I just got back to California and was again shocked by the high cost of gas… the highest in the nation.
As of May 22, 2025, the national average gas price per gallon was $3.17 – in California, it was $4.87 — $1.70 higher than the national average.
But hang onto your wallet. Prices are about to go much higher in California.
Two major oil refineries in the state are closing in the next year.
Phillips 66 is closing its southern California refinery by the end of 2025 because of the California regulations.
The state has passed regulatory policies in recent years aimed at phasing out the sale of gasoline-powered lawn mowers, cars, big rig trucks, and trains.[1]
The southern California Phillips 66 refinery produces 8.3% of the state’s refining capacity.[2]
A workforce of 600 employees and 300 contractors will be impacted by the closure.
Valero Energy Corp. will be shutting down its refinery in the San Francisco Bay area by April 2026.
This refinery accounts for about 9% of the state’s refining capacity.
Any way you interpret these percentages, there will be a shortage of gasoline in California beginning sometime this fall – and the shortage will double in April next year.
When demand exceeds supply, prices rise. That’s Economics 101.
Also, when the excise taxes on gasoline increase each year on July 1st, prices increase – just in time for the high-demand summer driving season.
It’s a double whammy.
But it’s not because the big oil companies are price gouging or making windfall profits at the expense of car owners – like the politicians claim.
Between June 2023 and May 2024, California refiners made net profits in only 6 of 11 months – and the average net profit during that time period was 9 cents per gallon[3] – hardly a windfall.
Here are 4 reasons why gas prices are expected to rise sharply in California during the next 12 months:
- The Division of Petroleum Market Oversight (DPMO).
In October 2024, Gov. Gavin Newsome signed AB X2-1 into law, authorizing the DPMO by to require that oil refiners maintain a minimum quantity of refined fuel in storage at all times.
The idea is to prevent gas shortages and price spikes during refinery downtimes for scheduled maintenance.
The problem is that this requirement will increase production costs due to the need to build or acquire additional storage facilities.
The additional production costs will be passed on to the consumer.
Depending on the as-yet-to-be-determined minimum fuel supply, the additional cost per gallon at the gas pump could be anywhere between $0.05 and $0.27.
Phillips 66 announced the closure of their Los Angeles-based refinery within 72 hours of the passage of AB X2-1.[4]
Will this law result in the closure of other California refineries after it takes effect?
Only time will tell.
- California environmental groups hate oil companies.
In 2019, Kern County was the #1 oil-producing county in California – and was the 7th largest oil-producing county in the nation.[5]
The county produced 71% of the state’s annual oil production and 78% of the state’s annual natural gas production.
But thanks to the Sierra Club, the Center for Biological Diversity, Earthjustice, and the Natural Resource Council, new drilling permits in California cratered from 2,676 in 2019 to a measly 86 in 2024.
And the permits were suspended altogether in Kern County last year when a state court ruled that the county had failed to meet California Environmental Quality Act requirements.[6]
California consumes 10% of all the gasoline used in the U.S., and 14% of all the jet fuel.[7]
But it now must import – from Iraq, Ecuador, Saudi Arabia and other foreign countries – up to 75% of all the oil it refines.
- State excise taxes punish both oil companies and consumers.
Every summer the price of gas increases dramatically in California. Most people believe it’s because demand increases when people begin going on summer vacations in their cars.
But the real reason is because every July 1st, the state increases its excise tax on every gallon of gas, plus all the other taxes the state imposes on the oil refiners – which are passed on to the consumer.
Here are the 5 taxes California adds to each gallon of gas Californians buy – in addition to the 18.4 cents per gallon that the federal government charges you:
- State Excise Tax – increasing from 59.6 cents to 61.9 cents per gallon on July 1st.
- State and local sales tax – 2.25% of fuel cost for gasoline and 13% of fuel cost for diesel. Additional county and local sales taxes are added, which vary by locality. This amounts to an average tax of 10 or 11cents for gasoline and 65 cents for diesel.
- Low Carbon Fuel Standard (LCFS) – The California Air Resources Board (CARB) continually increases the carbon emission standards for gasoline sold in the state. The LCFS basically subsidizes Midwestern corn farmers for producing and shipping grain alcohol to California refineries because there is thought to be a lower emission of greenhouse gases when gasoline is laced with ethanol before it is ignited inside an internal combustion engine.[8] The state calls this subsidy “high carbon fuel credits” and passes this on to consumers. The “tax” is projected to be 47 cents per gallon starting July 1st,[9] but some estimates are as high as 65 cents.[10]
- Cap-and-Trade Program – requires fuel suppliers to purchase carbon allowances. Projected cost to consumers in 2025 is 31cents per gallon.[11]
- Underground Storage Tank (UTS) Fee – funds the cleanup of underground storage tank leaks. The fee is 2 cents per gallon.[12]
- Governor Newsome wants you to switch to an electric vehicle.
In 2020, Governor Gavin Newsome issued an executive order mandating that all new passenger vehicles sold in the state be zero-emission by 2035.
Whether that happens or not – and whether or not that mandate is rescinded by federal law – it’s clear that the California state government wants to force Californians to switch from gas-powered vehicles to electric.
And the sooner the better.
The political elite know what’s best – and they are willing to punish and impoverish California citizens with exorbitant taxes on gasoline to convince them to stop buying it.
They are also making it extremely costly and time-consuming for oil companies to obtain permits to expand or upgrade their refineries.[13]
Professor Michael A. Mische from USC’s Marshall School of Business issued a research report estimating that California gas prices could increase by 75% to more than $8 per gallon by the end of 2026 – assuming the market price of crude oil remains the same.[14]
A price increase of this magnitude will hit rural Californians the hardest since they typically drive longer distances for work, school, and shopping.
But all Californians will suffer. It’s all about government overreach, regulations, socialist ideologies and no common sense.
What do you think? Email me at [email protected]
[1] https://apnews.com/article/california-refinery-oil-phillips-66-shut-down-bbea1826c0d5d472273f97ad86b870f8
[2] Michael Mische, https://californiaglobe.com/fl/brace-for-impact-california-gas-prices-to-increase-in-2025/
[3] Robert Rapier, https://www.forbes.com/sites/rrapier/2024/12/16/california-gas-prices-the-state-makes-more-money-than-refiners/
[4] Michael Mische, op. cit.
[5] Brad Jones, https://www.theepochtimes.com/article/new-oil-drilling-permits-in-california-drop-97-percent-in-5-years-what-to-know-5834946?welcomeuser=1
[6] Ibid.
[7] https://www.eia.gov/state/analysis.php?sid=CA
[8] Edward Ring, https://mailchi.mp/calpolicycenter/whats-current-issue-7860334?e=9ab231035f
[9] Ibid.
[10] Stephen Frank, https://capoliticalnewsandviews.com/californians-will-be-blindsided-gas-prices-could-surge-75-to-over-8-gallon-in-the-golden-state-by-2026-heres-whats-driving-the-pending-crisis-and-what/?utm_source=rss&utm_medium=rss&utm_campaign=californians-will-be-blindsided-gas-prices-could-surge-75-to-over-8-gallon-in-the-golden-state-by-2026-heres-whats-driving-the-pending-crisis-and-what
[11] Noel Fletcher, https://www.ttnews.com/articles/rising-fuel-taxes-2025
[12] https://factspergallon.com/
[13] Ted Gaines, https://californiaglobe.com/fr/california-government-driving-gas-prices-through-the-roof/
[14] Michael Mische, https://files.constantcontact.com/6ddc9aab901/d3ac27a3-d4d4-44f3-9a3b-f91f88735d11.pdf