Categories: California Business NewsCalifornia State News

California Gas Prices Expected to Surge Amid Refinery Closures

High gas prices displayed at a California gas station raise concerns for motorists.

News Summary

California is bracing for potential gas price increases, with estimates suggesting prices could climb to $8.43 per gallon by 2026 due to the closure of major refineries. The closures of Phillips 66 and Valero are expected to cut refining capacity by 20%, significantly impacting fuel prices. Economic repercussions are anticipated, particularly affecting working families and industries reliant on affordable fuel. Despite decreasing fuel consumption trends, these refinery shut-downs raise alarms about future fuel availability and economic stability in California, exacerbating challenges in the region’s high cost of living.

California is facing a potential surge in gas prices, with estimates predicting costs could rise to $8.43 per gallon as two major oil refineries, Phillips 66 and Valero, prepare to close by 2026. These closures are projected to reduce California’s refining capacity by approximately 20%, directly impacting fuel availability and prices across the state.

According to an analysis from University of Southern California Professor Michael A. Mische, the first closure could lead gas prices to spike to $6.43 per gallon. Following the closure of both refineries, prices might reach an alarming $8.43. Additionally, prices could escalate even further if the state implements stricter fuel standards, increases gas taxes, or renegotiates the Cap-and-Trade emissions credit program, which currently regulates greenhouse gas emissions in the state.

The potential impact of these refinery closures could lead to an economic crisis in California, particularly affecting working families. Industries reliant on affordable fuel, such as air travel, food delivery, and healthcare, may face significant disruptions as gasoline prices soar. California’s average gas price recently hovered around $4.85 per gallon, already well above the national average. The sustained high costs of fuel could exacerbate the challenges faced by Californians already dealing with a high cost of living.

Despite the projected rise in fuel prices, fuel consumption in California has been decreasing, dropping by about 11% since 2001. This trend indicates a potential shift in consumer behavior towards less gasoline reliance, even as supply challenges loom. The closures of Phillips 66 and Valero will not only affect fuel prices but may also have employment consequences. Approximately 1,300 workers are directly employed at the affected refineries, with an estimated additional 3,000 jobs supported statewide.

Critics are placing blame for these refinery closures on the state’s renewable energy policies and regulations designed to lessen environmental impact. Republican Senate Minority Leader Brian Jones has specifically pointed to Governor Gavin Newsom, suggesting that policies have rendered refinery operations in California financially impossible. However, Newsom’s office has not provided any comments on the matter, leaving questions about the future direction of state energy policy unanswered.

The potential refineries’ closures will likely compel California to increase its reliance on out-of-state and foreign oil supplies. This shift could result not only in higher gas prices but also in national energy security concerns, raising alarms over the state’s ability to maintain sufficient fuel supplies for its residents.

In response to the rising gas prices, legislative efforts have been underway aimed at addressing the underlying causes of fuel costs. However, ongoing tensions remain between oil companies and state regulators regarding who is responsible for the rising expenses. These disputes complicate potential solutions to ease the financial burden on consumers while meeting environmental standards.

The combination of refinery closures, increased fuel prices, and related socioeconomic impacts could set the stage for a challenging economic environment in California as it moves further into 2026. With the state’s unique challenges, the focus will likely remain on finding a balance between energy reliability and environmental sustainability.