California’s reputation for high living costs is about to get even more challenging. Already sitting 38.5% above the national average in overall expenses, the Golden State may soon break unwanted records at the gas pump.
A new analysis from USC’s Marshall School of Business predicts California drivers could face gasoline prices exceeding $8 per gallon by the end of 2026 — representing a potential 75% spike from current levels.
The refinery crisis driving price hikes
This alarming projection stems from a scheduled double-blow to California’s fuel supply: the upcoming closures of two major oil refineries.
Phillips 66 has announced it will cease operations at its Los Angeles-area facility by the end of 2025, citing long-term sustainability goals and shifting market conditions, as detailed in a company press release. Meanwhile, Valero is set to shut down its Benicia refinery in Northern California by April 2026, driven by what the company described to Reuters as an increasingly challenging regulatory environment and rising operational costs.
Together, these shutdowns are expected to eliminate roughly 21% of California’s total refining capacity over the next three years, significantly tightening supply at a time when demand remains strong.
Professor Michael A. Mische of the USC Marshall School of Business has warned that this supply disruption could increase gas prices dramatically.
In his recent analysis, cited by CBS News Sacramento, Mische projects that California’s average fuel price could rise from $4.82 per gallon in April 2025 to between $7.35 and $8.43 by the end of 2026. He also noted that rural counties such as Mono and Humboldt could face even steeper prices due to limited access and logistical challenges.
A perfect storm of market pressures
Multiple factors are converging to create this potential crisis. According to energy analysts cited by Reuters and CBS News, California’s refining industry is facing mounting pressure due to a combination of economic and environmental challenges:
- Weak refining margins that reduce profitability and make continued operations less appealing to companies like Phillips 66 and Valero
- Rising regulatory compliance costs that are unique to California, contributing to decisions to exit or scale back operations
- Softening demand for traditional gasoline, driven by evolving transportation habits and improved fuel efficiency
- The accelerating transition toward lower-carbon alternatives, which is reshaping long-term investment strategies across the energy sector
Refinery closures would create a substantial daily supply deficit. California currently consumes more than 13.1 million gallons of gasoline per day while producing less than 24% of its own crude oil, according to the California Energy Commission.
With the upcoming shutdowns, experts estimate a daily shortfall of between 6.6 million and 13.1 million gallons — a gap that would need to be filled through imports or alternative supply strategies.
Political pressure mounting
The severity of the situation has prompted California lawmakers to raise urgent concerns. Senate Minority Leader Brian W. Jones issued a strong public appeal to Governor Gavin Newsom, warning that Californians could face sharp fuel price hikes and rising costs on everyday goods without swift action.
His remarks, shared by the State Senate Republican Caucus, reflect growing political pressure to respond to forecasts showing a spike in prices driven by upcoming refinery closures.
In response, the Newsom administration has emphasized efforts to stabilize the state’s fuel supply. As reported by CBS News Sacramento, Governor Newsom recently directed state agencies to step up coordination with refiners to ensure a safe, affordable, and reliable gasoline supply.
His spokesperson, Daniel Villaseñor, stated that the administration remains committed to shielding Californians from volatile fuel prices, pledging ongoing action to prevent consumer harm.
These responses underscore the mounting concern at both the legislative and executive levels over how refinery shutdowns could ripple through the economy — from higher prices at the pump to increased costs on everyday essentials.
How to prepare for potential record-breaking fuel costs
With California already facing some of the highest gas prices in the nation — averaging $4.87 per gallon as of late May 2025 and surpassing $5 in regions like the Bay Area and Los Angeles, according to Contra Costa News — residents are seeking practical ways to ease the burden at the pump, which could benefit drivers across all states.
1. Use fuel price comparison tools. Smart drivers are turning to apps like GasBuddy and Upside to find the cheapest gas stations nearby. Patrick De Haan, head of petroleum analysis at GasBuddy, has noted that many consumers overpay simply out of habit — choosing convenience over savings. He recommends filling up on Mondays or Tuesdays, when prices are generally lower, and pairing that with credit card rewards to maximize savings, as highlighted by The Sun.
2. Drive more efficiently. Small adjustments in driving behavior can make a noticeable difference. Experts recommend maintaining proper tire pressure, avoiding aggressive starts and stops, using cruise control on highways, and removing excess cargo. These steps can improve fuel economy and reduce wear on your vehicle. As The Sun reports, aggressive driving alone can increase fuel consumption by up to 40% in traffic and 30% on highways.
3. Join fuel rewards and loyalty programs. Many gas stations and grocery stores offer rewards programs that provide discounts or cashback on fuel. Axios highlights these programs as one of the most effective ways to save over time, especially for frequent drivers.
4. Consider alternative transportation. In areas with reliable public transit, carpooling, biking, or even walking when possible can reduce fuel dependence. For longer-term savings, more Californians are exploring electric or hybrid vehicles — a move that aligns with the state’s broader push toward sustainable energy.
By combining these strategies, drivers in any state can ease the sting of high gas prices and take more control over their transportation costs.
Looking ahead
As refinery closures loom and market pressures mount, California drivers are staring down the possibility of record-breaking fuel prices — with ripple effects that could touch every corner of the economy.
While policymakers scramble to stabilize the situation, residents must prepare to adapt. Whether through strategic fuel-saving habits, smarter shopping, or longer-term transportation shifts, taking proactive steps now may be the only way to stay ahead of the pump pain still to come.
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