As California grapples with a looming energy crisis, recent analyses have painted a dire picture for the state’s gasoline prices. A report released by Professor Michael Mische from the University of Southern California’s Marshall School of Business forecasts that regular gasoline prices could skyrocket from an average of $4.82 in April 2025 to as much as $8.44 a gallon by the end of the following year. This dramatic increase, potentially reaching 75 percent, is largely attributed to the expected shutdown of several key oil refineries within the state.
The impending closures, notably two Phillips 66 refineries in Los Angeles, which account for about 8 percent of California’s oil refining capacity, are set to take effect by the end of this year. Additionally, Valero Energy Corp. has announced plans to shut down or restructure its Benicia refinery—responsible for roughly 9 percent of the state’s refining capacity—by April 2026. The cumulative effect of these closures could lead to a staggering 21 percent reduction in refining capacity from 2023 to April 2026, resulting in a gasoline deficit ranging from 6.6 million to 13.1 million gallons per day, according to Mische’s analysis.
Such a substantial decrease in fuel supply is not merely an inconvenience at the pump; it has far-reaching implications across various industries. Mische notes that reduced fuel supplies will reverberate through multiple supply chains, impacting production costs and prices in sectors as diverse as air travel, food delivery, agriculture, manufacturing, electrical power generation, and healthcare.
Industry experts have echoed these concerns, warning of imminent spikes in gas prices as refinery operations dwindle. The closures are not occurring in a vacuum. California has been embroiled in legal battles against major oil companies, alleging deception regarding the risks associated with climate change and fossil fuel consumption. This legal landscape, combined with the refinery issues, creates a perfect storm for consumers and businesses alike.
In response to these alarming forecasts, Governor Gavin Newsom has urged the California Energy Commission (CEC) to take decisive action. In an April 21 letter, he tasked CEC vice chair Siva Gunda with enhancing collaboration with oil companies to ensure a “safe, affordable, and reliable supply” of transportation fuels. Newsom emphasized the importance of maintaining the state’s refining capacity even as the demand for fossil fuels gradually declines. He also suggested that the CEC explore various options, including a state takeover of oil refineries, to address the potential crisis.
However, not all voices are in agreement about the best course of action. Republican state Senator Brian Jones has characterized the refinery closures as a “looming energy and economic crisis,” calling for urgent measures to prevent further disruptions. He emphasized that without immediate action, Californians could face significant price shocks at the pump and across everyday goods. Meanwhile, Senator Shannon Grove has advocated for increased drilling permits to bolster in-state oil production, arguing that reliance on foreign imports—often from politically unstable regions—poses an additional risk to California’s energy security.
The declining number of new drilling permits—plummeting by an astonishing 97 percent from 2019 to 2024—has exacerbated these concerns. With only 86 new permits issued last year compared to 2,676 five years prior, the state’s capacity to produce its own oil is severely compromised. Grove has described this situation as “catastrophic for every Californian,” noting that the inability of refineries to secure necessary oil supplies is a critical factor in their ongoing struggles.
Mike Umbro, founder of Californians for Energy and Science, a nonprofit focused on energy economics, argues that Newsom’s recent communications appear aimed at damage control. He suggests a more proactive approach is necessary, including declaring an energy crisis and issuing permits for drilling to enable refineries to operate efficiently. Umbro commends the USC study, asserting that independent analyses are crucial for understanding the oil and gas supply landscape and ensuring consumers have access to affordable gasoline.
In the backdrop of these discussions, a fire at Valero’s Benicia refinery on May 5, which was contained without injuries, casts a further shadow over the stability of California’s refining operations. While the immediate impact of this incident on production remains unclear, it serves as a stark reminder of the vulnerabilities inherent in the state’s energy infrastructure.
As California navigates this complex web of refinery closures, legal challenges, and fluctuating market dynamics, the urgency for effective policy solutions has never been more critical. With gas prices poised to rise dramatically and the potential for widespread economic repercussions, the state must consider not only immediate measures but also long-term strategies to secure its energy future.
