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Jun 2, 2025  |  
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Annabella Rosciglione


NextImg:California gas could reach $8 by 2026 due to refinery closures and regulation: Report

A new study from the University of Southern California warned that gas prices in the state could reach $8 per gallon by the end of 2026. 

Two oil refineries in the state, the Phillips 66 refinery in Los Angeles and the Valero facility in Northern California, are set to shut down. Those two closures represent a possible 21% reduction in the Golden State’s refining output over three years, according to a report by Michael Mische at USC’s Marshall School of Business.

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“The estimated average consumer price of regular gasoline could potentially increase by as much as 75% from the April 23, 2025, price of $4.816 to $7.348 to $8.435 a gallon by calendar year end 2026,” Mische wrote, noting some California counties could see higher prices.

“Reductions in fuel supplies of this magnitude will resonate throughout multiple supply chains affecting production, costs, and prices across many industries such as air travel, food delivery, agricultural production, manufacturing, electrical power generation, distribution, groceries, and healthcare,” he continued.

California consumes more than 13.1 million gallons of gasoline each day, according to the report. The state produces under 24% of its crude needs. Losing these two refineries could create a deficit between 6.6 million and 13.1 million gallons per day.

Last year, regulators in California greenlit a low-carbon fuel standard, requiring fuel producers that are more carbon-intensive than the standard to purchase credits from fuel producers that are less carbon-intensive than the standard.

California said the program will increase gas costs by $162 billion through 2046 but would create $105 billion in credits for electric vehicle charging and $8 billion in hydrogen credits. 

California already has higher-than-average gas prices. California drivers are paying an average of $4.78 per gallon for regular-grade gasoline as of Tuesday, per AAA. The national average is $3.15 per gallon.

One Republican state lawmaker expressed concern about the report’s findings.

“If the Governor doesn’t act now, Californians will be blindsided by sticker shock at the pump and skyrocketing prices on everyday goods,” Senate Minority Leader Brian Jones said in a statement. “We’re talking about gas prices over $8.43 per gallon by the end of next year.”

CLEAN ENERGY ADVOCATES SEE REASON FOR HOPE UNDER TRUMP

Gov. Gavin Newsom’s (D-CA) office pushed back on the report’s findings and Republican concerns.

“Just last month, the governor directed the state to redouble efforts to work with refiners to ensure a safe, affordable and reliable supply of gasoline,” Daniel Villaseñor, a spokesman for Newsom, said in a statement to KTLA. “We thank Senate Republicans for highlighting the administration’s work on this critical issue. Governor Newsom will keep fighting to protect Californians from price spikes at the pump.”