Pump Prices 2026–2027: Why the Rest of the Country Gets Relief While California Pays More

Pump Prices 2026–2027: Why the Rest of the Country Gets Relief While California Pays More

California drivers are staring down $5.85–$5.89 per gallon at the pump while the national average trends toward the low-to-mid $3.70s — and the gap is structural, not temporary. Understanding exactly why that gap exists, how large it could grow, and what practical steps can close it is what this article covers.

The National Picture: Prices Easing Through 2027

The U.S. Energy Information Administration's April 2026 Short-Term Energy Outlook projects Brent crude prices easing in the second half of 2026 as Middle East risk premiums fade. U.S. retail regular unleaded is forecast to average in the low-to-mid $3.70 range for all of 2026, with further softening into 2027.

Three forces are working in most drivers' favor: steady domestic oil production, a growing share of EVs and hybrids pulling demand lower, and no significant new federal fuel regulations on the horizon. For most of the country, cheaper fill-ups are a reasonable expectation. California is a different calculation entirely.

Why California Pays More: Three Compounding Problems

1. The Refinery Capacity Collapse

The single biggest driver of California's current price crisis is a rapid loss of in-state refining capacity. Phillips 66 closed its Wilmington plant — rated at 139,000 barrels per day — in late 2025. Valero followed by shutting its Benicia refinery, rated at 145,000 barrels per day, in April 2026. Together, those two closures eliminated roughly 17–20% of California's total 1.68 million barrels-per-day refining capacity.

A July 2025 study from UC Davis economists put a precise number on the damage: under normal market conditions, the lost capacity is projected to add $1.21 per gallon to California pump prices by August 2026. The math behind that estimate uses California's gasoline demand elasticity of approximately -0.6, meaning a 17% supply reduction translates to roughly a 28% price increase.

2. A Fuel Market Cut Off From the Rest of the Country

California requires a proprietary low-emission gasoline blend mandated by the California Air Resources Board (CARB). No pipeline connects California to the Gulf Coast or Midwest refineries that supply the rest of the country, and most of those facilities cannot produce CARB-compliant fuel anyway. That leaves California dependent on in-state refining, plus tanker shipments from Asia and a small number of other international facilities capable of meeting the state's specifications. Shipping costs and port delays become embedded in the retail price in ways that simply do not apply elsewhere in the U.S.

3. State Taxes and Environmental Program Costs

The state excise tax currently sits at 61.2 cents per gallon. The Low Carbon Fuel Standard (LCFS) and cap-and-trade programs stack on an additional 40–65 cents or more per gallon, depending on current program rules. Combined, California's state charges and environmental compliance costs add roughly $0.90–$1.40 per gallon on top of crude oil, refining, and delivery costs. Summer driving demand amplifies price swings further.

The projected outcome: California pump prices in the $6.40–$7.50+ range through the remainder of 2026 under normal conditions. A crude oil price spike or another supply disruption would push that ceiling higher.

Four Policy Changes That Could Ease the Pressure

Several targeted adjustments could meaningfully lower pump prices without dismantling California's long-term environmental framework.

Temporary Regulatory Relief During Supply Shortages

The state could suspend portions of the LCFS and cap-and-trade costs during verified supply shortages, with clear expiration dates built in from the start. Even a $0.40–$0.80 per gallon reduction in regulatory add-ons would save California drivers roughly $5.4–$10.7 billion annually, based on the state's 13.4 billion gallons of annual gasoline consumption. The state would forgo some short-term program revenue, but the consumer savings would be substantially larger.

Refinery Modernization Incentives

A $200–$500 million investment over three to five years in tax credits, grants, and streamlined permitting could help keep the remaining California refineries operational and efficient. Maintaining even 5–8% more in-state capacity could reduce the supply-shock price impact by $0.30–$0.60 per gallon — translating to $4–$8 billion in annual consumer savings, well above the program's cost.

Faster Import Permitting and Strategic Fuel Storage

Accelerated permitting for CARB-compliant fuel imports, combined with expanded fuel storage infrastructure (estimated cost: a few hundred million dollars), would reduce the price spikes that arrive with port delays and seasonal demand surges. A modest strategic reserve would recoup its cost many times over by preventing the concentrated price pain California drivers absorb during summer peaks or global supply disruptions.

Cost-Benefit Review of New CARB Rules

Any upcoming CARB regulation with a direct effect on fuel supply should clear a transparent cost-benefit test before adoption. Rules that tighten supply without proportional environmental returns compound the problem the closures of Wilmington and Benicia have already created. Built-in review timelines and measurable performance targets would keep new regulations accountable without reversing California's broader clean air commitments.

What California Drivers Can Do Right Now

California drivers have direct channels to the officials and agencies making these decisions. Enough constituent contact on a specific issue moves the needle.

Contact Governor Gavin Newsom

• Phone: (916) 445-2841
• Online form: https://gov.ca.gov/contact/
• Mail: Office of the Governor, 1021 O Street, Suite 9000, Sacramento, CA 95814

Ask specifically for temporary LCFS and cap-and-trade relief tied to the refinery closures, plus the refinery modernization incentive package.

Contact Your State Assemblymember and State Senator

Find both representatives in seconds at https://findyourrep.legislature.ca.gov/ by entering your address. Members of the Assembly Utilities and Energy Committee and the Senate Energy, Utilities and Communications Committee are particularly relevant. Reference the UC Davis study and the four policy options above when you call or write.

Submit Public Comments to CARB

CARB accepts public comments on upcoming LCFS and cap-and-trade rule changes at https://ww2.arb.ca.gov/applications/public-comments, by email at [email protected], or by phone at (916) 322-5594. Keep comments brief: identify the refinery closures, cite the price projections, and request cost-benefit requirements plus temporary supply-shortage relief.

Sample Letter (Copy, Fill In, and Send)

Subject: Support Targeted Relief on LCFS/Cap-and-Trade and Refinery Incentives to Lower Gas Prices

Dear Governor Newsom / Assemblymember [Name] / Senator [Name],

As a California driver, I am concerned about the $1.21-per-gallon price increase projected by the UC Davis study due to the Wilmington and Benicia refinery closures. These closures, combined with CARB fuel specifications and LCFS/cap-and-trade compliance costs, are driving California gas prices well above the national average.

I respectfully ask you to support:

• Temporary, time-limited relief from portions of LCFS and cap-and-trade rules during supply shortages (potential $5.4–$10.7 billion in annual savings for drivers)
• $200–$500 million in targeted incentives to modernize remaining refineries (potential $4–$8 billion in annual savings)
• Faster permitting for CARB-compliant imports and expanded fuel storage capacity

These steps would deliver real relief at the pump while keeping long-term environmental goals intact. Thank you for your attention to this issue.

Sincerely,
[Your Full Name]
[Your Address]
[Your Phone and Email]

Key Takeaways

• The national average for regular unleaded is forecast at low-to-mid $3.70 per gallon through 2026; California is already at $5.85–$5.89 and rising.
• The closures of the Phillips 66 Wilmington plant (139,000 bpd) and Valero Benicia refinery (145,000 bpd) eliminated roughly 17–20% of California's refining capacity, with UC Davis economists projecting a $1.21/gallon price impact by August 2026.
• California's CARB-mandated fuel blend, absence of pipeline connections to lower-cost refining regions, 61.2 cents/gallon state excise tax, and LCFS/cap-and-trade costs add $0.90–$1.40 per gallon beyond crude, refining, and delivery costs.
• Without policy intervention, California pump prices are projected in the $6.40–$7.50+ range through the rest of 2026.
• Four targeted, time-limited policy changes — temporary regulatory relief, refinery modernization incentives, faster import permitting, and CARB cost-benefit reviews — could collectively save California drivers billions annually while preserving the state's environmental framework.