California already has the highest gasoline prices in the country.

As of January 2026, drivers are paying about $4.33 per gallon statewide, about $1.30 more than the national average, according to AAA. In some metro areas, prices are much higher.

And now, the state is staring down a shrinking fuel supply — the result of a sequence of events, years in the making — just as its cost of living crisis deepens.

• In December, Phillips 66 began winding down its Los Angeles-area refinery, a facility that has supplied fuel to Southern California for decades.

• Valero Energy announced plans to idle its 170,000-barrel-per-day Benicia refinery, which has operated for roughly 25 years.

Under the company’s updated plan, the refinery will continue producing gasoline through April 2026, then fully shift to importing fuel to serve Northern California.

Governor Gavin Newsom framed the move as manageable.

“Under Valero’s updated plan, the Benicia refinery will continue producing gasoline through April 2026, and then continue importing gasoline into Northern California beyond April once the refinery fully idles,” Newsom says.

He calls it “a constructive development” that would help maintain “steady supply and stable prices.”

State officials echoed that confidence. The California Energy Commission said it is working with refiners to ensure fuel reliability during the state’s energy transition.

But numbers have a way of cutting through reassurances.

Your Rundown for Monday, January 12, 2026...

An Isolated Market with No Backup Plan

Together, the Los Angeles and Benicia closures account for almost 20% of California’s gasoline supply, according to independent analyses and federal data.

California is already an isolated fuel market, with no pipelines crossing the Rocky Mountains and limited ability to pull fuel quickly from the Gulf Coast. When supply tightens here, it doesn’t snap back easily.

“The loss of the refineries are certainly going to result in California having much shorter gasoline supplies,” says Andy Lipow of Lipow Oil Associates.

“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.”

“When you try to import [fuel], your best option in California for the most part is to get it from Asia,” says Matt McClain, a petroleum analyst at GasBuddy. “You’re going to have to tank that across the Pacific, and it could take several weeks.”

That lag matters when something goes wrong.

California once had enough refineries that an outage was inconvenient but survivable. That cushion is gone.

“When you have 10 refineries and two are down for planned or unplanned maintenance, it’s no big deal,” says Tom Kloza of Gulf Oil. “But when you have only six, and one of them is down — God forbid you have a fire — you’re in trouble.”

The fire already happened.

The Martinez Refining Company facility in Northern California caught fire in February and remains offline nearly a year later. That single incident tightened supply across the state. With fewer refineries left, each outage carries more risk.

Kloza warns that under the wrong conditions, California’s market “can easily go to $5 to $6 a gallon.” Other analysts forecast $10–12 gas per gallon.

Supply is only half the story. California also taxes gasoline more heavily than any other state.

The state gas tax stands at 61.2 cents per gallon, about 1.5 times the typical state average, according to the American Petroleum Institute.

Add the state’s carbon pricing system — estimated by OPIS to add 20–25 cents per gallon — and California drivers are paying a premium before the fuel even reaches the tank.

Those policies are deliberate. California has adopted a regulation that will require 100% of new cars and light trucks sold in the state to be zero-emission vehicles by 2035, effectively ending sales of new gasoline-powered passenger vehicles in the state.

Yet only a fraction of vehicles on California roads are pure EVs or plug-in hybrids, according to the California Energy Commission. Most drivers will still be buying gasoline for decades — just in a market with fewer suppliers and higher costs.

For refinery workers, the closures aren’t abstract.

Job losses ripple across a workforce of roughly 100,000 Californians employed in the fossil-fuel industry — among the state’s last pathways to a six-figure income without a college degree.

Studies of past closures show that workers who do land new jobs typically earn about $12 less per hour than before, if they recover their footing at all.

The implications reach beyond the civilian workforce: California is home to more than 30 major military installations, many of which rely on in-state refining for fuel.

As refining capacity shrinks, lawmakers warn that supply disruptions could complicate military logistics in a region already isolated from the nation’s main refining hubs.

California’s refineries also underpin fuel markets across the West. Nevada and Arizona, which lack significant refining capacity of their own, have long depended on California for supply.

When California’s market tightens, price spikes don’t stop at the state line. They ripple across the region, pushing already-high Western fuel prices even higher.

High gas prices don’t hit everyone the same way.

For the wealthy, they’re an annoyance. For the poor, they’re often offset by subsidies or reduced driving. It’s the middle — the tradespeople, the commuters, the families stretched between childcare and housing — that feel the squeeze first.

Gasoline becomes another fixed cost layered on top of high rents, high taxes and long commutes. At some point, people do the math.

Economic researchers already point to outward migration driven by affordability. High fuel prices amplify that pressure, especially in regions where driving isn’t optional.

The result is a slow sorting. Those who can leave, do. Those who can’t, stay. And those who can afford anything remain insulated.

Market Rundown for Monday, January 12, 2026

S&P 500 futures are down 0.55% to 49,405.

Oil is down 0.55% to $58.79 for a barrel of WTI.

Gold’s up 2.65% to $4,620.90 per ounce.

And Bitcoin’s barely in the green at $90,530.