California gas prices could reach $8 a gallon by 2026, new report suggests
Study: Gas could hit $8 a gallon in 2026
According to a new study published by USC's Marshall School of Business, the impact of the refineries closing could drive gas prices up to $8 a gallon by 2026.
LOS ANGELES - California could soon face a fuel crisis as two oil refineries are set to shut down. That crisis could also drastically increase gas prices for consumers.
According to a new report published by USC's Marshall School of Business, the impact of the refineries closing could drive gas prices up to $8 a gallon by 2026.
Why are prices increasing?
What we know:
The Phillips 66 refinery in Los Angeles is set to close in October 2025 and Valero’s Benicia refinery is expected to close in April 2026.
The report suggests that the closures will lead to an economic crisis and result in a gasoline shortfall.
"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. Additionally, a reduction in gasoline production and related price increases will likely have a dragging effect on the growth of California’s GDP, and have a significant impact on the affordability of living in the Golden State, as well as personal and household spending patterns and saving behaviors. The loss of in-state gasoline production will also adversely affect corporate and personal income, sales, and excise tax revenues at a time when California’s budget deficit is estimated to be as high as $73 billion, and state and local government debt at $1.6 trillion," the report read.
Experts say California is confronting a potential 21% reduction in collective refining capacity from 2023 to April 2026.
What's next:
Experts believe that in order to make up for the shortfall in production, California would likely have to rely on refineries from around the world, including those on the Gulf Coast, South Korea, and China.
RELATED: Oil company Phillips 66 to shut down Los Angeles refinery
"As a consequence of the two refinery closings, California will be at the mercy of out-of-state and foreign, non-U.S. refiners. Historically, when California needed gasoline to compensate for its in-state production shortages, it turned to Washington State refineries. However, Washington State’s current capacity of 648,000 barrels a day is less than 40% of that of California’s, and it does not appear that it has sufficient surplus capacity to compensate for the expected reductions," the report said.
$8 a gallon?
Why it Matters:
Experts who conducted the study estimate that the average price of regular gasoline in California could potentially increase by as much as 33.6% from the April 23, 2025, price of $4.816 to $6.045 and/or $6.433 a gallon by the end of 2025.
More so, they estimate the average price of regular gasoline could also potentially increase by as much as 75% from the April 23, 2025, price of $4.816 to $7.348 and/or $8.435 a gallon by the end of 2026.
California's average gas price is typically 40% to 50% higher than the national average. According to AAA, currently, the national average price is $3.15, while California's current average price is $4.79.