California Faces Potential $5 Gas Prices Next Year
California is facing a potential rise in gasoline prices, with forecasts suggesting they could reach $5 per gallon next year. The closure of two significant refineries will impact the state’s fuel supply substantially.
Gas Supply Threatened by Refinery Closures
In California, refineries have been shutting down for years, and two more are on track to close soon. One is located in the Los Angeles area, set to shut down at the end of this month, while the other in the Bay Area will close in April. Together, these refineries represent approximately 17% of California’s gasoline supply.
Currently, California drivers pay around $4.32 per gallon, which is 50% higher than the national average. Experts like Andy Lipow, president of Lipow Oil Associates, predict that these closures could push prices up by an additional 50 cents per gallon.
Risks of Shortages and Price Hikes
The loss of these refineries may lead to an ongoing gasoline shortage. If any of the remaining six refineries encounter unexpected outages, the situation could worsen. Tom Kloza, a veteran oil analyst at Gulf Oil, warns that with only six refineries operational, any issues could lead to significant price surges.
- Current average price per gallon: $4.32
- Potential increase after refinery closures: +$0.50
Should prices rise, California could face gasoline prices soaring to $5 to $6 per gallon, especially if a disaster strikes any operational refinery.
Factors Contributing to High Gas Prices
California holds the title for the highest gas tax in the United States, nearing 71 cents per gallon. This tax is more than twice the national average. Additionally, a carbon tax, which is passed on to consumers, can add another 20 to 25 cents per gallon. Industry experts attest that California’s stringent environmental policies and regulations complicate refinery operations, further increasing costs.
Future Predictions and Industry Responses
Experts expect the national average gasoline price to drop to approximately $2.75 per gallon. However, in California, prices may either hold steady or continue climbing from an average of $4.64 projected for 2025. Without significant regulatory changes, the outlook for California remains bleak compared to national trends.
Closure Impact and State Response
Phillips 66, which manages the Los Angeles refinery, stated that closure decisions were primarily driven by operational costs. Valero has announced the closure of the Bay Area facility due to similar financial pressures. State officials express confidence that the market can adapt, citing new gasoline sources and the planned reopening of the Martinez refinery in 2026.
Shift Towards Electric Vehicles
While electric vehicle sales are growing, they still represent only about 6% of vehicles on California roads. However, nearly 25% of new car sales in the state are electric, supported by recent federal tax credits. Despite this progress, most drivers will continue to rely on gasoline for years to come.
With planned regulations aiming to phase out gasoline-powered vehicles by 2035, refinery operators face uncertainty, making California a challenging environment for their businesses. As Jodie Muller, CEO of the Western States Petroleum Association, pointed out, ongoing refinery closures place additional strain on gasoline supply, potentially leading to further price increases and supply disruptions.
