With a cost of living that’s 38.5% higher than the national average, California is an expensive place to live. In fact, the Golden State currently ranks as the third most expensive state to live in, but a recent news report suggests California could potentially work its way up that list in the years to come.
According to a report from USC’s Marshall School of Business, California drivers could be paying more than $8 per gallon for gasoline by the end of 2026. The analysis, authored by Professor Michael A. Mische, warns of a potential 75% price increase from the April 2025 average of $4.82 per gallon.
Don’t miss
- I’m 49 years old and have nothing saved for retirement — what should I do? Don’t panic. Here are 5 of the easiest ways you can catch up (and fast)
- Robert Kiyosaki warns of a ‘Greater Depression’ coming to the US — with millions of Americans going poor. But he says these 2 ‘easy-money’ assets will bring in ‘great wealth’. How to get in now
- Gain potential quarterly income through this $1B private real estate fund — even if you’re not a millionaire. Here’s how to get started with as little as $10
“The estimated average consumer price of regular gasoline could potentially increase by as much as 75% from the April 23, 2025, price of $4.816 to $7.348 to $8.435 a gallon by calendar year end 2026,” Mische wrote. “We can expect retail prices to be even higher in counties such as Mono and Humboldt.”
What is causing this drastic increase?
According to KTLA 5 News, the potential increase is primarily driven by the scheduled closures of two major oil refineries. The Phillips 66 refinery in Los Angeles and Valero’s facility in Northern California are both slated to shut down, removing approximately 21% of the state’s refining capacity over the next three years.
"Weak refining margins, rising regulatory compliance costs, softening demand for gasoline and the push for lower-carbon alternatives like batteries and renewable diesel have each contributed to a steady decline in California’s refining capacity the past few years," writes Robert Auers in a blog post for RBN Energy LLC.
"Now, Phillips 66’s plan to idle its 139-Mb/d Los Angeles Refinery in Q4 2025 will leave the Golden State with only seven conventional refineries producing gasoline, diesel and jet fuel — a couple of dozen fewer than it had 40 years ago."
The closure of these two refineries could lead to a daily deficit of 6.6 million to 13.1 million gallons of gasoline, as California currently consumes over 13.1 million gallons daily while producing less than 24% of its crude oil needs. Lawmakers have expressed concern over the potential economic impact and have urged Governor Gavin Newsom to intervene and prevent the refineries from closing.
“If the Governor doesn’t act now, Californians will be blindsided by sticker shock at the pump and skyrocketing prices on everyday goods,” said Senate Minority Leader Brian W. Jones in a written statement.
A spokesperson for the governor said that efforts are underway to maintain a stable fuel supply and protect Californians from steep price increases.
“Just last month, the governor directed the state to redouble efforts to work with refiners to ensure a safe, affordable and reliable supply of gasoline,” Daniel Villaseñor, a spokesperson for Governor Newsom, shared with KTLA 5 News. “Governor Newsom will keep fighting to protect Californians from price spikes at the pump."
Read more: Want an extra $1,300,000 when you retire? Dave Ramsey says this 7-step plan ‘works every single time’ to kill debt, get rich in America — and that ‘anyone’ can do it
How to navigate rising gas prices in California
As of now, California already has some of the highest gas prices in the country, with averages exceeding $5 per gallon in certain areas. If prices rise to the projected $8.43 per gallon, California would further solidify its position as the state with the most expensive gasoline.
To mitigate the impact of rising fuel costs, residents can consider several strategies:
Look for fuel discounts: Membership-based retailers like Costco often provide lower fuel prices. Some grocery stores also offer points per dollar spent to help offset gas prices.
Carpooling: Sharing rides can significantly reduce individual fuel expenses. Consider riding to work with a colleague or sharing driving duties with a family at your child’s school.
Limit your driving: Be mindful of when and where you drive. For example, you can consolidate nearby errands and make them all in one trip. Also, consider working remote more often, if that is an option.
Invest in fuel-efficient vehicles: Transitioning to a vehicle with higher fuel economy, or switching to an electric vehicle, can offer long-term savings. California also offers a variety of tax rebates and incentives for electric cars.
Use public transportation: California’s major cities, including Los Angeles, San Francisco and San Diego, offer extensive public transit systems including buses, light rail and commuter trains. However, the state offers limited alternatives to driving outside of the major hubs.
While these measures can help, the state’s infrastructure may limit alternatives to driving for many residents. Continued investment in public transportation and policies to rein in the costs of fuel will be critical to address what could become a gasoline crisis in California.
What to read next
- JPMorgan sees gold soaring to $6,000/ounce — use this 1 simple IRA trick to lock in those potential shiny gains (before it’s too late)
- This is how American car dealers use the ‘4-square method’ to make big profits off you — and how you can ensure you pay a fair price for all your vehicle costs
- Here are 5 ‘must have’ items that Americans (almost) always overpay for — and very quickly regret. How many are hurting you?
- How much cash do you plan to keep on hand after you retire? Here are 3 of the biggest reasons you’ll need a substantial stash of savings in retirement
Like what you read? Join 200,000+ readers and get the best of Moneywise straight to your inbox every week. Subscribe for free.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
