Two California refineries are preparing to shut down, and the closures could drive gas prices sharply higher.
Together, the refineries supply about 17% of the state’s gasoline. Analysts warn their shutdowns could send prices soaring at a time when most of the country is enjoying cheaper fuel.
Drivers nationwide are paying an average of $2.855 per gallon. Californians, however, are paying about $4.310 per gallon — nearly unchanged from last year. That gap could widen soon.
According to CNN, one refinery near Los Angeles is set to close at the end of the month, while another in the Bay Area will shut down in April. Removing nearly a fifth of California’s fuel supply could push gas prices up by as much as 50 cents per gallon.
A fragile fuel system
Once the closures take effect, California will have just six operating refineries left. That leaves the state highly vulnerable to supply disruptions.
“When you have 10 refineries and two are down for planned or unplanned maintenance, it’s no big deal,” analyst Tom Kola said. “But when you have only six, and one of them is down — God forbid you have a fire — you’re in trouble. It’s then a market that can easily go to $5 to $6 a gallon.”
California has seen prices that high before. In June 2022, the state’s average gas price peaked at $6.438 per gallon. A return to $6 gas would represent a roughly 110% increase from today’s average.
Why California gas costs so much
Earlier this year, the U.S. Energy Information Administration explained why California consistently posts some of the highest gas prices in the continental U.S. The agency cited high state taxes and fees, strict environmental rules, unique fuel requirements, and the state’s isolated fuel market.
Taxes play a major role. When local, state, and federal taxes are combined, Californians pay about 90 cents per gallon at the pump — the highest total tax burden in the country.
Oil companies have also grown increasingly uneasy about operating in the state. Valero told CNN it decided to shut down its refinery because of high costs and regulatory uncertainty in California.
The state’s plan to ban sales of new internal combustion engine vehicles by 2035 has added to that uncertainty. With demand for gasoline expected to decline, oil companies see little incentive to keep investing in refineries that may soon serve a shrinking market.
As refineries close and supply tightens, California drivers could soon feel the impact every time they fill up.
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