Officials Say Shoring Up California’s Oil Supply Will Come ‘At a Price’

While officials are not concerned about an immediate oil shortfall, California consumers are likely to see another price hike in the coming weeks as the war in Iran strains the global market, lawmakers said on Tuesday at a hearing about the uncertain future of the state’s fuel supply.

The hearing came after the final oil tanker to pass through the Strait of Hormuz arrived at the Port of Long Beach this week — the last shipment from the Middle East expected to reach California for the foreseeable future.

“When this tanker is empty, it’s unclear where the next replacement ship will be coming from,” said Assemblymember Cottie Petrie-Norris, D-Irvine, and Utilities and Energy Committee chair at Tuesday’s hearing.

Californians have been feeling the pain at the pump since the U.S.-Israeli war on Iran spiked crude oil prices around the world. Today, drivers pay about $6.13 per gallon compared to the national average of $4.48, according to AAA.

While officials do not foresee California running out of oil, consumers should brace for additional price increases.

“Based on what we’re hearing from the industry and what we have heard, the pricing will move molecules towards California, but it will come at a price,” Gunda said.

Siva Gunda, vice chair of the California Energy Commission, said the costs will come from a bidding war to divert oil from Asian markets to the West Coast.

Ahead of Tuesday’s hearing, a California Energy Commission spokesperson said in a statement that the price spike is due to “the rapid escalation of crude oil prices because of the Iran War. These elevated prices are not unique to California, and prices are continuing to rise globally.”

However, Jamie Court, the head of Consumer Watchdog, a consumer protection group, said that California legislators, along with the state’s oil refiners, should take more responsibility for high prices. In a statement, Consumer Watchdog said oil refiners have been taking advantage of the current war to make record oil-refining profits, and Court said California Gov. Gavin Newsom “chickened out” of price gouging regulation.

“Trump can be responsible for about 70 cents of this because of the crude oil increase, but the rest of the two extra dollars we’re paying at the pump … are on Newsom,” Court said.

Severin Borenstein, professor and faculty director of The Energy Institute, UC Berkeley’s Haas School of Business, said in the public hearing that the recent spike is just one part of a larger trend.

While higher gasoline taxes and stronger environmental regulations in California play a role in the comparatively high prices — adding about $0.72 per gallon in taxes and $0.50 per gallon in environmental programs, according to the U.S. Energy Information Administration — a refinery fire in Southern California in 2015 led to a “mystery gasoline surcharge” driving up prices. Bornstein said this adds about $0.50 per gallon, on top of oil and refining costs.

The Commission’s Division of Petroleum Market Oversight said in the hearing that it’s also taken steps to deal with “branded” retailers like Chevron that have been overcharging California consumers at the pump.

“Everyone should be getting their gas at the generic brands,” Petrie-Norris said.

KQED’s Sara Hossaini contributed to this report.