California Faces Dramatic Gas Price Surge by 2026

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Gas prices soar as California anticipates refinery closures

News Summary

California is projected to experience a staggering increase in gas prices, with estimates suggesting a rise of up to 75% by the end of 2026. The closures of two major oil refineries, Phillips 66 in Los Angeles and Valero in Benicia, are anticipated to leave a significant gap in local gas production, with gas prices potentially rising to $8.43 per gallon. The refinery shutdowns could also lead to around 3,000 job losses and exacerbate California’s budget deficits, raising concerns over economic stability and fuel supply in the state.

California could soon face a dramatic increase in gas prices, with projections estimating a surge of up to 75% by the end of 2026. The anticipated closures of two major oil refineries, the Phillips 66 facility in Los Angeles and the Valero refinery in Benicia, will significantly impact local gas production and pricing.

The Phillips 66 refinery is expected to stop operations by the end of 2025, while the Valero refinery is scheduled to cease operations by April 2026. Together, these refineries are responsible for roughly 20% of California’s local gas production. Without them, estimates suggest gas prices could soar to around $8.43 per gallon. Current forecasts indicate that with the closure of Phillips 66 alone, gas prices may rise to approximately $6.43 per gallon.

The closures are projected to affect 1,300 jobs directly associated with these refineries. Taking into account the job multiplier effect, where each job supports additional jobs in the community, the total job losses could approach 3,000 throughout the state of California.

Regulations and Economic Impacts

Several factors contribute to these refinery shutdowns, primarily linked to stringent regulations such as the Low Carbon Fuel Standard, which imposes high operating costs on local refiners. Adjustments to these regulations could potentially stave off the closures, but the timeline and feasibility of such changes remain uncertain.

Currently, California produces only 23.7% of its own petroleum needs, a significant drop from 62% in 1982. The state has increasingly relied on imported oil, emphasizing the importance of local refineries for maintaining a stable fuel supply.

As the state braces for these closures, economists warn of a potential gasoline deficit ranging from 6.6 million to 13.1 million gallons per day, which could severely impact California’s economy. Such a decrease in gasoline production may hinder the state’s gross domestic product (GDP), affect affordability for consumers, and limit personal income growth.

Government Response to Fuel Supply Crisis

Governor Gavin Newsom’s administration is under significant pressure to address the impending fuel supply crisis created by these refinery closures. Initiatives have been implemented to improve fuel supply stability, but their long-term success is still uncertain in the wake of growing challenges.

In addition to rising gasoline prices and potential job losses, the recent closures could aggravate California’s already considerable budget deficits, which are projected to reach $73 billion, alongside $1.6 trillion in combined state and local government debt. The economic strain from increased fuel costs could further exacerbate financial issues for the state.

Current Gas Price Trends

As of April, California’s average gas price was reported at $4.918, markedly higher than the national average of $3.260. High regulatory costs for local refiners contribute to these elevated prices, making gasoline significantly more expensive in California compared to other states. Ensuring a consistent gas supply at reasonable prices will be a critical challenge for state officials as these refinery closures approach.

The future of California’s fuel landscape remains precarious. As the state transitions to cleaner energy sources, the impact of these refinery closures will likely be felt across the economy, affecting consumers, jobs, and local government revenue.