By Collin Eaton
The last South Korea-bound oil tanker to sail through the Strait of Hormuz dropped off its cargoes late last month. That is a grim omen for California, which relies on the Asian nation for jet fuel shipped 6,000 miles across the Pacific.
The reverberations of the Iran war are poised to hit California harder than other states. That is because California imports roughly 75% of its crude oil, almost one-third of which comes from the Middle East. It also gets jet fuel and gasoline from countries whose refineries depend on the flow of oil from the Persian Gulf.
With the Hormuz still closed, South Korea and India -- two of California's biggest fuel suppliers -- are dramatically slowing exports, threatening to squeeze the Golden State's energy supplies. This month, South Korea is set to ship about half the jet fuel it normally sends to California, according to market intelligence firm Vortexa.
"If it's not resolved soon, it's going to get super tight," said Andy Walz, who runs Chevron's oil refining, pipeline and chemicals business.
California's coffers are sufficient to meet demand for refined products like jet fuel and gasoline in April, but a shortfall is likely to emerge over the following months, Walz said. Asian refineries are working through their existing inventories, and some countries including Japan and South Korea are releasing strategic oil reserves as a buffer.
"At some point, those things are going to be gone," Walz added.
The price of gasoline is often a political flashpoint in California. Prices at the pump on Tuesday averaged $5.93 a gallon, more than $1.75 above the national average. The state has higher-than-average gasoline taxes and fuel-standard requirements that add about $1.10 to the price of a gallon of gas, estimates Ryan Cummings, a researcher at Stanford University's Institute for Economic Policy Research.
California wasn't always an island in the energy market. Chevron and other oil companies blame the state's energy policies and policymakers' push to spur a transition away from fossil fuels for a huge drop in oil production and refinery shutdowns.
The state's crude output has fallen by more than 50% over the past two decades, partly because of aging oil fields and moves by Chevron, Occidental Petroleum and others to invest in regions with fewer regulations on the industry. After more than 140 years in California, Chevron packed up and moved its corporate headquarters to Houston in 2024.
A dozen refineries in the state have closed since 2000 because of the decline in oil production and the high costs of complying with California fuel standards and climate policies that have weakened the economics of making fuel. Those remaining have had to make up for dwindling production by buying more expensive imported crude.
California gets 20% of its jet fuel from overseas, most from South Korea. It also imports more than 25% of its gasoline, according to the California Energy Commission, with about two-thirds of that coming from South Korea, India and Taiwan.
The state has been cut off from the shale boom that turned the U.S. into the world's largest producer of oil and gas. It doesn't have the pipeline connections to draw from that supply and gets just 0.5% of its crude by rail. It is typically more expensive to move crude on tankers from oil-producing states like Texas or Louisiana than from the Middle East and Asia.
Although other states, including Illinois and New Jersey, also import a significant share of crude, they largely turn to Canada, Mexico and parts of South America and Africa for their supply. The amount of oil that California got from the Middle East last year rose 22% from the prior year.
Through a combination of taxes and regulations, California policymakers have "progressively driven the fossil-fuel industry out of business because they didn't think they needed fossil fuels," Walz said. "They thought everybody could drive an electric car and transition to wind and solar -- and it hasn't happened."
California leads the nation in electric-vehicle sales, but adoption is set to slow after the elimination of EV tax credits. Zero-emissions vehicles made up 19% of light-duty vehicle sales in the fourth quarter of last year, according to the California Energy Commission.
Even before the war with Iran, California needed to boost its fuel imports to fill the void stemming from the closure of two major refineries.
Valero is closing its Benicia refinery, which accounts for about 10% of the state's oil-refining capacity, this month, a decision the company blamed on the state's 20-year push away from fossil fuels. Phillips 66 closed a Los Angeles refinery with similar capacity last year.
Refineries on the West Coast built up inventories of jet fuel near their five-year averages in preparation for those shutdowns, said Debnil Chowdhury, an analyst at S&P Global Energy, who called that decision a lucky break for the airlines.
"It still takes a couple of months to draw down this relatively healthy days-of-supply rate in California," he said.
Inventories should remain at healthy levels until July or August, he said, assuming the Hormuz reopens within the next two to five weeks.
Even if shortages don't materialize immediately, getting much-needed supplies to California from Asia won't be cheap. Buyers on the West Coast have to offer incentives for foreign sellers to make the voyage during a high-risk period, said Cummings, the Stanford researcher.
The trip can take six weeks, so traders risk losing money if the Hormuz opens and prices for oil and refined products fall, he said.
"This is a really big problem for California," Cummings said. "In order to even engage in that trade, it raises the price in California."
Some California Democrats see a political silver lining. Now, they can point to President Trump's war in Iran as the reason for high gas prices, said Andrew Acosta, a California political consultant who has worked primarily with Democrats in state elections.
Republican state officials "can write a five-page thesis on California and the regulatory markets and all the rest of that stuff," Acosta said. "The problem is, everyone wakes up every day looking at their phone to see the five breaking-news alerts around Trump in Iran."
Write to Collin Eaton at collin.eaton@wsj.com
(END) Dow Jones Newswires
April 08, 2026 05:30 ET (09:30 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
Comments