Concerns Over Gas Price Increases in California
Residents of California are bracing for a potential surge in gas prices, as indicated by two recent studies.
The first study suggests that gas prices in the state could escalate by as much as 75% by the end of 2026. A report from Michael Michet, an associate professor at the University of Southern California’s Marshall School of Business, highlights that the planned shutdown of the Phillips 66 Oil Refinery complex in Los Angeles may significantly impact supply. The Benicia refinery’s closure could reduce California’s refined gasoline production by 21% from 2023 to April 2026.
“If the Phillips 66 refinery shuts down, we might see the average price of regular gasoline in California jump by 33.6% by April 2025, escalating from $4.816 to $6.433,” Michet noted. He added that areas like Mono and Humboldt could experience even higher prices.
Brian Jones, the Republican Senate Minority Leader in California, has reached out to Governor Gavin Newsom. In a letter, he urged the governor to prevent further refinery closures, emphasizing concerns about job security and rising fuel costs.
Jones expressed his worries regarding the Phillips 66 and Valero refineries, which together account for about 20% of the state’s gasoline supply. Losing these facilities could jeopardize fuel prices, job stability, and long-term energy security in California.
Moreover, the California Legislature is considering additional fees that could mean an increase of around 74 cents per gallon due to the state’s Cap and Trade Program, which is aimed at limiting greenhouse gas emissions. According to a report from the California Legislative Analyst Office, this fee could disproportionately affect low-income households.
The Cap-and-Trade Program compels various sectors, including natural gas and coal power plants, to purchase allowances to mitigate emissions, establishing a cap on significant sources of greenhouse gases statewide. The goal is to incentivize investment in cleaner technologies.
Recently, Governor Newsom directed efforts to work closely with refiners to ensure a reliable gasoline supply. Since the implementation of California’s gas price gouging law two years ago, the state has avoided severe gas price spikes similar to those witnessed in 2022, saving residents considerable amounts of money. This law established an independent oversight body to hold major oil companies accountable.
A spokesperson for Newsom contended that Michet’s research does not substantiate claims about future increases in gas prices, arguing that it overlooks factors such as state production loss and market dynamics that could mitigate price hikes.
