Pasadena residents could soon be paying a lot more at the pump. According to one study, gasoline prices in California could surge past $8 per gallon by the end of 2026 due to upcoming oil refinery closures that could slash the state’s refining capacity by more than 20%.
The analysis by Michael A. Mische, senior lecturer at USC’s Marshall School of Business, warns that the scheduled shutdowns of the Phillips 66 refinery in Los Angeles and the Valero facility in Northern California could leave the state with a significant daily supply deficit.
“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 between $7.35 and $8.43 a gallon by calendar year end 2026,” the report states. Mische also cautioned that prices could be even higher in remote areas.
California currently consumes more than 13.1 million gallons of gasoline each day, but produces just under 24% of its crude oil needs. The refinery closures could create a shortfall of 6.6 to 13.1 million gallons per day, further stressing an already strained supply chain.
Lawmakers reacted swiftly to the findings. In a letter to Gov. Gavin Newsom, several legislators urged immediate intervention to delay or prevent the refinery shutdowns.
“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 W. Jones (R-San Diego) said in a statement. “We’re talking about gas prices over $8.43 per gallon by the end of next year.”
Former Los Angeles Mayor and Assembly Speaker Antonio Villaraigosa, who is running for Governor, echoed the warning on Wednesday.
“Since I launched my campaign, I have been warning Californians that if we continue to drive refineries out of California, we are going to be faced with soaring gas prices,” Villaraigosa said. “California has the cleanest gasoline in the world, and we need an ‘All of the Above’ energy policy. We can keep our climate goals, but we can’t do it with mandates that unfairly burden working families.”
Factors leading to the closures include environmental regulations, high costs, and the state’s transition to electric vehicles.
Gov. Newsom has championed California’s transition to zero-emission vehicles and aggressive climate goals.
California currently leads the nation in electric vehicle adoption, with more than 25% of new car sales in the state being zero-emission vehicles. Still, the report underscores the immediate challenges of balancing that progress with the logistical realities of fuel supply during the transition.
The closures come as part of broader shifts in the global energy market and increased regulatory pressures. Phillips 66 has announced plans to convert its Los Angeles facility to produce renewable diesel, while Valero has cited economic factors and future demand projections for its decision.
The Legislature is expected to hold hearings on the matter in the coming weeks.
“The shutdown of the two California-based refineries could possibly place the Golden State in a precarious economic situation and create a gasoline deficit potentially ranging from 6.6 million to 13.1 million gallons a day, as defined by the shortfall between consumption and production,” wrote Mische. “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.”
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