California Gas Prices Expected to Surge 75% by 2026

News Summary

California is facing a significant increase in gas prices, projected to soar by 75% due to the closure of major refineries. With experts estimating prices could reach $8.43 per gallon, the economic implications extend beyond fuel costs, threatening thousands of jobs. The state is also grappling with challenges related to budget deficits and debt, causing concern for residents and businesses alike. Governor Newsom’s administration is under pressure to find solutions as the state’s energy landscape shifts and reliance on imported oil grows.

California is facing a dramatic increase in gas prices, with projections indicating a potential surge of 75% by the end of 2026. This alarming forecast is largely attributed to the anticipated closures of two major refineries: the Phillips 66 refinery in Los Angeles, expected to shut down by the end of 2025, and the Valero refinery in Benicia, scheduled to cease operations in April 2026. Together, these refineries produce approximately 20% of California’s gasoline.

If these closures occur as planned, experts estimate that gas prices in California could reach about $8.43 per gallon. Currently, due to the expected closure of the Phillips 66 refinery alone, gas prices are projected to rise to around $6.43 per gallon. This significant increase in fuel costs would not only affect individual drivers but could also have broader implications for the state’s economy.

The impact of the refinery closures extends beyond fuel prices. Approximately 1,300 jobs are directly associated with these refineries, but with a job multiplier of 2.3, the total job losses throughout California could be as high as 3,000 when considering indirect employment affected by the closures. The loss of jobs would further complicate California’s economic landscape, which is already grappling with challenges stemming from budget deficits and high levels of state and local government debt, amounting to $73 billion and $1.6 trillion respectively.

Reasons Behind the Closures

The impending shutdowns of the Phillips 66 and Valero refineries are partially attributed to stringent regulations stemming from the state’s Low Carbon Fuel Standard. These regulations have imposed significant operational costs on local refiners, contributing to the decision to cease production. It is important to note that changes to the Low Carbon Fuel Standard have been suggested as a potential solution to prevent the closures; however, whether these changes can be implemented effectively remains in question.

California’s Changing Oil Landscape

California’s current reliance on oil has shifted markedly over the years. Recent statistics show that the state meets only 23.7% of its petroleum needs through in-state production, relying heavily on imported oil for the remainder. This contrasts sharply with historical data from 1982, when California managed to satisfy 62% of its petroleum needs locally. In recent years, California’s contribution to total U.S. crude production has fallen to only 2.5% to 2.7%.

Economists have raised alarms about the consequences of these refinery closures, warning that the state could face a gasoline deficit between 6.6 million and 13.1 million gallons per day. Such a decrease in gasoline production could significantly impact California’s gross domestic product (GDP), affordability of living, and individual income levels. As gas prices rise and supply dwindles, residents and businesses alike may feel the financial strain in various aspects of daily life.

Government Response and Future Outlook

Governor Gavin Newsom’s administration is under pressure to confront the approaching fuel supply crisis spurred by the refinery closures. The measures already passed aim to stabilize fuel supply, yet their long-term effectiveness in addressing the impending issues remains uncertain. As gas prices rise, the situation presents a significant challenge not only for the state’s economy but also for consumers who could see their everyday expenses escalate.

As of April, California’s average gas price stood at $4.918, a stark contrast to the national average of $3.260. The expected rise in fuel prices due to the refinery closures could create a ripple effect across all sectors of the economy, affecting transport costs, consumer goods, and overall living expenses. As the state grapples with these forthcoming challenges, it remains to be seen how quickly and effectively policymakers can respond to mitigate the impacts of these closures.

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