U.S. News

California Gas Prices Could Hit $5

By Jake Beardslee · December 21, 2025

California motorists could soon face even higher gasoline prices as the state prepares for the closure of two major oil refineries that together account for roughly 17 percent of California’s fuel supply.

One refinery in the Los Angeles area is scheduled to shut down at the end of the month, followed by a Bay Area refinery closure in April. The loss of that capacity comes as California already posts some of the highest gas prices in the nation.

Drivers in the state currently pay about $4.32 per gallon—roughly 50 percent more than the national average. Prices could rise by another 50 cents per gallon as supply tightens, according to Andy Lipow, president of Lipow Oil Associates, CNN reported.

“The loss of the refineries are certainly going to result in California having much shorter gasoline supplies,” Lipow said. “The price of gasoline in California will rise on a sustained level, because it’ll have to attract imported gasoline month in and month out.”

The refinery closures also heighten the risk of shortages if any of California’s remaining six refineries experience unplanned outages due to fires or mechanical failures. That vulnerability was underscored earlier this year when a refinery in Martinez suffered a fire in February and has yet to return to full capacity.

California already ranks second only to Hawaii for average gas prices nationwide. Beyond supply constraints, state taxes and environmental policies further elevate costs at the pump. California’s gas tax stands at nearly 71 cents per gallon—more than double the national average—according to the American Petroleum Institute. Retailers also pass along the state’s carbon tax, which can add an additional 20 to 25 cents per gallon, according to OPIS, which tracks gasoline pricing for AAA.

Phillips 66, which operates the Los Angeles-area refinery slated for closure, described the move as a business decision driven by the cost of operating in California. CEO Mark Lashier previously referred to the facility as a “challenged asset.” The company said it still intends to supply California through imports and other means.

Valero, which operates the Bay Area refinery, said in a regulatory filing that it plans to shut down the facility in April due to rising costs and regulatory uncertainty tied to California policies.

State officials, however, maintain that fuel shortages are unlikely. California officials pointed to the Martinez refinery, expected to return to service in early 2026, noting that it is similar in size to the Valero facility being shuttered.

Officials also argue that the state can rely on imported gasoline and market adjustments despite California’s strict fuel-blend requirements.

Electric vehicles currently account for only about 6 percent of cars on California roads, meaning most drivers will still rely on gasoline for years to come. However, the state leads the nation in EV adoption, with electric vehicles making up nearly one-quarter of new car sales during the first nine months of the year, according to Cox Automotive.

California’s plan to effectively ban new gasoline-powered vehicle sales by 2035 has contributed to refinery operators exiting the state, even as that policy faces potential federal challenges. Industry groups say environmental rules, carbon pricing, and costly upgrades have made long-term investments less attractive.