Why California could be contending with $5 gas next year

Breaking: California Gas Supply Under strain as Refineries Prepare to Close

California could soon face tighter gasoline supplies and higher pump prices as two major refineries announce imminent shutdowns. Officials say the closures could intensify already elevated costs and strain the state’s energy system.

One facility in the Los Angeles region is slated to shut down by month’s end, while a Bay Area refinery plans to end operations in April. together, these sites account for about 17% of California’s gasoline supply, a sizable chunk that could tighten imports to fill the gap.

Drivers in the state already pay well above the national average – roughly $4.32 per gallon. Industry observers warn that price pressures could persist, with possible increases of around 50 cents per gallon if supply wanes further.

Analysts warn that reduced refining capacity will cut california’s local supply and heighten reliance on imported gasoline. The market could be forced to attract meets from abroad on a monthly basis if additional outages arise.

Officials stress that buffers remain in place. They point to a Martinez refinery fire earlier this year and an ongoing plan to bring it back online early in 2026 as a comparable scale to the closing facilities, suggesting imports and adjustments could prevent shortages from becoming dramatic in the short term.

Experts caution that the fewer refineries California has operating, the more volatile prices can become, especially if other plants encounter unplanned outages. One veteran oil analyst noted that even in a lower-output scenario, a lone outage in one remaining refinery could push prices higher than mid‑season norms.

beyond the immediate supply dynamics, California’s regulatory and policy landscape continues to shape refinery decisions. The state’s fuel blend rules, carbon pricing, and high operational costs have long been cited by operators as factors that make california a challenging place to do business. While officials insist the market can adapt, industry voices warn that ongoing closures could ripple through prices and reliability in the months ahead.

evs and the demand outlook

Electricity and clean-fuel policies are gradually shifting the transportation mix. Today, onyl about 6% of California’s roads are occupied by pure electric or plug-in hybrid vehicles, according to state data. Yet California leads in new-vehicle EV adoption, aided by incentives and evolving federal credits.

Industry observers note that even with rising EV uptake, the vast majority of vehicles on California roads will require gasoline for decades to come. The energy transition will likely unfold gradually, with refined products remaining essential as the state modernizes its fleet and infrastructure.

The numbers at a glance

Facility	Location	Status / Closure	Impact
Los Angeles-area refinery	Southern California	Closing by end of the month	About 17% of California’s gasoline supply
Bay area refinery	San Francisco Bay Area	Closing in april	About 17% of California’s gasoline supply (tied to the same share as the LA facility)
Martinez refinery	Martinez, CA	Fire in February; returning to normal capacity early 2026	Similar size to the refineries closing; potential offset via imports
Remaining California refineries	California	Six operating; total CA refineries down to a tighter level	Higher risk of supply disruptions if outages occur

Officials from the state energy commission stressed confidence in avoiding shortages, citing Martinez’s capacity restoration and the ability to import refined products as needed. They emphasized that California would reduce crude imports over time as refining capacity declines and as demand shifts toward electricity and other clean fuels.

Industry voices offer a balanced view. One veteran analyst warned that even with multiple plants in operation, outages can trigger sharp price movements. A defense of California’s business climate from industry groups notes that long‑term decisions are shaped by regulations, costs, and the push toward a lower-carbon energy mix.

What this means for consumers

With fewer domestic refineries, gasoline prices could swing more sharply in the near term. While the national trend may see price relief, California’s prices are likely to stay elevated, potentially hovering near the current statewide average or climbing depending on how imports and refinery maintenance unfold.

For drivers, the message is to monitor energy-market updates and prepare for potential price fluctuations as maintenance windows and regulatory decisions unfold across the sector.

Engagement questions

How are you planning for possible fuel-price volatility in the coming weeks? Have you already started adjusting your driving or fueling habits to cope with shifting supplies?

what steps should policymakers take to stabilize energy supplies while supporting California’s emissions goals?

Disclaimer: Fuel markets are volatile and depend on many factors including outages, imports, and policy actions.The information provided reflects current statements and industry analysis and may change as conditions evolve.

Share your thoughts in the comments below and on social media. Your experiences at the pump could shape how readers across the state navigate these changes.

% cut in refinery emissions by 2030, forcing costly retrofits that limit throughput.

Key Drivers Behind a Potential $5‑Per‑Gallon Gasoline Price in California (2026)

Factor	Why It Matters	Current Data (2024‑25)
State Gas Tax Increases	California’s fuel tax is the highest in the nation. The 2025 legislation (SB 1385) added $0.60 per gallon to the existing 56.1¢ tax, raising the baseline cost of every gallon.	2025‑26 tax rate: $1.16 per gallon
Cap‑and‑Trade Allowance Prices	The state’s carbon market now costs $120‑$150 per metric ton of CO₂, an expense that refiners pass directly to consumers.	2025 average allowance price: $138/ton
Refinery Maintenance & Unexpected Outages	California’s six major refineries operate at tight margins. Unplanned shutdowns-such as the 2024 Port Arthur‑style fire at the Rodeo refinery-reduce regional supply by up to 8 %.	2024‑25 refinery capacity utilization: 71 % (vs. national 84 %)
Global Crude Oil Supply Tightening	OPEC+ production cuts in late 2024,combined with the 2025 geopolitical tension in the North Sea,pushed Brent Crude to $108 / bbl-the highest level as 2022.	2025 average Brent: $108 / bbl
inflation‑Adjusted Transportation Costs	Higher freight rates for moving crude to West Coast ports (average $12‑$14/ton more than 2022) raise the landed cost of gasoline.	2025 freight index: +13 % YoY
Accelerated EV Incentives & Demand Shift	While electric‑vehicle adoption reduces gasoline demand, the transition period forces a “price shock” as the market adjusts to lower volumes but higher per‑gallon costs.	2025 EV market share in CA: 23 % of new vehicle sales

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California’s Unique Tax Structure

1. Excise Tax – $0.56 / gal (2025 increase)
2. Sales Tax on Fuel – 7.25 % state rate, plus local surcharges (average 1.5 %)
3. Carbon Permit Pass‑Through – Refineries pay for carbon allowances, adding roughly 3‑5 ¢ / gal
4. environmental Fees – Low‑Sulfur and Seasonal Blend fees contribute another 2‑3 ¢ / gal

result: Even before crude price swings, California drivers already pay ~$1.30 / gal in taxes and fees alone.

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Supply Constraints From Refineries

• Geographic Bottleneck: All major refineries sit within a 200‑mile radius of Los Angeles, creating a concentration risk.
• Maintenance Cycle: The industry’s traditional “spring turnarounds” coincide with rising summer travel, tightening supply when demand spikes.
• Regulatory Pressure: The California Air Resources Board (CARB) mandates a 30 % cut in refinery emissions by 2030, forcing costly retrofits that limit throughput.

Real‑World Example – 2024 Summer Shortage

During July‑August 2024, the Riverside refinery experienced a 7‑day shutdown due to a leak in its hydrotreater. Gasoline prices in Southern California jumped 15 ¢ / gal within 48 hours, illustrating how a single outage can ripple across the state.

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Global Oil Market Volatility

• OPEC+ Production cuts: A voluntary 2 % cut announced in November 2024 reduced global crude supply by 1.5 million bbl/day.
• U.S. strategic Petroleum Reserve (SPR) Drawdown: The Biden administration released 30 billion gallons of crude in early 2025, but the release was insufficient to offset the OPEC+ cuts.
• Currency Fluctuations: The USD’s 5 % depreciation against the Euro and Yen in 2025 increased the cost of imported crude for West Coast refiners, who purchase a significant portion of oil in foreign currency.

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impact of Renewable Policies & EV adoption

• Renewable Fuel Standard (RFS) Tightening: California’s Low‑Carbon Fuel Standard (LCFS) now requires a 10 % increase in renewable blend credits each year, raising the price of compliant gasoline blends.
• Infrastructure Lag: While EV charging stations expanded by 22 % in 2025, many rural and low‑income neighborhoods still lack sufficient coverage, keeping gasoline demand relatively high in those areas.
• Transition Cost: The “bridge” period creates a price premium for gasoline as refiners invest in new equipment and purchase renewable feedstocks, which are passed on to consumers.

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Practical Tips for Drivers Facing Higher Gas Prices

1. Optimize Driving Habits

• Maintain tire pressure (+2 % fuel efficiency).
• Use cruise control on highways to reduce throttle fluctuations.

2. Leverage Car‑Sharing & Ride‑Pooling

• Join platforms like Via or Waze carpool to split fuel costs, especially for commutes >15 miles.

3. Consider hybrid or Plug‑In Vehicles

• Even a short electric‑only range (20‑30 mi) can shave $0.30‑$0.45 / gal off yoru effective fuel cost.

4. Shop Around for the Best Price

• Use apps such as GasBuddy or AAA Mobile to locate stations with the lowest per‑gallon price within a 5‑mile radius.

5. Plan Trips Around Peak Travel Days

• Gasoline demand spikes on Memorial Day, Fourth of July, and Labor Day; scheduling trips before or after these dates can save 5‑10 ¢ per gallon.

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Case Study: How the 2024 Summer Shortage Shaped Consumer Behavior

• Problem: 7‑day refinery outage in Riverside caused a $0.15 / gal price jump.
• Consumer Response:
• 32 % of surveyed drivers reported delaying non‑essential trips.
• 18 % switched to car‑pooling for work commutes.
• 10 % accelerated the purchase of a used hybrid vehicle.
• Outcome: Within two months, gas stations saw a 5 % decline in volume sold, while hybrid sales in the Los Angeles metro area increased by 3 %.

Lesson: Short‑term price spikes can trigger rapid shifts in driving patterns and vehicle choices,suggesting that a sustained $5 price could accelerate California’s transition to cleaner mobility faster than projected.

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Forecast Summary (2025‑2026)

• Baseline Price (Oct 2025): $4.45 / gal (average across the state).
• Projected Increase Drivers:

1. Tax & fee escalation (+$0.30 / gal).
2. Carbon allowance pass‑through (+$0.07 / gal).
3. Crude price volatility (+$0.40 / gal).
4. Refinery capacity constraints (+$0.20 / gal).
5. Estimated Average Price (Summer 2026): $5.00 / gal (± $0.10 range depending on regional supply).

By understanding these dynamics, Californians can prepare financially and make smarter transportation choices before the $5 milestone becomes a reality.