How high will gas prices in California get this year?

The combined impact of refinery closures could significantly increase California gasoline prices by 2026. Economist estimates project that the closures of the Phillips 66 and Valero refineries by April 2026 may elevate California regular gasoline prices to a range of $7.348–$8.435 per gallon by the end of 2026 ^[1]. This projection indicates a potential increase of up to approximately 75% when compared to an April 23, 2025 baseline price of $4.816 per gallon ^[1].

Specific analyses detail potential increases and market expectations for future prices. Further analysis from UC Davis indicates that prices could rise by about $1.21 per gallon above the current market price once the full effect of the closures is realized around August 2026 ^[2]. An initial increase of $0.40 is also anticipated almost immediately after the first closure, assuming no other market changes ^[2]. Prediction markets corroborate the plausibility of sustained high prices for late-2026 averages, with one snapshot showing a 59% chance of prices being “Above $7.00” and a 52% chance of being “Above $7.20” by December 31, 2026 ^[3].

Leading economic forecasts from USC anticipate $7-8 per gallon gas in California. Michael Mische of USC's Marshall School of Business projects that California gas prices could reach $7.24 to $8.43 per gallon by the end of 2026 in a worst-case scenario ^{[1][2][3][4][5][6]}. These predictions are primarily driven by planned refinery closures within the state, California's unique market vulnerabilities, and geopolitical instability.

Planned refinery shutdowns significantly reduce California's fuel supply and capacity. The impending closure of the Phillips 66 refinery in Los Angeles by the end of 2025, followed by the Valero refinery in Benicia in April 2026, is expected to reduce California's refining capacity by approximately 18-21% ^[7][2][5][6]. This translates to about 20% of the state's in-state gasoline supply, potentially creating a daily shortfall of 6.6 million to 13.1 million gallons ^[2][5][6]. USC's research suggests these closures alone could increase prices by $1.21 per gallon by August 2026, with an immediate 40-cent surge after the first closure ^[8][4]. California's market vulnerabilities further exacerbate the situation, including its reliance on foreign oil, lack of interstate pipelines, and the mandatory, more expensive summer fuel blend, which adds 15-17 cents per gallon ^[1]. Strict environmental regulations require a unique gasoline blend, making it difficult to replace supply with out-of-state imports ^[8][9][10]. Other contributing factors include rising taxes and regulatory costs, such as state excise and sales taxes, cap-and-trade, and pending Low Carbon Fuel Standard (LCFS) changes, which could add $0.65 per gallon ^[2][4], as well as declining in-state oil production. Geopolitical instability, such as international conflicts, can also disrupt global oil shipments and increase crude oil prices ^{[1][11][4][12]}.

UC Davis experts acknowledge challenges but are skeptical of extreme price forecasts. While economists at UC Davis recognize the difficulties of offsetting reduced refining capacity with imports due to California's regulatory environment ^[8], Colin Murphy from the UC Davis Institute of Transportation Studies expresses skepticism about prices reaching $8 per gallon. He characterizes such projections as "worst-case possibilities" and notes that the California Energy Commission is actively pursuing mitigation strategies ^[13].

California's gasoline prices are significantly influenced by specific taxes and fees. Californians pay approximately 89 cents per gallon in combined federal, state, and local taxes and fees, which is about 37 cents more per gallon than the national average of 52 cents ^[1]. These taxes and fees typically add between 70 and 90 cents per gallon to the price ^[9]. Environmental compliance costs, as of March 2025, were estimated to add up to $0.54 per gallon ^[2]. Specific programs like the Low Carbon Fuel Standard (LCFS) can add 10 to 20 cents per gallon, and the Cap-and-Trade program contributes roughly 20 to 30 cents per gallon, depending on market conditions ^[9]. An update to the LCFS taking effect in July 2026 could potentially add an additional $0.65 per gallon ^[10].

Unique fuel blend requirements further elevate California gasoline prices. The state mandates a special cleaner-burning gasoline known as California Reformulated Gasoline (CaRFG), which is more expensive to produce and typically adds about 10 cents per gallon compared to conventional gasoline ^[2][3][4][5]. Furthermore, the seasonal requirement for summer-blend fuel, which reduces evaporation in warmer temperatures, is also more costly to produce, adding an estimated 13 to 15 cents per gallon ^[6][5][7][8]. California often begins its transition to summer-blend fuel earlier than other states, which can lead to earlier price increases ^[6][11].

The U.S. Energy Information Administration (EIA) and California Energy Commission (CEC) reports offer timely West Coast refinery data. The EIA's Weekly Petroleum Status Report (WPSR) and the CEC's Weekly Fuels Watch are primary sources for current information on West Coast refinery operations and gasoline inventories ^[1][4][2][3]. The EIA WPSR is released every Wednesday, providing details on PADD 5 refinery utilization and gasoline inventories ^[1][4]. The CEC Weekly Fuels Watch offers refinery stocks dashboard data, with updates typically posted weekly by Wednesday or Thursday at 5 p.m. ^[2][3].

The EIA WPSR provides extensive historical and current refinery data. This report has consistently offered weekly data since the 1990s ^[1]. For instance, the report for the week ending May 1, 2026, indicated that West Coast refinery gross inputs averaged approximately 1,933 thousand barrels/day, operating at 79.9% utilization ^[1].

The CEC Weekly Fuels Watch tracks California's refinery operations since 2005. This report includes data from 2005 to the present, with its last noted update on March 25, 2026 ^[2][3]. The CEC gathers detailed weekly operational data for California through its PIIRA forms, which include requirements for both refinery monthly and weekly reports ^[5].

Geopolitical tensions in the Middle East could significantly elevate crude oil prices. Specific geopolitical scenarios, particularly those involving OPEC+ actions or conflict in the Middle East, are identified as key factors that could push crude oil prices above $100 per barrel in 2026 ^[1]. Hostilities in the region could cause further damage and slow the recovery of export volumes ^[1]. Such events are projected to result in substantial supply disruptions and persistent bottlenecks, preventing OPEC+ from effectively offsetting market losses and thereby supporting crude prices above $100 ^[3]. The World Bank, for instance, projects that Brent crude could average as high as $115 per barrel in 2026 should Middle East hostilities impede export-volume recovery ^[1].

Sustained disruption of the Strait of Hormuz poses a significant threat. A sustained or renewed disruption of Strait of Hormuz flows represents a concrete mechanism for such price increases ^[3]. A significant disruption or closure of this crucial waterway due to Middle East conflict could remove substantial volumes from the market, potentially leading to a rapid repricing of crude oil ^[2]. Even if OPEC+ approves quota increases, physical deliverability can remain constrained if the Strait of Hormuz is closed, effectively erasing the spare capacity needed to meet targets ^[2]. Under such conditions, spikes above $150 per barrel are considered possible if the Strait of Hormuz remains disrupted into mid-May ^[2]. Additionally, a renewed escalation or continuation of a US-Iran blockade, or a breakdown in talks, could also push crude oil prices above $100 per barrel in 2026 ^[4].

EIA expects U.S. retail gasoline prices to fall in 2026 versus 2025 (down 6% in 2026), but notes that the West Coast (PADD 5) could face relatively higher prices due to an upcoming loss of refinery capacity, which is expected to contribute to higher margins and prices through 2026-2027 ^[1]. The transition of Valero’s Benicia refinery is a significant factor, with the company updating plans to keep producing gasoline until reserves are depleted, after which it will start importing. This operational and structural supply change is expected to affect West Coast tightness and potentially price volatility in spring and summer 2026 ^[2][3]. A 2026 analysis of the West Coast (PADD 5) sets late-2026 regular gasoline bands from about $6.00–$7.35 in a base case up to $7.35–$8.44 in a pessimistic scenario, explicitly connecting these projections to refinery capacity loss and the duration of conflict or geopolitical stress ^[4].

Geopolitical events pose an additional risk; a state or press report in early May 2026 tied near-term spikes to the Iran-war disruption risk, saying that oil companies have planned shipments that could provide stability for another approximately 6 weeks if there isn’t an opening of the Strait, otherwise price increases are likely ^[5]. Market probabilities reflect these concerns, with a Kalshi-style probability snapshot for California “Above $7.00” showing 59% and “Above $7.20” showing 52% for the contract resolving at December 31, 2026, based on AAA’s California average regular gasoline price ^[6].