California drivers face an economic nightmare as gas prices could skyrocket to a staggering $8.43 per gallon by the end of 2026, thanks to Democrats’ approval of a massive new gas tax increase.
Key Takeaways
- California’s Assembly has approved a gas tax increase of 50 to 65 cents per gallon, set to take effect July 1, 2025, under the Low Carbon Fuel Standard.
- Republican efforts to block the tax increase through Assembly Bill 12 were defeated by an 18-39 vote, highlighting the Democratic supermajority’s commitment to environmental regulations despite economic concerns.
- Two major refineries are closing (Phillips 66 in Los Angeles by end of 2025 and Valero in Benicia by April 2026), potentially creating a daily gasoline deficit of up to 13.1 million gallons.
- USC Professor Michael Mische projects gas prices could rise by 75% to $8.43 per gallon by 2026, creating widespread economic hardship.
- The refinery closures could eliminate 1,300 direct jobs and nearly 3,000 indirect positions, further straining California’s economy.
Democrats Push Through Massive Gas Tax Increase Despite Already Record Prices
California drivers already suffering under the nation’s highest gas prices are about to face an even greater burden. The California Assembly has approved a substantial gas tax increase of 50 to 65 cents per gallon starting July 1, 2025, as part of revisions to the state’s Low Carbon Fuel Standard. This comes as the state’s gas excise tax is also increasing to 61.2 cents per gallon. The decision to add these new costs comes at a time when Californians already pay an average of $4.78 per gallon for regular gasoline – the highest in the nation.
Republican lawmakers attempted to shield California drivers from this financial blow through Assembly Bill 12, which would have prevented the tax increase. However, the measure was soundly defeated in an 18-39 vote, with Democrats overwhelmingly supporting the new tax burden. A similar Senate bill (SB 2) proposed by Senate Minority Leader Brian Jones to repeal the tax increase was also killed by a 10-23 vote, with every Democrat voting against relief for California drivers.
Refinery Closures Threaten California’s Fuel Supply and Economy
Compounding the tax increase crisis are the impending closures of two major refineries that currently produce approximately 20% of California’s gasoline. The Phillips 66 refinery in Los Angeles will shut down by the end of 2025, followed by the Valero refinery in Benicia in April 2026. These closures represent a devastating blow to California’s energy independence and threaten to create a severe fuel shortage that will drive prices even higher.
“The shutdown of the two California-based refineries could possibly place the Golden State 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,” Said Michael A. Mische, a professor at the University of Southern California.
The refinery closures will eliminate approximately 1,300 direct jobs and nearly 3,000 indirect positions, further weakening California’s economy. The state will also become increasingly dependent on out-of-state fuel supplies, raising serious national security concerns and making California vulnerable to supply disruptions and price fluctuations.
Republican Leaders Warn of Economic Catastrophe
Senate Minority Leader Brian Jones has been vocal in his criticism of Governor Gavin Newsom’s policies, which he believes have made it nearly impossible for refineries to operate profitably in California. The combination of excessive regulations, high taxes, and hostile business policies has effectively driven these essential energy producers out of the state, with catastrophic consequences for California’s economy and its residents.
“We’re talking about gas prices over $8.43 per gallon by the end of next year,” Stated Leader Jones. “If the Governor doesn’t act now, Californians will be blindsided by sticker shock at the pump and skyrocketing prices on everyday goods.”
Jones added, “Let’s be clear: Newsom owns this gas crisis. His policies have made it nearly impossible for California refineries to stay open. As Newsom eyes the White House, America should be watching closely: the crisis he created here could be the next national nightmare.” The impact of these fuel supply reductions will extend far beyond the gas pump, affecting air travel, food delivery, agriculture, manufacturing, power generation, and healthcare.
Environmental Regulations Without Economic Consideration
Perhaps most troubling is the admission by California Air Resources Board (CARB) Chair Liane Randolph that the board did not consider the economic impact of its regulations on gas prices when implementing these changes. This revelation underscores the disconnect between California’s environmental policymakers and the economic realities faced by ordinary citizens who must bear the costs of these decisions.
“That admission is stunning. CARB is making billion-dollar decisions that hit every family at the pump, and they’re doing it without even asking what it will cost. That level of arrogance and detachment from reality is exactly why we need SB 2,” Said Senate Jones.
Following the defeat of efforts to repeal the tax increase, Jones pledged that Senate Republicans would continue fighting against these gas price hikes, stating, “Democrats love to talk about affordability until they actually have to vote on it. Senate Republicans will keep fighting to stop these reckless gas hikes and force real accountability from the Governor and his regulators.” For California drivers, the road ahead looks increasingly expensive and uncertain.
