California’s $9.999 Diesel Warning

California's diesel crisis has reached a remarkable milestone: some fuel pumps are literally running out of numbers.

Fortune reports that diesel prices at some California stations have reached $9.999 per gallon, the maximum price their digital displays can accommodate. California's statewide average reached $7.91 per gallon last week, while several stations were charging more than $9.

The immediate cause is clear. War in the Middle East, renewed disruptions in the Strait of Hormuz, and attacks on international energy infrastructure have tightened global crude oil and refined-product supplies. Oil surged above $100 per barrel last week, while diesel supplies have become particularly strained.

But California's extraordinary prices should raise another question: Why has the state made itself so vulnerable to exactly this kind of international energy crisis?

California cannot control wars in the Middle East. It can control how much of the petroleum Californians consume is produced and refined here at home.

For years, California policymakers have pursued policies designed to reduce both oil production and refining capacity, even while Californians continue consuming enormous quantities of petroleum. Demand does not disappear simply because California makes production more difficult. When domestic supply falls faster than demand, the difference must be supplied from somewhere else.

Increasing California oil production would not magically insulate motorists from a global crude oil shock. But economics remain economics: more supply available to California puts downward pressure on prices, while constraining supply does the opposite.

The same principle applies to refining.

Fortune notes that the world is competing for a limited supply of diesel and quotes one energy analyst describing the problem bluntly: there is no easy relief valve because new refineries are not being built. That warning should sound particularly familiar in California, where refinery closures and conversions are reducing the state's ability to manufacture the gasoline, diesel, and jet fuel its residents and businesses still require.

California therefore needs both sides of the equation: oil production and refining capacity.

Produce more California crude. Maintain the infrastructure necessary to move that crude. Preserve sufficient California refining capacity to turn it into diesel, gasoline, and jet fuel. The result is a more resilient energy supply chain and less exposure to imported crude and refined products moving through geopolitical chokepoints thousands of miles away.

Diesel deserves particular attention because its price does not stop at the fuel pump. Diesel powers trucks, farm equipment, construction machinery, and countless other pieces of California's economy. When diesel approaches $8, $9, or potentially $10 per gallon, those costs move through the supply chain into groceries, construction, agriculture, and virtually everything transported by truck.

That makes California's independent oil producers and remaining refiners part of the solution, not the problem.

CIPA has consistently argued that California should produce as much of the oil Californians continue to demand as reasonably possible. The current international crisis demonstrates why. Domestic energy production is not merely an industry issue. It is an affordability, economic security, and supply reliability issue.

California cannot end the war in the Middle East or guarantee uninterrupted passage through the Strait of Hormuz.

But California can stop making itself unnecessarily dependent upon events occurring on the other side of the world.

At $9.999 per gallon, the warning could hardly be displayed more clearly.