As Some Oil Deliveries to US Stop Flowing, California Braces for an Energy Crisis

The final oil tankers to clear the Strait of Hormuz before the U.S.-Israeli war on Iran began are expected to dock at West Coast ports this week, marking the end of a more than 45-day buffer that has largely shielded California’s economy from the closure’s full cost.

Since President Donald Trump and Israeli Prime Minister Benjamin Netanyahu’s war began, killing thousands and triggering a wave of violence across the Middle East, Iran has cut off most maritime traffic through the narrow gulf passage, ratcheting up oil prices in California and around the world.

While some analysts believe prices have plateaued for now, the incoming deliveries mark a potential transition from sticker shock to a supply crisis for California — one that could worsen if Iran follows through on a fresh threat issued Wednesday to disrupt Red Sea trade if the U.S. blockade on Iranian ports continues.

Kyle Meng, an economics professor at the University of California, Santa Barbara, and formerly the White House’s senior climate and energy economist during the Biden administration, said oil and futures markets have likely already priced in the arrival of the final deliveries.

However, should Iran interfere with Saudi shipments out of the Red Sea, “that’s when you will see the next discrete jump in oil prices around the world,” Meng said.

Due to a lack of easy access to pipelines and globally uncompetitive production of its own, California imports most of its fuel. Of its imports, about 17% of crude comes from Iraq, which has also been affected by the war — compared to around 8% nationwide for imports overall from the Middle East Gulf region.

The state also gets refined products, like gasoline and jet fuel, from South Korea and other Asian countries, which are facing their own supply squeeze.

Kate Gordon, CEO of economics policy group California Forward, and a former Biden administration energy adviser, said the dominance of the agricultural sector makes the Golden State “uniquely vulnerable.”

“Diesel prices are incredibly connected to food and ag — and logistics, which is a huge sector for California,” Gordon said.

The repercussions could potentially reach the skies.

“Jet-fuel prices are bonkers,” said Tom O’Connor, an ICF energy consultant who advises California’s Energy Commission after 30 years with ExxonMobil.

Jet fuel prices have nearly tripled since February, and O’Connor said he believes airlines won’t have many options if Asian countries can’t meet demand coming from major airports in California, as well as Phoenix and Vegas.

“They’re going to have to cut flights,” O’Connor said.

O’Connor said he’s advised the state to come up with a plan for addressing shortages. Even if normal flow resumes, he said, things could remain elevated for at least four months. Both Meng and O’Connor advise Californians to “hedge” their bets.

“If that means going down and getting an electric vehicle, try to do it, get a cheap one … if you can afford it,” O’Connor said. “Carpool with neighbors, things like that. I don’t want to make it sound overly dramatic, but as COVID proved, there’s one thing that will [drive] prices lower, and that’s lower demand.”