A new University of Southern California (USC) report warns that shutting down two California refineries could jeopardize energy security in the Golden State and lead to $8 per gallon gasoline rates by 2026.
“California can ill afford the loss of one refinery, let alone two,” warned USC Marshall School of Business Associate Professor Michael Mishe. He also reported that these potential closures would have a devastating effect on California’s economy.
The two impacted refineries would be Phillips 66 in Los Angeles, slated for closure in October 2025, and Valero in Benicia (to be closed by April 2026). As of this writing, the average price of gasoline in California is $4.92/gallon–a rate significantly higher than the national average ($3.19/gal).
Professor Mishe’s report also found that despite Sacramento’s commitments to net-zero climate policies, Californians still consume large amounts of gasoline: upwards of 13.1 million gallons of gas daily. Shutting down these two refineries, Mishe adds, would put California “in a precarious economic situation and create a gasoline deficit potentially ranging from 6.6 million to 13.1 million gallons a day, as defined by the shortfall between consumption and production.”
The consequences wouldn’t stop at energy production and consumption. The negative downstream effects of these closures would lower state GDP, worsen housing affordability, raise household costs, and add to the already high $73 billion budget deficit. Equally concerning is that California would become dependent on out-of-state and foreign refiners, despite it being the seventh-largest oil and gas-producing state.
Contra Newsom, there is no price-gauging of gas prices. Professor Mishe further explained:
Despite political claims of price manipulation by refiners, there is simply no direct economic evidence of widespread price gouging or price or supply manipulation by California refiners, a conclusion that has been reached by the state’s own Attorney General Office, the Federal Reserve Bank of Dallas, a Federal District Court in San Diego, and my own USC study. California’s excessive gasoline prices can be directly traced to declining in-state production of both oil and decreasing gasoline supplies, increasing regulatory oversight, escalating regulatory costs, and fees associated with mandatory programs such as Cap and Trade, environmental initiatives, the California special gasoline blend (LCFS), and various taxes, which collectively, adds around $1.47 a gallon to the current consumer price. Even when the spot price of oil and retail gasoline prices have declined, California taxes on gasoline have increased.
The Energy Information Administration (EIA) attributes these high gas prices to several factors: state taxes and fees, environmental requirements, special fuel requirements, and isolated petroleum markets. The EIA adds that Californians pay the highest gas tax of any state, amounting to $0.90 per gallon levied by local, state, and federal taxes. It’s no surprise that California’s climate policies, including the 2015 cap and trade law and Advanced Clean Cars II
Electric Vehicle (EV) mandates, contribute to higher gasoline prices.
The report ultimately concluded California’s gas crisis is “self-created.” In 1982, California produced 62% of its petroleum needs. Today, 60% of California’s petroleum is imported from foreign nations like Iraq, Saudi Arabia, Brazil, and Guyana.
California wouldn’t be the Golden State without its oil and gas industry. Policymakers should think carefully about shutting down two refineries.