California drivers are facing a double challenge at the pump as gas prices rise due to global war and new state climate rules. The average price for a gallon of regular gas in California hit $5.29, rising for ten days in a row. While a conflict between the U.S. and Iran is pushing global oil prices up, a heated debate is also growing in Sacramento over the state’s “cap-and-invest” program. Changes to this program could add between 65 cents and $1.21 to the price of a gallon by the end of the year, leaving leaders to choose between fighting climate change and keeping life affordable for residents.
War and the Global Oil Shock
The current spike in prices is not just a local problem. Global oil markets are reacting to the intensifying war with Iran, which has made it harder to ship oil through the Middle East. Crude oil prices have jumped by more than $25 a barrel since the conflict began. For regular people, this means paying much more every time they fill up their tanks.
Severin Borenstein, an energy expert at UC Berkeley, says that when global oil prices go up this much, it almost always leads to a 60-cent increase at the pump. In cities like San Francisco and Los Angeles, some stations are already charging more than $6.00 for premium fuel.
“California has a structural problem: fewer refineries, a captive market, and no easy outside supply options,” Borenstein explained. “When prices rise nationally, they can rise even more here.”
The “Cap-and-Invest”
While the war is a major factor, the political fight in Sacramento is focused on California’s own policies. The California Air Resources Board (CARB) is updating its cap-and-invest program, which requires companies to pay for the pollution they create. The goal is to make the state carbon-neutral by 2045, but these rules come with a high cost.
Industry leaders and some economists warn that the new updates will make gas much more expensive. Chevron, which runs two major refineries in the state, is strongly against the changes. Andy Walz, a high-level executive at Chevron, released a statement saying the new rules will “cripple the survivability” of the state’s remaining refineries. He warned that California could lose the entire industry, making the state rely even more on expensive imports from other countries.
A Supply Problem: Losing Refineries
California is also losing its ability to make its own gasoline. Two major refineries, Phillips 66 in Wilmington and Valero in Benicia, have announced they are closing or stopping production. Together, these two plants represent about 17% of the state’s total refining capacity.
When a refinery closes, there is less gas available. Because California uses a special “clean” blend of gasoline that is not made in other states, it is very hard to bring in extra supply from places like Texas or Nevada.
Refinery Capacity Impact in 2026:
Total Capacity Lost: 17% to 20%
Expected Price Increase from Closures: Up to $1.21 per gallon
Jobs at Risk: Over 536,000 industry-related positions
Ryan Cummings, a chief of staff at the Stanford Institute for Economic Policymaking, warned that if more refineries close, the situation could get worse.
“A prolonged closure could push crude prices above $130 per barrel, driving California prices closer to $7, with a worst-case scenario approaching $10 at some stations,” Cummings noted.
The Political Tension in Sacramento
In the state capital, the debate is splitting lawmakers. Some want to pause the climate rules to give families a break, while others say the state must stay the course to save the planet. Governor Gavin Newsom has faced pressure to use a 2023 law that allows the state to cap refinery profits. However, regulators recently voted to delay those rules for five years, fearing that penalizing oil companies would just make them leave the state faster.
Republicans in Sacramento are calling for a total pause on the gas tax and a rollback of the new cap-and-invest rules. They argue that the “California premium,” which is the extra amount Californians pay compared to the rest of the country, is becoming a burden that most families cannot carry.
On the other side, environmental groups like the Center for Biological Diversity say the state should not back down. They believe that the only way to stop gas price spikes is to stop using gas altogether.
What Comes Next for Drivers?
As the deadline for the new policy changes approaches, the future looks uncertain. A report from the USC Marshall School of Business suggests that if current trends continue, prices could reach $8.00 by the end of 2026. For a worker who has to drive 30 miles to get to their job, this could mean spending hundreds of extra dollars every month just on fuel.
State leaders are now considering small fixes, like sending out gas rebates or temporarily using a cheaper “winter blend” of fuel for longer. But as long as the war continues and the climate rules get stricter, the “pain at the pump” is likely to stay.
