California could quickly be working in need of gasoline, probably mountaineering a number of the highest gas costs within the nation.
Refineries within the state have been closing for years with two extra set to shutter quickly: a Los Angeles-area refinery on the finish of the month and a Bay Area one in April. Together, the 2 refineries present about 17% of the state’s provide of gasoline.
California drivers already pay 50% greater than the remainder of the nation, about $4.32 per gallon. These closures could increase costs by one other 50 cents, in accordance with Andy Lipow, president of consulting agency Lipow Oil Associates.
“The loss of the refineries are certainly going to result in California having much shorter gasoline supplies,” Lipow stated. “The price of gasoline in California will rise on a sustained level, because it’ll have to attract imported gasoline month in and month out.”
The closures additionally threat widespread shortages if any of the remaining six refineries in California expertise unplanned outages brought on by fires or different accidents. Those dangers are extra pronounced if the outages lengthen for a chronic interval — just like the refinery in Martinez, California, which suffered a fireplace in February and has but to return to regular capability.
“When you have 10 refineries and two are down for planned or unplanned maintenance, it’s no big deal,” stated Tom Kloza, a veteran oil analyst now working for Gulf Oil. “But when you have only six, and one of them is down — God forbid you have a fire — you’re in trouble. It’s then a market that can easily go to $5 to $6 a gallon.”
Only Hawaii, which will get most of its gasoline delivered by ship, has a better common worth for gas than California.
California has the best gas tax within the nation at almost 71 cents, greater than twice the nationwide common, in accordance with the American Petroleum Institute. There’s additionally the state’s carbon tax, which is paid by gasoline retailers and distributors however handed alongside to drivers on the pump. According to OPIS, which tracks gasoline worth knowledge for AAA, the carbon tax can add one other 20 to 25 cents to a gallon of gas.
“California is not like the United States. They’re serious about suppressing carbon,” stated Kloza.
Kloza expects the nationwide common to fall to $2.75 per gallon, whereas California’s costs will both stay close to its present 2025 common of $4.64 or climb increased.
“Where rest of the country will probably see lower prices in 2026 than 2025, I wouldn’t bet that’ll be the case for California,” he stated.
Phillips 66, which operates the Los Angeles refinery, stated the closure was a enterprise choice given the price of working in California. CEO Mark Lasiher referred to as the LA refinery a “challenged asset” at the beginning of the year.
The firm stated it should nonetheless discover methods to provide California to satisfy demand, together with imports.
Valero, which operates the Bay Area refinery, stated in a submitting that it was closing the refinery in April because of the prices and uncertainty imposed on the corporate by California state laws.
California state officers informed NCS they’re assured there gained’t be any shortages. They cite the shuttered Martinez refinery, which is about to return again on-line early in 2026 and is an analogous dimension to the Valero refinery that’s closing.
Even with strict laws on the mix of gasoline that may be offered within the state, California officers stated different sources of gas and modifications available in the market will permit California to get by with fewer refineries.
“As California refining capacity decreases over time, the state will import less crude and more refined oil products, which refiners around the world now produce to meet cleaner burning fuel standards in California and elsewhere,” the California Energy Commission, which oversees gasoline provides within the state, informed NCS in a press release. “Overall demand for oil will decline as the transportation sector shifts to electricity and other clean, alternative fuels.”
EV gross sales trimming gas demand
Only about 6% of the vehicles on California roads are pure EV or plug-in hybrids, in accordance with California Energy Commission. The majority of California drivers might want to preserve filling up with gas for many years to return.
Still, California boasts the best proportion of recent automotive gross sales which are electrical autos within the US, in accordance with Cox Automotive. EVs accounted for almost 1 / 4 of gross sales within the state through the first 9 months of the year, juiced by the tip of a $7,500 federal EV tax credit score in October.
But California’s plans to primarily ban new gasoline powered autos by 2035 is one motive refinery operators have been pulling out of California for years, even when that ban now faces challenges from the federal authorities. Companies additionally blame harder environmental guidelines on their operations, the carbon tax and the expensive upgrades wanted to proceed operations.
“These companies are making business decisions (based on conditions) years down the road and decided that California is a difficult place to do business,” stated Jodie Muller, CEO of the Western States Petroleum Association, an business commerce group.
With the continued refinery closures, she stated, “the system really gets weaker, prices climb and there could be disruptions down the road.”