- California gas prices could reach $8 per gallon by the end of 2026 due to refinery closures and rising costs.
- Supply challenges stem from reduced in-state production, taxes, and reliance on imported fuel.
- Officials, small business owners, and politicians express concern over economic impact and energy security.
California drivers may soon face a shocking reality at the pump: gas prices that could soar past $8 per gallon by the end of 2026. That would mark a staggering 75% increase from today’s rates, sending shockwaves through households and small businesses alike.
The warning comes from a new study conducted by Michael A. Mische of USC’s Marshall School of Business. His research suggests that regular gasoline in California could cost anywhere from $7.35 to $8.43 per gallon, compared to the current statewide average of $4.82 as of April 23, 2025. While market forces will ultimately decide the exact price, Mische says the trend is unmistakable. “The models all indicate the same thing — the price of gas is going up,” he said.
Refinery Closures Threaten Supply
A key driver behind this projected spike is the scheduled closure of two major oil refineries: Phillips 66 in Los Angeles and Valero in Benicia. According to Mische’s report, these shutdowns would slash California’s refining capacity by 21% over the next three years. In practical terms, that could remove 6.6 to 13.1 million gallons of gasoline per day from the state’s supply — nearly half of what the state currently produces.
California consumes more than 13.1 million gallons of gasoline daily while producing less than a quarter of its own crude oil needs. “We’re not going to see a 20% drop in demand to match that reduction,” Mische explained. “That creates a significant supply shortfall.” He likened the impending loss in refinery production to eliminating over half the capacity of the state of Washington. The implications are clear: fewer refineries mean tighter supplies, and tighter supplies almost always mean higher prices.
Multiple Forces Pushing Prices Up
Mische highlighted a complex mix of factors that could send gas prices higher. Beyond refinery closures, California drivers are feeling the weight of rising state excise and sales taxes, expanding cap-and-trade program costs, and changes to the Low Carbon Fuel Standard. On top of that, in-state oil production is declining, pipelines are scarce, and the state increasingly relies on costly maritime transport to bring in fuel.
“Any disruption to maritime transport — whether from geopolitical tension, hurricanes, or labor strikes — could cause major problems,” Mische said. “We’re putting ourselves in a vulnerable position.”
Even the Low Carbon Fuel Standard alone could push prices up by nearly 10%, the study notes, though officials have since removed specific price projections from the state’s website. Additional hidden costs include transporting gasoline from distant sources like the Gulf Coast or Asia, as well as maintaining mandatory reserves of 14 to 16 days’ worth of fuel. “Refiners pass those costs on to consumers,” Mische added.
Despite the grim projections, he stressed that the study is not a “doomsday prediction.” Instead, it’s a risk assessment designed to help the public and policymakers understand the trajectory of gas prices. “We layered in variables ranging from refinery capacity and seasonal blends to global spot prices and consumer demand elasticity. It’s about understanding the trend and being prepared,” Mische said.
Local Businesses Feel the Pinch
In Stockton, small business owners are already grappling with the impact. Ernie Giannecchini, who has run Ernie’s General Store and Deli for 40 years, typically offers the lowest gas prices in town. At times, he has kept his cash price below $4 per gallon as a way to fight back against big oil and help local residents.
But even Ernie has had to adjust. Last week, he raised his price from $3.99 to $4.49 per gallon. It’s still below the statewide average, but for his loyal customers, it’s a noticeable hit. “My prices have to go up because I’m at rock bottom,” he said. “I usually try to be the lowest price in Stockton, but right now there’s no end in sight.”
For many Californians, stories like Ernie’s are personal. Families already juggling rising rents, food costs, and utility bills are now bracing for one more squeeze. Social media is buzzing with frustration, as users share photos of long lines at gas stations and debate ways to cope. Some have called for more public transit investment, while others warn that the state’s heavy regulations are to blame.
Government Response
Governor Gavin Newsom’s office has responded, emphasizing the state’s commitment to protecting drivers. In March, Newsom directed officials to collaborate with refiners to ensure a reliable supply of gasoline. A spokesperson noted that California has avoided extreme price spikes like the historic 2022 surge, thanks in part to a law establishing an independent petroleum watchdog.
“This law gives us more transparency and accountability than ever before,” the statement read. “Governor Newsom will keep fighting to protect Californians from price spikes at the pump.”
While the statement reassures some, critics argue the measures don’t go far enough. Many point to looming refinery closures as proof that proactive planning cannot fully prevent pain at the pump.
Political Backlash
The study has ignited strong reactions from Republican leaders, who view the potential price increases as a looming “energy and economic crisis.” Senate Minority Leader Brian W. Jones of San Diego called the refinery shutdowns a threat to fuel prices, jobs, and California’s energy security. In a letter to the governor, Jones warned that state policies and excessive regulations are pushing refineries out of operation.
“We’re not just losing gas,” Jones wrote. “We’re losing jobs, hurting local economies, and jeopardizing affordable living in California. This is a direct hit to national security as well.”
The rhetoric reflects growing tension in Sacramento, as lawmakers debate the balance between environmental regulations and economic stability. For Californians, these political battles play out in the most immediate way: on their dashboards.
Looking Ahead
Experts warn that unless decisive action is taken, Californians could be in for years of high gas prices. Drivers may face a mix of frustration and adaptation, from cutting back on travel to seeking alternative fuels. Meanwhile, smaller businesses like Ernie’s General Store are caught in the squeeze, trying to stay afloat while keeping prices as low as possible.
While Mische’s report doesn’t promise an exact number, the trajectory is clear: supply constraints, environmental policies, and logistical hurdles are all converging to push prices higher. How high and how fast depends on global markets, political decisions, and the state’s ability to mitigate refinery losses.
For now, one thing is certain: California drivers are bracing for a rocky ride at the pump. And as families, businesses, and policymakers weigh the stakes, the coming years could redefine what it means to drive in the Golden State.
