California gas is pricey already. The Iran war could cost you even more
The US attack on Iran is expected to have an unpleasant impact on drivers in California; An increase in gasoline prices that may be felt at the pump within a week or two.
The outbreak of war in the Middle East, which nearly closed a key shipping lane in the Persian Gulf, pushed the price of Brent crude oil up to $10 a barrel; prices rose as high as $82.37 on Monday and then calmed down.
The international standard’s price determines how much motorists pay for gasoline globally, including in California, with each dollar increase corresponding to 2.5 cents at the pump, said Severin Borenstein, faculty director. UC Berkeley Haas School of Business Energy Institute.
That means drivers could pay at least 20 cents more per gallon, but it’s not yet known how much damage the conflict will hit wallets.
“The real problem is that oil markets are just guessing right now about what’s going to happen. This is a period of extreme volatility,” Borenstein said. “We don’t know if the war will expand or end quickly, and all of this will increase the price of crude oil.”
President Trump has praised the reduction in gas prices across the country as a validation of his economic agenda, despite concerns about a weak job market and persistent inflation concerns.
The turmoil in the Middle East may be felt more acutely in the state.
Californians already pay much more for gas than the rest of the country; The average cost of a gallon was $4.66, up 3 cents from a week ago and 30 cents from a month ago. According to AAA. The nationwide average right now is about $3 per gallon.
The disruption in international crude oil markets also comes as refineries begin producing California’s summer blend gas, which is less volatile during the state’s hot summer months. This change could increase the price of a gallon of gasoline by at least 15 cents.
Prices in California are driven largely by higher taxes and a cleaner, less polluting mix that regulators call for year-round to combat pollution — and it’s a long-standing issue.
The policies have been exacerbated by recent refinery closures, including the idling and planned closure of the Phillips 66 refinery in Wilmington in October and the Valero refinery in Benicia, California, which reduced refining capacity in the state by about 18%.
California has also seen a steady decline in crude oil production, making it more dependent on international oil and gasoline imports.
Only 23.3 percent of crude oil refined in the state in 2024 was pumped in California, 13 percent from Alaska and 63 percent from elsewhere in the world, with about 30 percent from the Middle East, spokesman Jim Stanley said. Western States Petroleum Assn.
If supply in the Middle East is disrupted, “we could see a contraction in supply and real price fluctuations,” he said.
According to information received, the Strait of Hormuz in the Persian Gulf, through which approximately 20 percent of the world’s oil passes, was almost closed on Monday. Although Iran produces only 3 percent of global oil, it has a significant influence on energy markets due to its control of the strait.
Additionally, in response to the US attack, Iran launched a barrage of missiles on neighboring Persian Gulf countries. Saudi Arabia announced that it intercepted Iranian drones targeting one of its refinery complexes.
California Republicans and California Fuels and Convenience AllianceA trade group representing fuel marketers, gas station owners and others accused Gov. Gavin Newsom’s policies of driving up gas prices.
A landmark climate change law passes California’s Carbon neutral by 2045and Newsom told regulators in 2021 to stop issuing fracking permits and phase out oil extraction by 2045. He also signed a bill allowing local governments to block the construction of oil and gas wells.
But last year, Newsom changed his tune and signed a bill that would allow 2,000 new oil wells a year in Kern County by 2036, despite legal objections from environmental groups. The county produces nearly three-quarters of the state’s crude oil.
Borenstein said he doesn’t expect new state oil production to do much to lower gas prices because it’s only marginally cheaper than oil imported by ocean tankers.
Stanley said the bill is intended to support Kern County’s oil industry, which is facing pipeline closures without additional supplies to send to state refineries.
Statewide, the industry supports more than 535,000 jobs, $166 billion in economic activity and $48 billion in local and state taxes. According to a report Last year by the Los Angeles County Economic Development Corp.
Bloomberg News and the Associated Press contributed to this report.
