California Gas Prices Projected to Skyrocket by 2026

Categories: California Business NewsCalifornia News

Consumers at a California gas station brace for rising fuel costs amidst projected price surges.

News Summary

California is experiencing a sharp rise in gas prices, with forecasts indicating they may exceed $8 per gallon by late 2026. A study by USC’s Michael A. Mische attributes the surge to refinery closures, decreasing production capacity, and heightened regulations. With California’s refining capacity expected to drop significantly, consumers may face additional economic stress. Governor Newsom’s office aims to address these challenges alongside refiners. As residents brace for these changes, many are considering alternative transportation options to manage rising fuel costs.

California is facing a significant rise in gas prices, with forecasts indicating that prices could exceed $8 per gallon by the end of 2026. This increase would represent a potential 75% rise from the current average of $4.82 per gallon, as of April 23, 2025. The findings originate from a study conducted by Michael A. Mische, a scholar at USC’s Marshall School of Business, which outlines how refinery closures and production capacity challenges are driving this projected spike in prices.

The report estimates that the price of regular gasoline may range between $7.35 and $8.43 per gallon. These projected increases are linked to several refinery closures, including Phillips 66 in Los Angeles and Valero in Benicia, which are expected to diminish California’s refining capacity by 21% over the next three years. The shutdowns could eliminate between 6.6 million and 13.1 million gallons of gasoline from the state’s daily supply, which consumes more than 13.1 million gallons daily.

Currently, California produces less than 24% of its crude oil needs and is heavily reliant on imports. Mische highlights that there will not be a corresponding decrease in fuel demand to accommodate the reduction in supply, resulting in a significant supply deficit. Moreover, California’s refinery production capacity is expected to decline by 20%, accounting for over half of the total production capacity of Washington State.

Multiple factors are influencing the potential price surge, which includes but is not limited to increases in state excise and sales taxes, expenses linked to the cap-and-trade program, proposed changes to the Low Carbon Fuel Standard (LCFS), and a growing dependency on costly maritime fuel transportation due to insufficient incoming fuel pipelines. The anticipated changes to the LCFS could drive prices up by nearly 10%.

Additionally, disruptions in the logistical supply chain present vulnerabilities that could be intensified by geopolitical events. These disruptions may further complicate the supply of gasoline due to California’s reliance on fuel imports from distant locations, such as the Gulf Coast or Asia, which could add extra costs for consumers.

While Mische positions his study as a risk assessment rather than an alarmist prediction, it emphasizes the need for awareness and preparation against future price trends rather than focusing solely on the reported figures. Local gas station owners have already begun raising prices in response to these trends, with one operator noting an increase from under $4 to $4.49 per gallon, which remains below the state average.

California Governor Gavin Newsom’s office has announced intentions to collaborate with refiners to ensure a steady gasoline supply amid these foreseen challenges. Meanwhile, Senate Minority Leader Brian W. Jones has raised concerns over an impending energy and economic crisis as a direct result of refinery shutdowns, calling for immediate action to address the issue.

In response to the rising prices and refinery shutdowns, some consumers are considering alternative transportation methods, including public transit. Mische’s predictions indicate that without regulatory changes or interventions, gas prices in California are likely to continue escalating, placing additional economic stress on residents.

The anticipated refinery closures are also expected to result in significant job losses, with approximately 1,300 direct jobs and around 3,000 indirect jobs at risk. However, Mische’s findings have faced scrutiny, with some critics, including individuals associated with the governor’s office, questioning the study’s validity and accusing Mische of potential conflicts of interest related to funding.

In summary, Californians are advised to prepare for rising gas prices, which could challenge household budgets further, particularly if the projected trends hold true. The convergence of refinery closures, increased taxation, and reliance on imported fuels indicates the need for proactive measures to manage the energy landscape.