California drivers are watching pump prices climb past levels most have not seen since the 2022 energy crisis — and this time, the pressure is coming from two directions at once. A global oil supply disruption triggered by the U.S.-Iran conflict is colliding with a structural contraction in the state’s own refining capacity, producing conditions that energy analysts say could push prices significantly higher before they stabilize.
As of early April, California’s average gasoline price stood at $5.93 per gallon, well above the national average, with stations in parts of Southern California already posting $6 at the pump. One motorist in Anaheim paid $44.09 for 7.35 gallons of regular gas — a figure that would have seemed improbable just six months ago. The price environment is no longer the product of a single event or a temporary spike. It reflects a compounding set of problems that analysts say are structural in nature and unlikely to resolve quickly.
The Hormuz Crisis Is Hitting California’s Supply Chain
The immediate catalyst for the current price environment is the U.S.-Iran conflict and the effective closure of the Strait of Hormuz, through which roughly 20 percent of the world’s seaborne oil trade normally passes. Since Iranian forces began restricting transit in late February 2026, tanker traffic through the strait has declined sharply, producing what the International Energy Agency has described as the largest oil supply disruption in the history of global energy markets.
California, as a major importer of petroleum products, is among the U.S. states most exposed to that disruption. Energy market analysts cited by Newsweek have flagged the state as carrying a higher risk profile than most of the country, given its dependence on a narrow set of import suppliers and its limited ability to source alternative supplies quickly. JPMorgan analysts estimated that the last oil deliveries from the Gulf to the U.S. would arrive around April 15, assuming the strait remains closed — after which domestic and global markets would need to draw down reserves at an accelerating pace to cover the gap.
The blockade announced by the U.S. Navy on April 13 added a new layer of uncertainty. With crude oil again trading above $100 per barrel and peace talks between Washington and Tehran having collapsed in Islamabad over the weekend, there is no near-term timeline for the strait’s reopening. Every additional week of closure tightens the supply picture further — and California, which is structurally dependent on imports to meet its fuel demand, has less buffer than most.
California’s Refinery Problem Predates the War
What makes the current situation in California different from a typical oil price shock is that the global disruption is landing on top of a refining base that was already contracting before the conflict began.
Two major closures have reshaped the state’s supply landscape in a short window. Phillips 66 closed its Wilmington refinery in late 2025, removing approximately 139,000 barrels per day of processing capacity. Valero’s Benicia refinery, one of Northern California’s largest, is now idled and set for full closure in April 2026 — removing an additional 145,000 barrels per day from the system.
Together, those closures have reduced California’s total refining capacity to roughly 488 million barrels per year. The state’s estimated annual consumption is approximately 511 million barrels. That gap — about 23 million barrels — must be filled through imports, making California structurally reliant on outside supply in a way it was not even two years ago.
Governor Newsom has noted publicly that every $10-per-barrel increase in crude oil prices translates to roughly $0.24 per gallon at the pump. By that calculation, the movement from pre-war crude levels to the current range above $100 per barrel has added more than $1.50 per gallon in price pressure. The refinery closures amplify that effect further, because less domestic processing capacity means fewer options to absorb price shocks locally.
CARB Specifications Limit California’s Options
California’s fuel situation is further complicated by the regulatory requirements governing its gasoline blend. The California Air Resources Board mandates a specialized fuel formulation that significantly reduces the pool of suppliers able to deliver compatible product into the state.
Unlike most other states, California cannot easily accept out-of-state gasoline blends or switch between fuel sources during a supply crunch. The CARB specifications, designed to meet the state’s air quality standards, effectively narrow the number of refineries — domestic or international — whose output can be sold at California pumps. That constraint, which has long been a factor in why California prices run higher than the national average under normal conditions, becomes considerably more consequential during a supply disruption of the current scale.
The combination of CARB requirements, falling in-state refining capacity, and a globally disrupted import pipeline puts California in a position that analysts describe as uniquely exposed. The state must import more, has fewer compatible sources, and is competing for those sources at a time when buyers across Asia and Europe face similar pressure.
Where Prices Could Go From Here
Scenario projections for California retail fuel prices through the remainder of 2026 span a wide range, reflecting genuine uncertainty about how long the Hormuz disruption continues and how quickly the market absorbs the Benicia closure.
Under a scenario in which the strait reopens relatively soon and crude prices retreat toward the $70 to $80 range, California pump prices could stabilize somewhere between $5.50 and $6.00 per gallon. Under a prolonged closure scenario, with crude holding above $100 and the Benicia closure fully absorbed by mid-summer, projections rise to as high as $8.44 per gallon by late 2026.
That upper range would represent a cost environment without precedent in California’s history. Diesel prices, which have already surged significantly and carry significant knock-on effects for trucking, agriculture, and construction, would face parallel pressure.
What Comes Next
For California households and businesses, the months ahead carry meaningful economic risk. Higher fuel costs flow through to freight rates, food prices, and consumer goods across the supply chain — effects that tend to be felt most acutely by lower-income residents who spend a larger share of income on transportation and necessities.
The state’s political leaders are monitoring the situation closely, but the structural drivers — refinery capacity, CARB specifications, and global oil markets — are not levers Sacramento can move quickly. The resolution of California’s current fuel crisis depends, to an unusual degree, on events unfolding far from the state’s borders: in the Persian Gulf, in Washington, and in ongoing negotiations that have so far produced no agreement.
