California Gas Prices Could Spike 75 Percent Next Year as Refiners Flee State

Gas prices in California, already among the highest in the country, could jump 75 percent next year due to refinery closures, new environmental regulations, and tax increases, according to analysis by a University of Southern California researcher.Phillips 66 says it is closing an oil refinery in Los Angeles this year and Valero, another oil giant, plans to close one in the San Francisco area next year. Those closures could contribute to an average consumer price of $8.40-a-gallon for regular gasoline, a USC business school professor, Michael Mische, says.“California can ill afford the loss of one refinery, let alone two,” Mr. Mische says. After the closures, he says, the state will see as much as a 21 percent reduction in refining capacity, putting it short 13.1 million gallons of gas a day.California has traditionally counted on Washington State refineries to pick up any slack from in-state production shortages, but Mr. Mische says Washington doesn’t have enough excess capacity to make up for California’s expected shortfall. He suggests that the state may have to rely on more expensive fuel imports from Asian refineries to meet demand.He calls the consequences “devastating” to California’s economic growth and says the shortages could threaten its status as the fourth largest economy in the world. Mr. Mische notes that the number of refineries in the state has dropped nearly 70 percent in the past 40 years with a corresponding 36 percent decrease in refinery capacity.Taxes are already driving average retail gasoline prices 40 percent to 50 percent higher than the national average. California’s mandated regulatory fees, refining costs, and taxes are the highest in America and add $1.47 to each gallon of gasoline sold in the state, Mr. Mische says. He says new regulations could potentially increase the price at the pump by another $1.18 a gallon next year, even if the refineries don’t close.California’s senate minority leader says Governor Newsom needs to take “urgent action” to protect consumers. “If the Governor doesn’t act now, Californians will be blindsided by sticker shock at the pump and skyrocketing prices on everyday goods,” Senator Brian Jones says.Mr. Jones says excessive regulations and financial burdens on gasoline producers have made it increasingly difficult for refineries to remain in operation. He says Mr. Newsom needs to work with California’s fuel producers to explore investment tax credits and relief from some taxes and regulations.Last month, Mr. Newsom wrote a letter to the vice chairman of the state energy commission directing her to work to convince refineries to find ways to stay in the state. His request, however, was short on specifics about how to accomplish that.Mr. Newsom’s office disputes the figures in the report, saying the author fails to provide any evidence for his assertions.“There are a few vague references to ‘models’ but no details about the model structure, the data used, or how these numbers were estimated,” spokesman Brandon Richards tells the Sun.He accused Mr. Mische of “clear fearmongering for personal and professional profits.”Mr. Mische says more refineries closing is “inevitable.” He cited Chevron’s plans to move its headquarters to Texas and warned that the company could close its two California refineries as part of unloading assets in the state.Mr. Mische says the coming 2035 ban on the sale of new gasoline-powered vehicles, new regulations, and a “caustic political environment toward the oil and gas industry” will convince other refiners to abandon California. He suggests an immediate revocation of the coming ban on the sale of new gas cars as a practical first step. He also recommends eliminating a profit margin cap on refiners so they can invest in new technologies, additional capacity, and maintenance.

California Gas Prices Could Spike 75 Percent Next Year as Refiners Flee State

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