California gas prices could reach $8 by end of 2026, report says

CBS News

09-05-2025

SACRAMENTO — Gas prices in California could reach more than $8 per gallon by the end of 2026, marking a potential 75% increase over current rates, according to a new report.
The study, led by Michael A. Mische of USC's Marshall School of Business, projects that regular gasoline could cost between $7.35 and $8.43 per gallon — up from the statewide average of $4.82 as of April 23, 2025. While the exact price point depends on market variables, Mische says there is a clear trend: "The models all indicate the same thing — the price of gas is going up."
A major contributor to the projected price spike is the scheduled closure of two key oil refineries: Phillips 66 in Los Angeles and Valero in Benicia.
According to the report, these closures would reduce California's refining capacity by 21% over the next three years, potentially removing 6.6 million to 13.1 million gallons of gasoline per day from the state's fuel supply. California currently consumes over 13.1 million gallons of gasoline daily, while producing less than 24% of its crude oil needs.
"We're not going to see a 20% drop in demand to match that reduction," Mische said. "That creates a significant supply shortfall."
California is also losing about 20% of its refinery production, a reduction Mische says is equivalent to over half the total production capacity of the state of Washington.
"We're not going to see a 20% drop in demand to match that reduction," he said.
Mische highlighted points from the study in an interview with CBS13 that create a mix of factors driving up prices: Increasing state excise and sales tax, expanding cap-and-trade program costs, a pending change to the Low Carbon Fuel Standard, declining in-state oil production and refinery capacity, the state's lack of incoming fuel pipelines, and increasing reliance on costly maritime transport.
The logistics challenges extend to global instability.
"Any disruption to maritime transport—geopolitical events, a hurricane in the Gulf, labor disputes—could cause major problems," Mische said. "We're putting ourselves in a vulnerable position."
The LCFS alone, if passed in its current form, could raise prices by nearly 10%, according to estimates Mische cited — though he noted that the California Air Resources Board has since removed specific price projections from its website.
Other hidden costs include transportation, since gasoline may now need to be shipped in from the Gulf Coast or Asia, as well as storage reserves.
"Refiners are required to hold 14 to 16 days' worth of gasoline on reserve," said Mische, "and the cost of maintaining that reserve will be passed on to consumers."
Mische noted that the data used in the study were provided by the State of California through publicly available data, as well as data from the Federal Government, which was also publicly available.
Mische emphasized that the study isn't a doomsday prediction—it's a risk assessment.
"We layered in a wide array of variables—from refinery capacity and seasonal blends to global spot prices and consumer demand elasticity," he said. "It's not about whether the price hits exactly $8. It's about understanding the trajectory and being prepared."
Stockton gas station raises prices
Ernie Giannecchini has owned and operated Ernie's General Store and Deli in Stockton for forty years. Typically, he's the cheapest gas in town with his cash price coming in under $4, at times.
He told CBS13 this is his way of turning the tables on big oil companies and saving some pain at the pump for his customers.
Over the holidays, he's dropped the cash price for a gallon and customers have responded by showing up and showing out, supporting the small business.
A week ago, Giannecchini said the price was $3.99, but on Thursday, he was forced to go up to $4.49. It's still below the state average per gallon, but it's not the lowest for his customers, something he says he wishes he could change.
"My prices have to go up because I'm at rock bottom prices, I'm just basically at my cost right now, and I usually try to be the lowest price in the area, in Stockton... I have a lot of loyal customers," Giannecchini said.
He told CBS13 he hopes that the price can go back closer to what it usually is for customers, the lowest in town. But as of now, he explained, there's "no end in sight" for the price going up.
Governor's office responds
In a statement to CBS13, a spokesperson for the Governor, Daniel Villasenor, noted that in March, Gov. Gavin Newsom directed the state to redouble efforts to work with refiners to ensure a safe, affordable, and reliable supply of gasoline. The statement read:
"In the two years since the Governor signed California's gas price gouging law, the state has avoided severe gasoline price spikes like the historic 2022 spike, saving Californians billions of dollars at the pump. The law established the nation's first state-level independent petroleum watchdog to hold Big Oil accountable, and the state has more transparency from the industry than ever before. Governor Newsom will keep fighting to protect Californians from price spikes at the pump."
California Republicans demand action
In a statement, Senate Minority Leader Brian W. Jones (R-San Diego) warned of a looming "energy and economic crisis", citing the same study by Mische.
In a letter to Governor Gavin Newsom, Jones urged immediate action to halt the shutdowns, calling them a threat not only to fuel prices, but also to thousands of good-paying jobs and California's energy security. He blames state policies and excessive regulations for pushing refineries out of operation.
"We're not just losing gas. We're losing jobs, losing local economies, losing our grip on affordable living in California, and losing a critical layer of our national security," Jones said.