Analysis: USWC Gasoline Market to Face Volatility in 2026

MIAMI, FL (DTN) — The U.S. West Coast gasoline market in 2025 was shaped less by collapsing demand and more by a steady erosion of supply flexibility, as refinery closures, recurring outages and heavier reliance on imports kept prices volatile despite softer consumption. While electric vehicle adoption continued to rise, particularly in California, gasoline demand declined more gradually than many earlier forecasts had projected, leaving the region exposed when supply disruptions occurred.
Throughout 2025, national gasoline inventories often appeared balanced. Yet West Coast prices continued to swing sharply in response to refinery outages, import timing and logistical constraints that limited the region’s ability to respond quickly when supply tightened.
U.S. gasoline consumption declined under 8.9 million bpd in 2025, down roughly 1% from 2024, according to Energy Information Administration and DTN data. However, on the West Coast, demand erosion was uneven and did little to relieve prices as refining capacity contracted more quickly than demand.
With fewer refineries operating and limited redundancy, even short-term outages tightened prompt markets and pushed prices higher.
DTN pricing data show Los Angeles CARBOB regular wholesale prices averaged roughly $1.70 to $1.80 per gallon in 2025, down from about $1.95 to $2.00 per gallon in 2024. Despite that year-over-year decline, prices remained elevated by historical standards. During the pandemic year of 2020, CARBOB prices averaged closer to the low $1.00-per-gallon range for much of the year as demand collapsed, refinery utilization fell sharply and global crude markets struggled with oversupply. Traders said the persistence of higher price floors in 2025 underscored how structurally tighter the West Coast gasoline system has become since the pandemic.

Refinery Reliability
Refinery availability dominated market outcomes throughout the year. California and neighboring states rely on a shrinking pool of facilities producing CARB compliant gasoline, leaving little margin to absorb maintenance, unplanned outages or extended downtime.
California has lost roughly 20% of its refining capacity since 2020 following refinery exits and conversions, a contraction that became especially visible in 2025. The impact was amplified in the fall after a major explosion and flaring events at Chevron’s El Segundo refinery. Phillips 66 has said it would close its 139,000-bpd Wilmington refinery in Los Angeles in late 2025, while Valero announced plans to end refining operations at its 145,000-bpd Benicia refinery in the Bay Area in April 2026.
With few backup options, traders said supply risk was priced into the market almost immediately, tightening spot values even before the full extent of output losses became clear.
As in-state supply narrowed, the West Coast leaned more heavily on imports from Asia and Canada. While those barrels helped rebalance the system, traders said greater reliance on overseas supply increased exposure to shipping schedules, global refinery economics and fuel specification constraints.
Even when cargoes were available, timing remained a challenge. Replacement supply often arrived weeks after outages occurred, leaving prompt markets tight and vulnerable.

Inventories Masked Localized Tightness

U.S. gasoline inventories periodically built to levels that would typically signal comfort. However, barrels held in regions with flexible logistics did little to relieve pressure on the West Coast, where strict fuel specifications and limited pipeline connectivity restrict barrel movement. As a result, national stock builds frequently masked localized shortages, allowing regional premiums to persist even when headline inventory data appeared benign.
California’s move toward broader E15 adoption and continued EV growth shaped longer term expectations, but traders cautioned that neither offers near term relief. While E15 may modestly lower average prices over time by increasing blending flexibility, it does not address the region’s core structural constraints tied to refinery concentration and logistics.
Infrastructure projects such as the Western Gateway pipeline  — backed by Phillips 66 and Kinder Morgan — are not expected to ease volatility in the near future. The pipeline will move gasoline, diesel and jet fuel from the U.S. Gulf Coast into Southern California.
By the end of 2025, the West Coast gasoline market had become increasingly regional and increasingly sensitive to infrastructure constraints. Looking ahead to 2026, traders pointed to continued instability tied to refinery reliability, import timing and a shrinking pool of supply options.
“Probably even more volatility in 2026, because of these refinery issues and fewer people trading,” one U.S. gasoline trader said.