Gas prices in California may hit a staggering $8.44 per gallon by the end of 2026, driven by the shutdown of two key refineries and the implementation of new state fuel regulations, according to a new analysis. The findings, published by University of Southern California professor Michael A. Mische, project that these closures—representing one-fifth of the state’s refining capacity—could create a severe supply shortfall amid steady demand.
California already leads the nation in gas prices, averaging $4.78 per gallon for regular unleaded fuel. Mische’s study warns that the planned 2025 closure of the Phillips 66 refinery and the 2026 closure of the Valero refinery, combined with aggressive environmental legislation, could drive up fuel costs by as much as 75%.
Mische outlined how state-imposed burdens—including Cap and Trade, increased excise taxes, and the new Low Carbon Fuel Standard (LCFS)—have steadily dismantled the state’s fuel infrastructure. He noted that while population and vehicle numbers have grown, refining capacity has shrunk 36%, in-state oil production has dropped 63%, and fuel stockpiles have plummeted 98%.
In response to mounting regulatory pressure, Chevron and state leaders from Arizona and Nevada have warned that these policies threaten regional fuel stability. Both states rely heavily on California’s refining output. Earlier this year, fuel prices spiked after state regulators delayed emergency repairs at a damaged refinery.
The LCFS alone is expected to add $162 billion in fuel costs by 2046, with only $113 billion returning in credits. Most of those credits go to EV charger manufacturers, not to consumers who pay for the equipment and electricity.
Additional legislation, such as SBX1-2 and ABX2-1, gives California sweeping control over refinery profits and maintenance schedules. Critics say these measures risk worsening supply chain disruptions and making California even more dependent on foreign oil.
Governor Gavin Newsom has called for new recommendations from the California Energy Commission (CEC) by July 1 but stopped short of reversing existing policies. California Republicans argue that the time for action is now.
“The Governor’s delays are inexcusable,” said State Senate Minority Leader Brian Jones. “We need immediate relief—not bureaucratic reports—before more refineries close and prices explode.”
