CA Gas Prices Could Hit $8/Gallon Amid Refinery Concerns

California drivers could start seeing gas prices as high as $8 next year as two refineries prepare to shut down, according to a recent expert report.

Industry groups, academics and state officials have voiced concerns in recent weeks. In 2026, the Phillips 66 in Los Angeles and Valero's Bay Area refinery will close. The plants have cited strict environmental regulations, high operating costs and market dynamics.

"California can ill afford the loss of one refinery, let alone two," wrote University of Southern California professor, Michael A. Mische, in a May report.

In his May 5 analysis, Mische says the average consumer price of regular gasoline could rise to between $7.348 and $8.435 per gallon by the end of 2026.

The shutdown of the two major facilities will reduce the state's daily refining capacity by 8.9 percent, the report says, adding that California will see a potential 21 percent reduction in collective refining capacity from 2023 to April 2026.

Together, the shutdowns will do away with some 300,000 barrels-per-day of refining capacity.

"The loss, although painful in terms of its impact on consumer prices, is absorbable and the deficit in production and gasoline levels will be compensated by imports of finished fuels from Washington State and perhaps Gulf Coast refineries," Mische continued.

In the Golden State drivers already pay more for gasoline than any other state. Nationwide, the current average for a gallon of regular gas is $3.22, according to the latest report from AAA. In California, the current average is $4.66.

Mische's study places blame with the Golden State's policies.

"California’s high gasoline prices and pending gasoline insecurity and shortage are largely self-created," he wrote.

Mische further argues that there is no evidence that refiners are price gouging or manipulating prices.

California’s excessive gasoline prices can be directly traced to declining in-state production of both oil and decreasing gasoline supplies, increasing regulatory oversight, escalating regulatory costs, and fees associated with mandatory programs such as Cap and Trade, environmental initiatives, the California special gasoline blend (LCFS), and various taxes."

These factors add $1.47 a gallon to the current consumer price, Mische claims.

“The damage doesn’t stop at the pump,” Senate Minority Leader Brian W. Jones (R-Santee) wrote in a statement in April. “Rising fuel prices and supply shortages impact everything from groceries and goods to fire trucks and police patrols. Every delivery truck, every city service vehicle, and every nonprofit serving the most vulnerable is affected when energy costs soar.”

Gov. Gavin Newsom has reportedly asked the California Energy Commission to work closely with refiners and by July. 1 recommend changes to the state's approach to ensure a more stable fuel supply.

“I am directing you … to reinforce the State’s openness to a collaborative relationship and our firm belief that Californians can be protected from price spikes and refiners can profitably operate in California — a market where demand for gasoline will still exist for years to come,” the governor wrote in an April 21 letter, MoneyWise reported.

The two refinery closures will also have measurable impact on the state's job market and economy. Both facilities will lay off hundreds California workers — some 600 employees and 300 contractors in LA, and around 400 workers in the Benicia area.

Last month, Mario Guiliani, Benicia's city manager told ABC7 News that the news of the refinery's "distressing" and will be "a major hit on the city."

"It is the newest refinery on the West Coast," he said. "It produces a significant amount of gasoline for the California market. I cannot foresee a possibility where that refinery just ceases operation altogether."

Meanwhile, Assemblymember Mike A. Gipson (D-Gardena) expressed similar concerns for Los Angeles County.

“This is a tremendous loss,” Gipson told NBC Los Angeles, referring to the looming closure of the Phillips 66 plant near L.A. "The jobs that it holds, the individuals… working each and every day, those individuals live in my district, they shop in my district, they add to the economy in my district."