California residents may soon confront unprecedented gas prices, with projections indicating costs could soar to $8.44 per gallon by the end of 2026. This alarming forecast stems from a study conducted by Professor Michael A. Mische of the University of Southern California, highlighting the combined impact of refinery shutdowns and stringent environmental regulations.
The anticipated closures of the Phillips 66 and Valero refineries are central to these concerns. Together, these facilities account for approximately 20% of California’s refining capacity. Their shutdowns are expected to significantly disrupt the state’s fuel supply, leading to increased prices at the pump. Professor Mische’s analysis suggests that, based on current demand and consumption patterns, the average consumer price for regular gasoline could escalate from $4.816 in April 2025 to between $7.348 and $8.435 by the end of 2026.
Compounding the issue are recent amendments to California’s Low Carbon Fuel Standard (LCFS), which aim to reduce carbon emissions by 90% by 2045. While these measures are designed to combat climate change, they may inadvertently contribute to higher fuel costs. The California Air Resources Board (CARB) estimates that these changes could add over $1 billion in new operating costs per refinery starting in 2025.
In response to these developments, Governor Gavin Newsom has signed legislation intended to prevent sudden spikes in gas prices. The new law empowers energy regulators to require refineries to maintain a minimum inventory of fuel, aiming to stabilize prices during periods of high demand or unexpected outages. However, critics argue that such measures could inadvertently raise overall gas prices and pose safety risks by interfering with refinery maintenance schedules.
As California continues its transition toward cleaner energy sources, the interplay between environmental objectives and economic realities presents a complex challenge. The potential for record-breaking gas prices underscores the need for balanced policies that address both climate goals and the financial well-being of residents.
