The last tanker carrying Middle Eastern oil has arrived in California, leaving the state with dwindling supplies and the highest fuel prices in the nation as the Strait of Hormuz remains shut.
The closure of the Strait of Hormuz has cut off nearly a third of California's crude oil supply, pushing average gasoline prices to $6.16 a gallon and forcing the state to confront its heavy reliance on foreign energy amid a deepening geopolitical crisis.
"The oil market will lose around 100 million barrels every week" if the strait remains closed, Amin Nasser, CEO of Saudi Aramco, said on Monday, highlighting the severe global impact of the disruption.
The supply shock has sent California's average diesel prices to $7.48 a gallon, a $1.82 premium over the U.S. average. The state, which imports 75% of its oil, now faces a future with no new crude shipments from Saudi Arabia or Iraq until the conflict resolves. OPEC's total output in April already plunged by 830,000 barrels per day to a two-decade low of 20.04 million bpd, according to a Reuters survey.
With at least 1 billion barrels already removed from the global market and California's refined product stockpiles shrinking, the crisis exposes the state's energy vulnerability. The economic fallout will likely extend beyond the pump, threatening to stoke inflation and challenge industries dependent on transportation fuel, even with federal interventions like a Jones Act waiver.
Global Supply Picture Darkens
The arrival of the supertanker New Corolla in Long Beach, which ferried about 2 million barrels of Iraqi crude on a six-week journey that began just before the war, marks the end of a critical supply line for the Golden State. California's heavy reliance on Middle Eastern oil—accounting for almost a third of its imports—makes it more vulnerable than any other U.S. state to the strait's closure.
The impact is reverberating through the global energy system. A Reuters survey found that OPEC's crude output in April fell to its lowest level in over two decades. The biggest drop came from Kuwait, while only the United Arab Emirates, which has an export route bypassing Hormuz, was able to increase production. This sharp reduction in supply comes as big Asian fuel suppliers like South Korea are slowing their own exports to California to protect domestic energy supplies, further tightening the squeeze.
Policy Levers Offer Limited Relief
The Trump administration has taken emergency measures to mitigate the crisis. In mid-March, it issued a 60-day waiver of the Jones Act, a 1920 law that prohibits foreign vessels from carrying goods between American ports. This has allowed about a dozen foreign tankers to ship roughly 2 million barrels of fuel from the Gulf Coast to California. However, this volume is a drop in the bucket for a state that typically consumes over 1 million barrels of refined products daily.
"Vessel availability and location have limited the relief the Jones Act waiver has been able to provide so far," said Ross Allen, a spokesman for Chevron.
Additionally, the administration invoked the Defense Production Act to restart an offshore pipeline operated by Sable Offshore, adding 50,000 barrels a day of crude into the state. While these measures provide some aid, they cannot fully compensate for the loss of Middle Eastern imports or the recent closure of two major state refineries that cut nearly one-fifth of California's fuel-making capacity. The situation underscores what Chevron CEO Mike Wirth called "the vulnerabilities that have been created in California as a result of decades of poor energy policy."
This article is for informational purposes only and does not constitute investment advice.
