California Gas Prices Expected to Soar Beyond $8 Per Gallon

News Summary

California may experience a dramatic surge in gas prices, projected to exceed $8 per gallon by the end of 2026, marking a 75% increase from current prices. The rise is largely attributed to the closure of major refineries, which will cut refining capacity by 21% over three years, exacerbated by state taxes and reduced local oil production. As supply dwindles, residents are facing an impending energy crisis that could lead to significant economic strain.

California is facing a potential surge in gas prices, with projections indicating that prices could exceed $8 per gallon by the end of 2026. This forecast implies a staggering 75% increase from the state’s current average of $4.82 per gallon as of April 23, 2025.

The research, conducted by Michael A. Mische at USC’s Marshall School of Business, estimates that the price for regular gasoline will likely fall between $7.35 and $8.43 per gallon. The driving force behind this steep increase is the expected closure of major refineries, including Phillips 66 in Los Angeles and Valero in Benicia, which are projected to reduce California’s refining capacity by 21% over the next three years.

These refinery shutdowns could potentially remove between 6.6 million and 13.1 million gallons of gasoline per day from California’s fuel supply, which currently consumes over 13.1 million gallons daily. The significant decrease in refining capacity is especially concerning given that California produces less than 24% of its crude oil needs, relying mainly on imports.

Mische emphasizes that while refining capacity is projected to decline, there is unlikely to be a 20% reduction in fuel demand to correspond with it, creating a substantial supply shortfall. This situation is exacerbated by a overall 20% reduction in refinery production capacity, equating to over half of Washington State’s total production capacity.

Multiple factors are contributing to the anticipated spike in gas prices, including rising state excise and sales taxes, costs affiliated with the cap-and-trade program, and adjustments to the Low Carbon Fuel Standard (LCFS). Additional complications arise from declining in-state oil production, reduced refining capacity, a lack of incoming fuel pipelines, and reliance on costly maritime transportation for fuel.

Changes to the LCFS alone could drive prices up by nearly 10%, according to Mische, and further costs for consumers may emerge from transportation needs as gasoline may have to be sourced from distant locations such as the Gulf Coast or Asia. Furthermore, the logistical supply chain vulnerabilities present the risk of additional complications, particularly if geopolitical disruptions occur.

Despite concerns raised by Mische’s report, including the anticipated loss of approximately 1,300 direct jobs and around 3,000 indirect jobs due to refinery closures, some critics have called into question the credibility of the report. The California Governor’s office has responded by asserting that Mische is supported by interests linked to Saudi Arabia, claims that Mische has denied, explaining his past work on Saudi Arabia’s Vision 2030, which involves diversifying the economy away from fossil fuels.

As gas prices continue their upward trajectory, local owner Ernie Giannecchini noted that he has already increased his prices from under $4 to $4.49 per gallon, still under the state average. Meanwhile, California Governor Gavin Newsom’s office has outlined plans to collaborate with refiners in an effort to maintain a steady gasoline supply. In contrast, Senate Minority Leader Brian W. Jones has warned of an impending energy and economic crisis stemming from refinery shutdowns, calling for immediate action.

The projected rise in fuel prices has led some consumers to explore alternative transport options such as public transit. However, without any regulatory changes or timely intervention, the likelihood remains high that California will face significantly increasing gas prices, placing additional economic pressures on residents.

Deeper Dive: News & Info About This Topic

• ABC7 News
• Wikipedia: Gasoline Pricing
• SFGate
• Google Search: California gas prices
• KTLA News
• Google Scholar: California gasoline prices
• Forbes
• Encyclopedia Britannica: Gasoline
• NBC San Diego
• Google News: California fuel refinery closures