Authored by Brad Jones through The Epoch Instances,
California gasoline costs may skyrocket by as a lot as 75 p.c by the tip of 2026 with the anticipated shutdown of oil refineries within the state, in line with an evaluation launched Might 5 by a researcher on the College of Southern California (USC).
Common gasoline costs may rise from a mean of $4.82 in April 2025 to as excessive as $8.44 a gallon by the tip of subsequent yr, stated the report, authored by Professor Michael Mische on the Marshall Faculty of Enterprise.
Two Phillips 66 refineries in Los Angeles—about 8 p.c of the state’s oil refining capability—are slated to shut by the tip of this yr. Valero Power Corp. additionally introduced final month it can shut down or restructure its Benicia refinery within the San Francisco Bay space—which accounts for about 9 p.c of refining capability—by April 2026, rising issues over gasoline costs and provide.
The USC evaluation states that based mostly on present demand, consumption, state rules, and different components, the refinery closures may end in a possible 21 p.c drop in refining capability from 2023 to April 2026.
This might create a gasoline deficit probably starting from 6.6 million to 13.1 million gallons a day, stated Mische.
“Reductions in gasoline provides of this magnitude will resonate all through a number of provide chains affecting manufacturing, prices, and costs throughout many industries equivalent to air journey, meals supply, agricultural manufacturing, manufacturing, electrical energy era, distribution, groceries, and healthcare,” he wrote.
Trade consultants have additionally warned that gasoline costs will spike dramatically when the refineries shut.
Phillips 66 stated it was shutting down its LA refinery due to the uncertainty surrounding its long-term sustainability, and due to “market dynamics.”
The state of California is at the moment suing main oil firms over alleged deception relating to the dangers of local weather change and fossil gasoline combustion.
Governor Urges Power Fee to Take Motion
In an April 21 letter, Gov. Gavin Newsom directed California Power Fee (CEC) vice chair Siva Gunda to “redouble” the state’s efforts to work intently with oil firms to make sure a “protected, inexpensive, and dependable provide of transportation fuels, and that that refiners proceed to see the worth in serving the California market, whilst demand for fossil fuels continues its gradual decline over the approaching a long time.”
Newsom directed Gunda “to bolster” the state’s “openness to a collaborative relationship and our agency perception that Californians may be shielded from value spikes and refiners can profitably function in California—a market the place demand for gasoline will nonetheless exist for years to come back.”
The governor additionally referred to the CEC’s Transportation Fuels Evaluation report, which lists a state takeover of oil refineries in California as considered one of a number of choices, and directed Gunda to suggest “any adjustments within the state’s strategy which might be wanted” by July 1.
Republican state Sen. Brian Jones from San Diego, the Senate minority chief, issued a Might 6 assertion citing the USC examine and calling the refinery closures “a looming power and financial disaster.”
“If the Governor doesn’t act now, Californians might be blindsided by sticker shock on the pump and skyrocketing costs on on a regular basis items,” Jones stated.
In a Might 6 letter to Newsom, Jones referred to as for pressing measures to stop additional refinery closures and assist long-term power stability, equivalent to funding tax credit or different reduction from taxes and rules.
In the meantime, Republican state Sen. Shannon Grove from Bakersfield urged the governor to extend new drilling permits to assist in-state oil manufacturing as an alternative of counting on “costly international imports, typically from hostile nations,” she instructed The Epoch Instances.
New permits have plummeted 97 p.c during the last 5 years, in line with information from the California Division of Conservation. New drilling permits within the state dropped from 2,676 in 2019 to 86 in 2024.
“That is catastrophic for each Californian on the gasoline pump,” Grove stated in an April 16 social media publish.
“Refineries are shutting down or barely hanging on as a result of they’ll’t get the oil they should produce the gasoline used each day by California households.”
‘Controlling the Injury’
Mike Umbro, founder and CEO of Californians for Power and Science—a nonprofit advocate for power economics and setting—and a developer of an oil discipline challenge west of Bakersfield, instructed The Epoch Instances that Newsom’s letter seems to be conducting injury management with oil firms.
“He’s attempting to job Siva Gunda with controlling the injury,” Umbro stated.
Umbro urged the governor to take a extra direct and deliberate strategy by signing an govt order declaring an power disaster, issuing permits to drill, and permitting refineries to provide gasoline.
He applauded the USC examine, saying it and different impartial research are what’s wanted to completely consider the oil-and-gas provide and guarantee there isn’t any scarcity of inexpensive gasoline on the pumps for customers.
Daniel Villaseñor, a spokesman for the governor’s workplace, instructed The Epoch Instances in response to questions that Newsom’s letter to Gunda “speaks for itself.”
Sandy Louey, a CEC spokeswoman, instructed The Epoch Instances in an e-mail that the company is “dedicated to working with stakeholders to discover choices to make sure an inexpensive, dependable, and protected transportation gasoline provide.”
Louey stated the idea of a state-owned refinery is “only one in an inventory of many potential choices for the state to think about” that the CEC proposed as attainable options to mitigate gasoline value spikes in a report launched final August.
Within the report, the CEC recognized {that a} state-owned refinery could present reduction to customers however acknowledged many challenges to beat, together with excessive prices, the experience essential to handle refinery operations, and the way the refinery would match into the state’s transition away from petroleum fuels, she stated within the e-mail.
The California Air Sources Board can also be required to develop and submit a Transportation Fuels Transition Plan to be launched by the tip of the yr, Louey stated.
In accordance with an announcement by Valero, a hearth broke out at its Benicia refinery on Might 5 however was extinguished inside hours.
No accidents have been reported, and the reason for the hearth is beneath investigation, stated the oil firm. Valero didn’t say whether or not the hearth would considerably disrupt manufacturing on the refinery.
