California’s Gas Crisis: Long Lines at Costco Expose Broken Fuel Market

California’s gas stations are in chaos, with drivers enduring 30- to 45-minute waits at Costco locations as affordable fuel becomes a rare commodity. The statewide average gas price hit $4.34 per gallon in October 2025, compared to the national average of $2.90—meaning Californians pay an extra $1.44 per fill-up. But these lines reveal deeper systemic failures: an oligopoly controlling 90% of gasoline, cities banning new stations, and refinery closures slashing supply by 17%. Experts warn prices could soar to $8.43 per gallon by 2026, exposing how California’s environmental policies have crippled its fuel market.

At the heart of the issue is California’s status as a “fuel island.” With no inbound pipelines, the state relies on domestic refineries or overseas tankers for its unique CARBOB gasoline blend, mandated since 2003 for cleaner burning. This specialized fuel requires extra processing and can only be produced by a handful of facilities, leaving no buffer for disruptions. When refineries like PBF Martinez exploded in February 2025 or Valero Benicia caught fire in May, prices spiked immediately, with no quick fixes from neighboring states.

Taxes and regulations compound the problem. California boasts the nation’s highest gas taxes: 61.2 cents in state excise tax, 18.4 cents federal, plus fees totaling about 90 cents per gallon before fuel costs. Climate programs add more: the Low Carbon Fuel Standard (LCFS) imposes 7 cents now, potentially rising to 47-65 cents; Cap and Trade adds 23-30 cents, possibly 74 cents if prices cap out. USC professor Michael Mish estimates regulatory burdens at $1.25-$2 per gallon, or 27% of pump prices. Environmental compliance tacks on another 20 cents.

Refinery decline exacerbates this. Once boasting 40 facilities, California now has 13, soon 11. Phillips 66 and Valero are shuttering operations, citing unsustainable costs from regulations aimed at phasing out fossil fuels by 2035. The top four refiners control 90% of capacity, creating an oligopoly where competition is stifled. A “mystery surcharge” of 59 cents per gallon since 2015 defies full explanation, attributed to market concentration and operational challenges. Consumer Watchdog reports refiners pocketed $2 billion in excess profits during 2023 spikes.

Costco’s bulk gas stations offer relief, but expansion faces backlash. Cities like Novato ban new stations under climate mandates, yet residents queue for hours. A proposed Novato Costco site, approved pre-ban, faces opposition over added traffic. Meanwhile, imported fuel from India—sourced from Russian crude—ignores California’s carbon calculations.

Governor Gavin Newsom’s response includes SB 237 for 2,000 annual drilling permits in Kern County and AB 30 for E15 ethanol fuel, promising 20-cent savings. Critics call these band-aids; UC Berkeley economists predict minimal impact. State Senator Brian Jones warns of “sticker shock,” urging action.

California’s policies—prioritizing emissions over supply—have isolated it from national markets, driving prices up and refineries out. As lines grow and costs rise, drivers question if environmental goals justify the pain. With projections of $10-$12 per gallon in extremes, the crisis demands reform to balance sustainability and affordability.