California has long held the unwelcome distinction of leading the nation in per-gallon gasoline prices — but today, that reality has reached a new threshold. As of mid-May 2026, Californians are paying an average of $6.15 per gallon, the highest in the nation. For consumers and business operators alike, the pain at the pump is no longer a market fluctuation. It is a structural condition — and understanding it requires looking well beyond the price sign at the curb. LendingTree
A Perfect Storm at the Refinery Level
The first driver is the reduction in in-state refining capacity. Two major refineries — Phillips 66 and Valero — shut down significant portions of their operations in late 2025 and early 2026, collectively reducing California's overall refining capacity by upwards of 20%. That loss is not temporary, although actions have been taken by both providers to mitigate the impact. The Phillips 66 and Valero closures are considered permanent, meaning baseline gas prices in California can remain elevated even as proactive measures to create fuel accessibility have been put into motion.
The motivation behind those closures is partly financial. Wisfe Aish, CEO and Founder of Double AA Corporation and a veteran leader in the fuel services industry, points to the regulatory incentive structure as a key factor. "It's getting tighter and tougher," Aish notes. "Tax credits and green points are driving major fuel companies to convert refineries to renewable diesel. That's a financial decision — and when Valero follows Phillips 66, you feel it at every pump in the state."
The Strait of Hormuz Factor
Compounding the domestic supply picture is a geopolitical crisis reverberating through global oil markets. California imported 28% of its foreign oil through the Strait of Hormuz in 2025 — from Iraq, Saudi Arabia, and the UAE — and the instability in that corridor is placing extraordinary pressure on the state's already strained supply chain. Eleven weeks into the Iran conflict and a resulting global energy shock, California's gasoline supplies appear stable for the next six weeks. Still, they are uncertain beyond that, as the state increasingly relies on imports. Washington ExaminerCalMatters
For operators and fleet-dependent businesses, the message is clear: California's fuel pricing is no longer a domestic conversation. It is a global one.
Infrastructure and the EV Transition: The Long Road Ahead
Many policymakers and consumers point to the electric vehicle transition as the logical off-ramp from fuel price volatility. Aish urges a more measured view. California's governor has mandated the elimination of new gas vehicle sales by 2035 — but the infrastructure required to support that vision remains years, if not decades, behind schedule.
"The grid is at its maximum," Aish explains. "PG&E is running underground cables, but they're so far behind that it won't be complete for generations. And new buildings can no longer use natural gas — meaning demand on that same overtaxed grid is only going to grow." He adds that when supply is constrained, and demand rises, consumers will face higher electricity costs on top of higher fuel costs—a double burden on household budgets.
Aish's near-term recommendation is pragmatic: the hybrid vehicle. "Most new vehicles today come as hybrids, and that's one way to protect yourself during the transition," he says. "A full pivot to electric isn't realistic by 2035. A hybrid gives you flexibility without leaving you stranded."
The Operator's Calculus
For fuel service businesses, the pressures are mounting from multiple directions simultaneously. Beyond the refinery and geopolitical dynamics, California station operators face a December 31, 2025, deadline requiring single-wall underground tanks to be converted or the station will cease operations — an expensive mandate that Aish predicts will accelerate closures, particularly at marginal sites.
His advice to operators reflects the broader resilience demanded of California's business community: think beyond the pump. Stations in residential corridors with constrained housing supply may be worth more as development parcels than as gas stations. Meanwhile, consumer behavior in convenience stores is shifting — with demand rising for water, protein bars, and healthier snacks, while tobacco products continue to decline.
"There's no bad gas station," Aish observes. "It's the operator who's not thinking outside the box."
For California businesses navigating this environment, the calculus at the pump reflects a larger truth: the structural forces driving today's prices — regulatory, geopolitical, and infrastructural — are not resolving quickly. Strategic adaptation, not simply cost management, is the order of the day.
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