About the time it became inevitable that California was going to lose two major refineries, in May of last year, an alarming study was released by Michael Mische, an economist and business professor at USC. In his analysis, “Ensuring California’s Gasoline Security for the 21st Century,” Mische made a prediction that was widely quoted:
“Based on current demand and consumption assumptions and estimates, the combined consequences of the 2025 Phillips 66 refinery closure and the April 2026 Valero refinery closure, the estimated average consumer price of regular gasoline could potentially increase by as much as 75% from the April 23, 2025 price of $4.816 to $7.348 to $8.435 a gallon by calendar year end 2026.”
In a less disseminated quote, more ad hoc, but equally consequential, Democratic candidate for governor Tom Steyer said this in a recent debate:
“Monopolies and small combinations of businesses control prices. In the case of gasoline, we’re held hostage by a very small group of companies that control refineries and push these prices up all the time. For us to get lower gas prices, we need to find competition. We need to import gasoline either from neighboring states like Washington, or we need to buy it from Asia and ship it; refine it there and ship it to us.”
So what’s actually going to happen, now that California’s in-state capacity to process crude oil has dropped from 592 million barrels per year down to 488 million barrels per year, when in 2024 the demand for crude oil in California was 511 million barrels per year? It doesn’t take an economist to see that we now have a 5 percent shortfall in capacity. In a healthy supply environment, taking into account refinery downtime just for routine maintenance and upgrades, it is prudent to operate with a 10 percent surplus. That’s a huge gap.
So can imported gasoline compete with refined gasoline?
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