California has managed a remarkable feat over the past twenty years. Even as its economy has grown to overtake Germany’s as the fourth-largest in the world, the state’s consumption of gasoline has declined by almost 15 percent, and consumption of petroleum diesel has fallen by around two-thirds. This has happened due to some of the world’s most aggressive climate policies, including a tax on carbon emissions and a strict requirement to adopt clean-burning fuels such as “renewable diesel” made from fats and oils.

During the same period, California’s production of crude oil has also fallen by around half, and many oil wells have shut down. The state now imports almost two-thirds of its crude oil from tanker ships, which is cheaper and more practical because it is separated by steep mountains from oil-producing zones such as Texas. Some of the state’s largest gasoline and diesel refineries are also shutting down amid declining demand, which will make the state dependent on imports of refined gasoline, too.

The state’s diminished fossil-fuel sector has made it especially vulnerable to the oil shock of the Israeli-U.S. war with Iran — and to interventions from the Trump administration that could delay or even reverse California’s trend toward renewable energy. Gas prices in the state have spiked toward $7 a gallon in recent weeks, the highest prices in the country. As other economies clamp down on fuel exports, it’s possible the state could face even higher crude prices or a shortage of gasoline.

Two weeks after the war began, President Donald Trump’s Justice Department issued a legal memorandum arguing that the federal government can use the Defense Production Act to preempt state law in the event of energy emergencies. The Department of Energy then moved to restart a long-defunct California offshore oil pipeline owned by the company Sable Offshore. The order from energy secretary Chris Wright cited “California’s reliance on foreign oil vulnerable to geopolitical disruption,” with “a significant share traveling through the Strait of Hormuz.” The pipeline has been shut down since a 2015 oil spill that killed hundreds of animals, and state officials had not given it clearance to reopen. On the very next day, the pipeline reopened. California has sued to shut it back down.

For now, the Sable pipeline is pumping around 50,000 barrels a day, which would provide around 3 percent of the state’s daily oil needs. Chevron has already said it will buy and refine 20,000 barrels of crude from the pipeline starting in April. The addition of new supply from Sable could lower costs for refineries, said Mike Umbro, an energy entrepreneur who runs Californians for Energy and Science, an educational nonprofit that advocates for increased oil production. Beyond Sable, though, there aren’t many good options for increasing crude supplies in the short term. “Sacreamento’s saying, ‘You don’t have a long term future here,’ so the companies aren’t going to dump a bunch of money in to increase production,” Umbro said.

Nevertheless, the Interior Department said this week it would consider a proposal from another offshore oil company to frack undersea oil wells in order to increase production. The administration has also held oil lease sales on federal land in California, and has sued to block a state law that would limit drilling near homes and schools, both measures that would open up more onshore oil production in the state.

But more upstream oil production won’t help resolve the current fuel crunch. Even as some oil producers consider pumping more crude, no one has suggested building more refineries. In fact, Chevron and other large refinery owners have warned that California’s “cap-and-invest” program — a carbon tax that gets more expensive as time goes on — could soon drive them out of the state. The California Air Resources Board, the state’s climate regulator, is supposed to debut new rules for the carbon tax later this year, which would reduce the amount of free emissions refineries would be allowed to emit and make refineries less likely to stay in California. 

The oil industry’s argument against these regulations follows the same logic as the Trump administration’s. “Continued erosion of California’s refining capacity risks increased reliance on imported fuels that are slower to arrive, more exposed to global supply disruptions, and less reliable during emergencies or periods of heightened geopolitical risk,” Andy Walz, a senior executive at Chevron, wrote in a letter to state leaders.

At the CERAWeek energy conference this week in Texas, Walz said he believes the state could soon have a shortage of gasoline and jet fuel, and that Chevron might close its own refineries within a decade. Those refineries account for 30 percent of capacity, and losing them could cause huge supply shortages for Bay Area drivers, Central Valley farmers, and even Air Force bases.

Democrats and environmental groups in the state, meanwhile, see the Iran crisis as more evidence that the state should lean harder into its transition away from oil. Indeed, as Kaetlyn Roedner Sutter, the California state director for the Environmental Defense Fund, sees it, the current gas spike may only speed up the state’s energy transition by making electric vehicles even more attractive. Governor Gavin Newsom’s latest budget proposed a subsidy for first-time EV buyers, designed to replace the repealed Inflation Reduction Act tax credits, and she said the Iran crisis could strengthen the governor’s case.

“I do think the war actually makes it even more important to move forward with this, because I think it just underscores how vulnerable we are, being so dependent on fossil fuels,” she said.

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