California’s Pending Gasoline Crisis
California State Senate Minority Leader Brian Jones (R-San Diego) is warning Californians that gas prices could soar to over $8 per gallon in 2026 due to the potential shutdown of two major in-state refineries.
An analysis published on May 5 by USC Professor Michael Mische entitled “Ensuring California’s Gasoline Security for the 21st Century” projects that gas prices could surge by 75% by the end of 2026. “California can ill afford the loss of one refinery, let alone two,” he states. The Phillips66 refining complex in Los Angeles is slated to close at the end of 2025, and the Valero refinery in Benicia is to shut down in April 2026. These two refineries produce approximately 20% of California’s in-state gasoline supply. “At no time has California ever faced a permanent 20% reduction in gasoline production...The pending loss of two refineries and a corresponding reduction in gasoline production will result in higher retail prices, the only issue is the severity of the price increase.”
Mische’s analysis makes it clear that “California’s high gasoline prices and pending gasoline insecurity and shortage are largely self-created. Over the last 30 to 50 years, the California state excise tax on gasoline has increased by 253%, the number of motor vehicles has grown by 38%, and our population has increased by 24%. Meanwhile, the number of refineries has declined by 56%, in-state oil field production has fallen by 63%, . . . in-state daily refinery capacity has decreased by 36%, average gasoline prices for all formulations have gone up by 253%, and imports of non-U.S. foreign oil increased 712%.”
“Today, the Golden State is held captive to foreign suppliers and imports over 60% of its petroleum needs from non-U.S. foreign sources, including Iraq, Saudi Arabia, Brazil, and Guyana… While California was becoming more dependent on foreign sources, the overall U.S. became less dependent.”
Professor Mische indicates that despite political claims of price manipulation by refiners, his own USC study, the Federal Reserve Bank of Dallas, a Federal District Court in San Diego, and California’s own Attorney General’s Office have all concluded that there is simply no direct economic evidence of widespread price gouging or price or supply manipulation by California refiners. He maintains that California’s gasoline prices, which are routinely 40% to 50% higher than the national average, can be traced directly to “declining in-state production of both oil and decreasing gasoline supplies, increasing regulatory oversight, escalating regulatory costs, and fees associated with mandatory programs”, which are the highest in the nation, adding at least $1.47 to each gallon of gasoline.
“Even without the loss of two of its most important refineries,” Mische’s report states, “California regulatory actions could potentially increase the price at the pump by $1.182 a gallon.”
In a letter to Governor Newsom on May 6 Minority Leader Jones urged action to halt the refinery closures, warning that, in addition to rising gasoline prices, the refinery closures threaten good-paying, union and trade jobs. The two refineries directly employ 1,300 Californians and indirectly support nearly 3,000 jobs statewide. “We’re not just losing gas. We’re losing jobs, losing local economies, losing our grip on affordable living in California, and losing a critical layer of our national security.”
“If the Governor doesn’t act now,” says Jones, “Californians will be blindsided by sticker shock at the pump and skyrocketing prices on everyday goods. We’re talking about gas prices over $8.43 per gallon by the end of next year.”
“Reductions in fuel supplies of this magnitude will resonate throughout multiple supply chains,” states Professor Mische, “affecting production, costs, and prices across many industries such as air travel, food delivery, agricultural production, manufacturing, electrical power generation, distribution, groceries, and healthcare. Additionally, a reduction in gasoline production and related price increases will likely have a dragging effect on the growth of California’s GDP, and have a significant impact on the affordability of living in the Golden State, as well as personal and household spending patterns and saving behaviors. The loss of in-state gasoline production will also adversely affect corporate and personal income, sales, and excise tax revenues at a time when California’s budget deficit is estimated to be as high as $73 billion, and state and local government debt at $1.6 trillion.”
Mische’s analysis explains that “The pending closure of another refinery in California was anticipated and could have been avoided. Unfortunately, for Californians, it is inevitable that more refiners will exit the state. Chevron is terminating its headquarters in California in favor of Texas, and with the $4 billion write-off in assets, its two California refineries may be next…The issue of refinery operations in California is no longer restricted just to profits… The issue is the California operating environment. Confronting the 2035 ban on the sale of new gasoline powered vehicles, a litany of new regulatory and potential actions, new restrictions, and a caustic political environment toward the oil and gas industry, refiners have no incentive or compelling need to stay in the Golden State.”
According to Leader Jones, “Newsom owns this gas crisis. His policies have made it nearly impossible for California refineries to stay open. As Newsom eyes the White House, America should be watching closely: the crisis he created here could be the next national nightmare.”
Experts recommend that Californians read Professor Mische’s full report and then contact their state and federal elected representatives to share concerns about this pending and critical issue.