California Gas Prices Climb Again as State’s Energy Vulnerabilities Come into Focus

California motorists ended August with another unwelcome reminder of the consequences of the state’s increasingly fragile petroleum market.

According to a recent New York Post report, gasoline prices in the Los Angeles area increased for 11 consecutive days, while the statewide average climbed from approximately $5.58 per gallon on August 19 to $5.66 by Saturday, August 29. Los Angeles County motorists were paying approximately $5.73 per gallon.

By Monday, August 31, AAA reported that the statewide average had climbed further to approximately $5.69 per gallon, compared with a national average of $4.08. California gasoline was therefore costing motorists roughly $1.61 per gallon more than the national average.

There is no question that international events contributed significantly to the latest increase. The continuing conflict involving Iran and disruption in the Strait of Hormuz have driven crude oil prices higher and created uncertainty throughout global petroleum markets. The Automobile Club of Southern California reported that oil prices had recently exceeded $90 per barrel before retreating somewhat, while continued instability in global oil supplies kept gasoline prices elevated nationwide.

But international instability does not explain why California motorists consistently pay substantially more than drivers elsewhere in the country.

California has spent years deliberately making itself more dependent upon an increasingly complicated petroleum supply chain while simultaneously discouraging production of the crude oil resources located beneath its own soil.

Even the California Energy Commission acknowledges several structural reasons California gasoline costs more than the national average, including higher taxes, the state's specialized gasoline formulation, environmental program costs, and, importantly, the isolated nature of California's fuels market. When additional gasoline is needed, replacement supplies generally must arrive by marine vessel, with the CEC estimating that deliveries can take three to four weeks.

That vulnerability becomes considerably more important when geopolitical events threaten international petroleum supplies.

The current Strait of Hormuz disruption provides a textbook example. Approximately one-fifth of the world's oil supply normally moves through the Strait. California refiners have responded to the disruption by seeking crude oil from alternative sources. According to the California Energy Commission's analysis of the impact of the Iran conflict on California gasoline prices, California refiners are sourcing imported crude from elsewhere to compensate for lost Middle Eastern cargoes.

There is an obvious alternative sitting much closer to home: California crude oil.

California remains an oil-producing state with substantial reserves, experienced workers, existing infrastructure, and some of the most heavily regulated petroleum operations anywhere in the world. Yet state policy has steadily made domestic production more difficult while California continues consuming hundreds of millions of barrels of petroleum every year.

The result is not the elimination of petroleum consumption. It is the relocation of petroleum production.

That distinction matters.

Every barrel of California crude that can responsibly replace an imported barrel represents petroleum that does not have to travel thousands of miles across oceans to reach California refineries. Maintaining a viable in-state production sector therefore should not be viewed merely as an industry issue. It is increasingly an energy-security, economic and environmental issue.

The same principle applies to California's refining infrastructure. California's isolated fuel market means refinery capacity cannot simply disappear without consequences. The Trump administration's focus on increasing domestic refining capacity and reducing gasoline prices reflects a growing national recognition that petroleum infrastructure remains essential even as governments pursue longer-term energy objectives.

California should reach the same conclusion.

For years, Sacramento policymakers have operated under the assumption that reducing California petroleum production would accelerate a transition away from fossil fuels. But Californians continue driving gasoline-powered vehicles, businesses continue moving goods by truck, farmers continue operating diesel equipment, aircraft continue requiring jet fuel and the state's economy continues consuming enormous quantities of petroleum products.

Demand cannot simply be legislated away.

When domestic production declines faster than petroleum demand, California does not become independent of oil. California becomes more dependent on somebody else's oil.

The current price spike should therefore be understood as more than another unpleasant trip to the gas station. It is another warning about the risks created when the nation's largest state deliberately constrains its own energy production while remaining dependent upon the very commodity it is discouraging.

California cannot control wars in the Middle East, instability in the Strait of Hormuz, or movements in global crude oil markets.

It can control whether California workers are permitted to safely produce California energy.

For independent producers, that distinction has rarely been more important.