This Is Why CA Gas Could Hit $8.44 Per Gallon In 2026

CALIFORNIA — A new analysis has found California gasoline prices could rise to $8.44 per gallon by the end of 2026 after the pending closure of two refineries — one-fifth of the state’s refining capacity — and the onset of new state regulations.

California gas prices are the nation’s highest, at $4.78 per gallon for regular-grade gasoline Tuesday, per AAA.

The new study from University of Southern California professor Michael A. Mische examined California’s historical gas prices, oil supply and refining capacity, and modeled the likely impact of refinery closures and costly new fossil fuel and refinery fees and regulations.

“The shutdown of the two California-based refineries could possibly place the Golden State in a precarious economic situation and create a gasoline deficit potentially ranging from 6.6 million to 13.1 million gallons a day, as defined by the shortfall between consumption and production,” wrote Mische. “Reductions in fuel supplies of this magnitude will resonate throughout multiple supply chains affecting production, costs, and prices across many industries such as air travel, food delivery, agricultural production, manufacturing, electrical power generation, distribution, groceries and healthcare.”

“Based on current demand and consumption assumptions and estimates, the combined consequences of the 2025 Phillips 66 refinery closure and the April 2026 Valero refinery closure, together with the potential impact of legislative actions such as, but not limited to, the new LCFS standard, increase in excise taxes, Cap and Trade, SBX1-2, and ABX2-1, the estimated average consumer price of regular gasoline could potentially increase by as much a 75% from the April 23, 2025, price of $4.816 to $7.348 to $8.435 a gallon by calendar year end 2026,” continued Mische.

Mische said the high delta between California gas prices and that of other states is the result of state taxes and fees, and policies that have reduced in-state oil production and refining capacity faster than gasoline demand has fallen.

“Over the last 30 to 50 years, the California state excise tax on gasoline has increased by 253%, the number of motor vehicles has grown by 38%, and our population has increased by 24%," Mische wrote. "Meanwhile, the number of refineries has declined by 56%, in-state oil field production has fallen by 63%, finished gasoline stocks have declined by 98%, in-state daily refinery capacity has decreased by 36%, average gasoline prices for all formulations have gone up by 253%, and imports of non-U.S. foreign oil increased 712%.