This Could Raise CA Gas Prices Even Higher (And They're Already The Highest In The US)

For many drivers, the cost of fuel is an ever present concern that affects everything from getting to work to visiting family. It can be especially troubling for residents of the Golden State, as California is home to the nation's highest gas prices. Now there's some more bad news, as Valero Energy is closing its Benicia refinery in 2026. State officials warn that this closure, combined with the shutdown of Phillips 66's Los Angeles plant, could eliminate about a fifth of the state's gas refining capacity. This would tighten California's supply, and increase the likelihood that gas prices will go up.

Valero's decision to leave stems from California's complex regulation standards, as well as the high cost of doing business in the state. The company just couldn't find a way to generate profit in California when compared to other areas. Phillips 66 had similar reasons for closing its operations in late 2025, along with an uncertainty about the future of its LA refinery in the long-term.

As of this writing, the average cost of gas in California, a state that actually wants drivers to start paying by the mile, is around $4.30 per gallon. This is about $1.44 higher than the national average. But if some experts are correct in their assessment of the situation, the state could see gas prices jump upwards of $10 per gallon or possibly even more. Since Valero's refinery won't officially close until April of 2026, the future of gas prices in the state won't be known for months to come.

Governor Gavin Newsom has urged the California Energy Commission to coordinate with local refineries to ensure a steady, yet affordable, supply of gas for residents. This comes after the exit of the two refineries, leaving a gap that the commission believes may be filled by adding additional import infrastructure. This could lead to the importing of more fuel, and possibly an increase in transportation and delivery costs. Unfortunately, this also means gas prices could remain as high as they are now, if not a bit higher.

The reason California's gas prices are the highest in the country to begin with is due to a combination of factors. First, the state has some of the highest taxes and fees on fuel, which increases the price residents pay with every fill-up. Then there's the costly environmental compliance policies, and the fact that California's clean-burning fuel mix is already limited. The absence of major pipelines delivering fuel to the state doesn't help, and even with California's new laws aimed at slashing prices, drivers still may not save money.

That's why the current loss of refineries is such a blow to the state, and explains why Governor Newsom is actually calling for more in-state drilling. But critics warn that there would be negative environmental impacts, which contradict the state's clean energy approach. Others believe the very problems that caused the refineries to leave weren't properly addressed from the start, leading to the issues the state now faces.