Napa, CA – California’s soaring gas prices may see an even steeper climb in the coming years due to refinery closures and new state regulations, according to a new study from the University of Southern California.

California, already home to the nation’s highest gasoline prices, may soon face even steeper fuel costs, with prices possibly reaching as high as $8.44 per gallon by the end of 2026. A new analysis by Michael A. Mische, a professor at the University of Southern California, has outlined a troubling future for the state’s gas prices due to the closure of two major refineries and a slew of new state regulations.

Currently, the average price of regular-grade gasoline in California stands at $4.78 per gallon, according to AAA. However, Mische’s study suggests that this price could spike dramatically in the next few years, potentially rising by as much as 75% from the current level. By 2026, regular gasoline could cost between $7.35 and $8.44 per gallon, a level that could place an even greater financial strain on consumers and businesses alike.

Refinery Closures and Supply Shortages

The primary drivers of this potential price surge are the scheduled closures of two significant California-based refineries: the Phillips 66 refinery in 2025 and the Valero refinery in 2026. These closures represent a loss of approximately one-fifth of the state’s total refining capacity, which could severely disrupt the supply of gasoline.

Mische’s analysis indicates that the shutdowns could create a gasoline shortfall of between 6.6 million to 13.1 million gallons per day. Such a deficit would have far-reaching effects on the state’s economy, affecting industries that rely on gasoline for transportation and production, including air travel, agriculture, manufacturing, and even healthcare.

Impact of New State Regulations

In addition to the refinery closures, California’s evolving regulatory landscape is also contributing to the projected price hikes. New environmental regulations, such as the Low Carbon Fuel Standard (LCFS), combined with increased fossil fuel taxes and cap-and-trade programs, will raise the cost of producing and distributing gasoline. These new measures are part of California’s broader effort to reduce carbon emissions and transition to renewable energy, but they come with a significant financial burden.

Mische’s study takes into account the potential impact of these legislative actions, projecting that the combination of refinery closures and higher production costs could send gas prices soaring in the coming years.

Economic Consequences for Californians

The potential price increases would not only affect drivers at the pump but could also have a cascading effect across various sectors of the economy. Industries that depend heavily on fuel—such as logistics, food delivery, and transportation—would face higher operational costs, which would likely be passed on to consumers. Furthermore, agriculture, manufacturing, and electrical power generation could also see increased costs as a result of the gasoline shortfall.

California’s middle and lower-income residents, who are already facing high living costs, would be especially vulnerable to these rising fuel prices. The state’s economic landscape could shift as businesses and consumers adjust to the new reality of sky-high gasoline prices.

The Road Ahead

As California looks to meet its ambitious environmental goals, questions are being raised about the balance between sustainability and economic stability. While the state has long been a leader in clean energy and carbon reduction, the forthcoming disruptions to its gasoline supply could test the limits of these policies.

The state’s leaders will likely face difficult choices in the coming years. How they navigate the potential gas price crisis will have wide-ranging implications, not only for drivers but for the entire state economy.

The next few years will be critical for California’s energy policies, as residents, businesses, and lawmakers wrestle with the delicate balance between reducing the state’s carbon footprint and keeping fuel prices affordable for all.

As the state heads toward 2026, one thing is clear: the high cost of gasoline in California may soon reach new and unprecedented heights.