Why California Is Taking The Hardest Hit Among All US States From The Iran War Energy Shock

The Iran war, which began on February 28, has left California more exposed than any other US state. This has happened due to its heavy dependence on imported energy.

The state imports around 75% of its crude oil, with nearly one-third coming from the Middle East. This has made it vulnerable to disruptions linked to the war, according to a report in The Wall Street Journal.

Dependence On Foreign Fuel

California’s energy system is tightly linked to global supply chains:

• Around 20% of its jet fuel comes from overseas, mainly South Korea
• More than 25% of its gasoline is imported
• Nearly two-thirds of these gasoline imports come from South Korea, India and Taiwan

The refineries in these supplier countries depend on oil flows from the Persian Gulf. With the Strait of Hormuz shut, exports from South Korea and India are slowing.

South Korea, for instance, is expected to ship only about half its usual jet fuel volumes to California this month. This is worrying for a state that relies on fuel transported nearly 6,000 miles across the Pacific, stated the WSJ report.

Why California Is More Vulnerable Than Others

Unlike other parts of the US, California cannot easily tap into domestic oil supplies:

• The state lacks sufficient pipeline connections to major US oil-producing regions
• It receives just 0.5% of its crude oil by rail
• Transporting oil from states like Texas or Louisiana is often more expensive than importing from overseas

Policy Shifts And Falling Production

California was not always so isolated in energy terms. Over time, policy decisions and industry changes have changed its energy landscape.

Oil companies, including Chevron, have pointed to strict regulations and a push away from fossil fuels as reasons for declining local production and refinery closures.

• The state’s crude output has dropped by more than 50% over the past two decades
• Ageing oil fields have contributed to the decline
• Companies like Chevron and Occidental Petroleum have shifted investments to regions with fewer regulations
• Chevron moved its headquarters to Houston in 2024 after more than 140 years in California

At the same time, refining capacity has shrunk:

• Around a dozen refineries have shut down since 2000
• Remaining facilities have had to rely more on expensive imported crude

Short-Term Relief

Fuel inventories are expected to remain stable until July or August, but only if the Strait of Hormuz reopens within the next two to five weeks. Even then, bringing in supplies from Asia will not be easy or cheap. Buyers on the US West Coast must offer incentives to suppliers willing to take the risk of long-haul shipments during a volatile period.

Ceasefire Offers Limited Breathing Space

The US and Iran agreed to a two-week ceasefire shortly before a deadline set by the US President Donald Trump for potential escalation. As part of the deal, Iran temporarily reopened the Strait of Hormuz.

However, despite this temporary pause, California’s dependence on imported energy means the state remains highly vulnerable to further disruptions.

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