The anticipated rise in gasoline prices is largely attributed to major refinery closures across the state. Notable plants, such as Phillips 66 in Los Angeles and Valero in Benicia, are expected to halt operations, resulting in a significant reduction of California’s refining capacity, estimated at 21% over the next three years. This disruption could eliminate between 6.6 million to 13.1 million gallons of gasoline daily, while California’s current consumption exceeds 13.1 million gallons per day.
Despite being a significant consumer of fuel, California produces less than 24% of its crude oil needs and relies heavily on imports. Mische noted that the expected supply reduction would not coincide with a decrease in demand, indicating a potential shortfall that could intensify price increases. As California faces a reduction in refinery capacity equivalent to over half of Washington State’s total production capability, the chances for price stability diminish.
Several factors compound the issue, contributing to the rising gas prices. Increases in state excise and sales taxes, expenses from the cap-and-trade program, and pending amendments to the Low Carbon Fuel Standard (LCFS) are significant cost drivers. Additionally, declining production capabilities, a lack of new fuel pipelines, and the necessity of relying on costly maritime transport further exacerbate the situation. Mische also pointed out that any changes to the LCFS could incur additional costs, potentially pushing prices up by nearly 10%.
With the prospect of gas prices climbing, some consumers are already contemplating alternative modes of transportation, such as public transit and carpooling. The looming refinery shutdowns threaten to eliminate approximately 1,300 direct jobs along with an estimated 3,000 indirect jobs in the state’s economy. Moreover, businesses may face increased operational costs due to the need for gasoline imports from as far away as the Gulf Coast or Asia, thereby further amplifying expenses for consumers.
In response to these findings, California Governor Gavin Newsom’s office has announced intentions to collaborate with refiners to secure a reliable gasoline supply amidst growing concerns. However, critics have emerged regarding the credibility of Mische’s report. Some officials, including Senate Minority Leader Brian W. Jones, express alarm at what they describe as an impending energy and economic crisis due to the refinery shutdowns, calling for immediate action.
Mische’s study is characterized more as a risk assessment than a bleak forecast, aiming to illuminate potential price trends rather than deliver a definitive prediction. In light of these developments, California residents may brace for a future of inflated gas prices unless effective regulatory changes or interventions are enacted. As the state’s energy landscape evolves due to these refinery modifications, residents remain alert to the possible economic burdens they may bear in the near future.
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