California Gas Prices Set to Spike

California's gasoline market is largely isolated, meaning over 90% of the fuel consumed in the state is also refined there. This reliance on a small number of in-state refineries makes prices highly sensitive to any disruption in production or the global cost of crude oil. The state mandates a unique, cleaner-burning gasoline blend to combat air pollution, which is more expensive to produce. Refineries are currently transitioning to this pricier "summer-blend," a seasonal factor that typically pushes prices up even before global events are factored in. Drivers in California already pay the highest taxes on gasoline in the U.S. As of March 2025, state taxes and fees added about $0.72 per gallon, compared to a national average of just $0.28 for state excise taxes. Adding to supply pressures, two significant refineries—Phillips 66 in Los Angeles and Valero in Benicia—are scheduled to close by April 2026. These closures are expected to reduce California's in-state refining capacity by a combined 16.9%. The current conflict threatens the Strait of Hormuz, a critical chokepoint through which about 20% of the world's total oil supply passes. Any disruption to the 15 to 20 million barrels of oil that move through the strait daily could cause a historic supply shock. Analysts are now predicting that a prolonged conflict could push global crude oil prices toward $100 a barrel or even higher. For comparison, Brent crude, the global benchmark, was trading around $73 a barrel before the recent escalation. This potential surge in crude oil costs would be layered on top of California's already high prices, which averaged $4.63 for a gallon of regular unleaded as of late February 2026. The combination of reduced local supply and a global oil shock creates a uniquely vulnerable situation for the state's drivers.