California’s Gas Crisis Explained: How State Policies Are Driving Prices Toward $8 a Gallon
California is heading toward a gas crisis that was entirely avoidable. According to a recent analysis by USC Professor Michael Mische, gasoline prices in California could rise as high as $8.43 per gallon by 2026. That would represent roughly a 75 percent increase from prices that are already punishing working families across the state. This is not a prediction based on speculation or fear. It is the logical outcome of decisions made by California’s political leadership over many years.
For a long time, Californians have been told that high gas prices are simply the price of living in a progressive state that takes environmental policy seriously. That explanation does not hold up under scrutiny. California’s gas prices are not high because of market forces. They are high because the state has chosen policies that restrict supply, drive out producers, and punish refiners. This crisis is not happening to California. California is doing it to itself.
There was a time when California was one of the world’s leading energy producers. In the mid-1980s, the state ranked fourth in the world in oil production. Today, California produces only about 23.7 percent of its own in-state oil and gas needs. It accounts for roughly 2.5 to 2.7 percent of total U.S. crude production. Since its peak in 1985, in-state oil production has declined by nearly 70 percent. During that same period, California’s reliance on foreign oil imports increased by more than 700 percent.
This matters because energy independence is not an abstract concept. It affects price stability, supply reliability, and national security. While the rest of the United States has moved toward greater energy independence, California has moved in the opposite direction. The state sits on large reserves. It has advanced refining infrastructure. Yet it has chosen policies that make producing energy within its borders increasingly difficult.
The immediate pressure driving the coming price spike is the planned closure of two major refineries. Phillips 66 plans to shut down its Los Angeles refinery by October 2025. Valero has announced it will close its Benicia refinery in April 2026. Together, these closures will reduce California’s refining capacity by roughly 21 percent. Professor Mische estimates that the resulting gasoline shortfall could range from 6.6 million to as much as 13.1 million gallons per day.
Even if the remaining refineries increased production, they would not be able to make up for the loss. The math does not work. California will be forced to import large volumes of finished gasoline from out of state and overseas. That includes fuel from the Gulf Coast and from Asia. This will increase transportation costs and expose Californians to greater supply disruptions. It will also make prices more volatile.
There is a deep irony here. California politicians routinely present themselves as champions of environmental responsibility. Yet their policies are pushing fuel production to regions with weaker environmental standards. The emissions do not disappear. They are simply shifted elsewhere. What does increase is cost. What does increase is dependence. This is not sound environmental policy. It is ideological posturing.
When gas prices rise, state leaders often blame oil companies. They accuse refiners of price gouging and profiteering. Professor Mische’s research directly challenges that claim. His analysis found no evidence of widespread price manipulation or unexplained pricing behavior by refiners. Instead, California’s high prices are driven by taxes, fees, and regulatory mandates imposed by the state.
Californians currently pay about $1.47 per gallon in state taxes and regulatory costs alone. That translates to roughly $30 extra on a typical fill-up. Those costs are set to rise. New Low Carbon Fuel Standard requirements, cap-and-trade expenses, excise tax increases, and refinery margin caps are all being layered on top of an already heavy burden.
The comparison with other states is revealing. Californians pay close to five dollars per gallon. The national average is around three dollars. Drivers in Texas often pay under $2.80. This gap is not the result of corporate behavior. It is the result of government policy.
Gasoline is not a luxury. It is a basic input for modern life. When fuel prices rise, the effects ripple outward. Food becomes more expensive. Shipping costs increase. Air travel becomes more costly. Manufacturing slows. Healthcare systems feel the strain. Electricity generation is affected. Higher gas prices function like a regressive tax. They hit working families the hardest.
This is happening at a time when California is already in a weak fiscal position. The state faces a projected $73 billion budget deficit. State and local government debt is estimated at roughly $1.6 trillion. Rising fuel costs will reduce consumer spending. They will slow economic growth. They will shrink tax revenues. The result will be even greater financial pressure on households and on the state itself.
Refineries are not leaving California because they lack expertise. They are leaving because the operating environment has become hostile. Policies such as SBX1-2, ABX2-1, aggressive revisions to the Low Carbon Fuel Standard, rising excise taxes, and the state’s 2035 ban on new gas-powered vehicles have made long-term investment increasingly unattractive. Senate Minority Leader Brian W. Jones has warned that California is not just losing gasoline production. It is losing jobs, local economies, affordability, and an important layer of national security.
Energy security is national security. A state that cannot reliably fuel itself places its citizens at risk. California’s leaders have chosen symbolism over practicality. They have chosen ideology over reality. The coming gas crisis is not mysterious. It is not sudden. It is the foreseeable result of years of decisions that ignored basic economic and logistical principles.
Eight-dollar gasoline is not inevitable. It is engineered. If California’s leadership refuses to change course, working families will continue to pay the price. Every trip to the pump will serve as a reminder that policy choices have consequences.
