California Gas Prices Projected to Surpass $8 by 2026

Categories: California Business NewsCalifornia News

Gas prices rise sharply at a California gas station.

News Summary

A report predicts California gas prices could exceed $8 per gallon by 2026 due to refinery closures and reduced supply. Current prices average $4.82, but projected refinery shutdowns and reduced local oil production are driving costs up. Experts warn of significant economic impacts and a potential energy crisis as local gas supplies dwindle and jobs are threatened.

California is projected to see gas prices exceed $8 per gallon by the end of 2026, according to a recent report. This substantial increase would represent a potential 75% rise from the current average price of $4.82 per gallon, as of April 23, 2025. The study, conducted by Michael A. Mische from USC’s Marshall School of Business, estimates that the price for regular gasoline may range between $7.35 and $8.43 per gallon as refinery closures impact the state’s fuel supply.

Several significant refinery closures are expected to take place in the near future, notably Phillips 66 in Los Angeles and Valero in Benicia. These closures are projected to reduce California’s refining capacity by 21% over the next three years. This reduction could eliminate between 6.6 million and 13.1 million gallons of gasoline per day from California’s fuel supply, which currently consumes more than 13.1 million gallons daily. Currently, California produces less than 24% of its crude oil needs, heavily relying on imports to meet its demand.

Mische underscores that a corresponding 20% drop in fuel demand will not occur alongside the reduction in supply. This lack of balance creates a significant supply shortfall, compounded further as California is also facing a 20% overall reduction in refinery production capacity—roughly over half the total production capacity of neighboring Washington State.

Various factors are driving up gas prices in California. These include increasing state excise and sales taxes, costs associated with the cap-and-trade program, pending changes to the Low Carbon Fuel Standard (LCFS), declining in-state oil production and refining capacity, the absence of incoming fuel pipelines, and the state’s dependence on costly maritime transport. Mische highlights that changes to the LCFS alone could drive prices up by nearly 10%.

Another point of concern is the potential for disruptions in the logistical supply chain due to geopolitical factors. Mische has warned that such vulnerabilities may exacerbate the rising cost of gasoline. Additional costs might also affect consumers as gasoline may need to be imported from distant locations, such as the Gulf Coast or Asia, when local supplies dwindle.

This risk assessment notes that the possibility of refinery shutdowns could have far-reaching implications beyond gas prices. These closures may eliminate approximately 1,300 direct jobs along with around 3,000 additional indirect jobs in the community, further impacting local economies. As prices continue to rise, some consumers have already begun considering alternative transportation methods, including public transit, in an effort to cope with the increasing costs.

Local gas station operators are feeling the pinch as well. One station owner reported recent pricing adjustments, raising gas prices from under $4 to $4.49 per gallon, though this still falls below the current state average. Meanwhile, California Governor Gavin Newsom’s office has stated plans to collaborate with refiners to maintain a reliable gasoline supply amid these challenges. In contrast, Senate Minority Leader Brian W. Jones has cautioned of an imminent energy and economic crisis attributed to the anticipated refinery shutdowns, urging the need for immediate action to address these concerns.

Mische’s report has faced scrutiny, with critics questioning its credibility. Among the detractors is the Governor’s office, which has suggested that Mische is linked to external interests, claiming he is “bankrolled by Saudi Arabia.” However, Mische has denied all allegations, clarifying that his previous work focused on diversifying economies away from fossil fuels, not promoting petroleum interests.

Without intervention or significant regulatory changes, experts warn that California gas prices could continue to rise steeply, potentially leading to increased economic burdens on the state’s residents. It remains to be seen how the forthcoming year will unfold amidst evolving energy dynamics and the associated costs consumers will face.