- Two refineries in California are about to shut down.
- They supply about 17 percent of the state’s gasoline.
- Regulations and an ICE ban are driving firms away.
Drivers are getting a break as the national average price for a gallon of gas is $2.855. That number varies by location and Californians are paying an average of $4.310 per gallon, which is virtually the same price as last year.
While Californians aren’t experiencing the same relief as most Americans, things could soon get a lot worse. According to CNN, two refineries in the state are about to shut down and send prices skyward.
More: Gas Prices Fall Under $2 In Some Areas And One Stations Drops To $1.69 Per Gallon
The refineries in question are located near Los Angeles and the Bay Area, and are responsible for about 17% of the state’s supply of gasoline. That’s a huge amount to be taken offline and drivers will ultimately pay the price.
One analyst suggested the closures could cause gas prices to spike by 50 cents. That’s a significant jump and the clock is ticking as the first refinery closes at the end of the month, while the other goes offline in April.
How Fragile Is California’s Fuel Supply?
With the closures, California will have just six refineries left. This means any problems could send shockwaves across the state.
As Tom Kola told the publication, “When you have 10 refineries and two are down for planned or unplanned maintenance, it’s no big deal. But when you have only six, and one of them is down — God forbid you have a fire — you’re in trouble. It’s then a market that can easily go to $5 to $6 a gallon.”
That’s not unheard of in the Golden State as the average price of a gallon of gas soared to $6.438 in June of 2022. However, $6 gas would be a 110% increase from today’s average.
What’s Driving High Prices in the Golden State?
Earlier this year, the U.S. Energy Information Administration explained why California has some of the highest gas prices in the continental United States. They chalked it up to a variety of factors including “state taxes and fees, environmental requirements, special fuel requirements, and isolated petroleum markets.”
In particular, the government said Californians pay the highest taxes at the pump. This works out to be $0.90 per gallon when local, state, and federal taxes are factored in.
Oil companies also aren’t thrilled with the state, which helps to explain the exodus. As CNN noted, Valero said they decided to close their refinery due to costs and uncertainty imposed by California’s regulations.
The publication also noted the state’s goal of banning sales of ICE-powered vehicles by 2035 is pushing companies to close refineries in California. That makes sense as why would oil firms invest in a market that’s about to disappear.
